GROWERS CAN use crop input financing to accelerate cash flow, increase profitability and reduce expenses, and a growing number of them are signing up for it. Ag retailers around the country have responded by offering a variety of financing programs — from those connected with large lenders, such as John Deere Credit, Rabo AgriFinance and ProPartners Financial, for example, to programs with attractive interest rates offered by crop protection and genetic trait technology companies.

Benefits

Brian Fullenkamp, manager of Golden Furrow Fertilizer, a full-service ag dealership based in Eldon, IA, notes that one reason more growers are using crop input financing is that they can purchase seed and crop protection products without having to pay for them all at once. Financing programs allow them to pay for one or more inputs later in the year. “It helps spread out cash flow,” Fullenkamp says.

Crop input financing also offers an option for growers who do not want to “max out” their operating credit line at their local bank, Fullenkamp says.

Charles Wagoner, Allen County Farmers Service, Scottsville, KY, says that since his Southern States dealership decided to do all of its financing through John Deere Credit's Farm Plan last March, more of its time has been freed for selling. Automatic approval of customers particularly helps during the busy spring season, he says.

The Kentucky dealer adds that the financing program has encouraged more customers to take advantage of early-season purchase discounts. Another benefit? The dealership's cattle farmer customers can buy handling equipment and not have to pay interest or make a payment for six months.

“The only challenge has been helping customers learn the program,” Wagoner says. He explains that some customers want to pay on a monthly basis while others are interested in longer-term financing. “We've received mostly good feedback, especially when you explain the programs and that the interest rate is lower than what our dealership could offer,” he says.

Jayma Sandquist, director of product development and marketing of Farm Plan, notes that the Farm Plan program underwent a relaunch last August. “The market continually changes and we'll continue to listen to dealers and farmers to understand what value proposition is needed,” she says.

Lanette Blackwell, Farmers Exchange, a full-service cooperative in Lockwood, MO, says that crop input financing has helped customers better manage their fertilizer and crop protection product expenses. Blackwell explains that some growers use financing with feed purchases, using credit until they sell their calves, for example.

Growers are figuring out how to make the best use of financing programs, Blackwell adds. “A 90-day no-payment, no-interest program could enable them to apply fertilizer twice and pay for it later,” she says. She notes that many growers like the fact they can get credit for rates comparable to those that banks offer, but with less paperwork.

Value per acre

With recent high fuel and fertilizer prices, growers are sharpening their pencils and searching for products with the best prices and terms, observes Jerry Harrington, sales and marketing public relations manager, Pioneer Hi-Bred International. Pioneer offers several options in its Rewards Program, including the TruChoice Opportunity Program. Growers can apply for competitive interest rates for the purchase of their Pioneer seed or DuPont-approved crop protection products.

Growers can qualify for additional savings on their interest rate by purchasing both Pioneer seed and DuPont crop protection products. Those who pay cash are eligible for discounts related to the timing of their cash purchases. If they commit to their Pioneer purchase by certain deadlines, they also qualify for the Commitment Reward discount.

Over the last five years, programs that link seed and crop protection financing have become popular because growers like the convenience, Harrrington says. With recent spikes in fuel and fertilizer costs, he says, more farmers are asking “early and in-depth questions about financing programs.”

What will continue to be important is to help bring the best value to each acre, Harrington says. He adds, however, that calculating value has become more complex when transgenic traits and seed-applied insecticides are taken into account, for example. One also may need to take into account identity-preserved markets where growers earn premiums on their grain.

Preapprovals

One of the newest developments in Rabo AgriFinance's program for the 2006 selling season is that it preapproved dealers' customer bases. The lender now preapproves customers for up to $50,000 typically on an unsecured basis, says Jamey Ross, Rabo AgriFinance. Another benefit of this program is the one-page application form, he says.

Ross says that higher fertilizer and fuel prices over the last several months have caused growers to use credit for more purchases than they normally do. Rising costs are creating a sizeable challenge for traditional lenders to provide credit to farmers, he says, adding that with more pressures on lenders, more growers are looking at credit programs offered by retailers. “Farmers also are looking to diversify their lending sources,” Ross says.

“We're also seeing many more players in the market, whether it be local retailers, national companies or seed companies,” he says. And because studies have shown that retailers are viewed as trusted advisors, growers will likely continue to rely on what retailers can offer.

FINANCING PROGRAMS

John Deere Credit's Farm Plan

  • Can be used for everyday purchases, convenience credit

  • Accelerates loan process

  • Allows growers to capitalize on “buy early” incentives

  • Offers automatic authorization

  • Tracks farmer purchases and reports back to farmers

  • Farmers can move balances to Farm Plan at low rates

  • Offers low-rate purchases for first six months of Farm Plan program

  • Has convenience credit product as well as seasonal product (for crop inputs)

Rabo AgriFinance QuickLink Credit Program

  • Provides line of credit exclusive to a particular retail location

  • No recourse

  • Allows submission of transactions over Internet

  • Online processing (e.g., invoicing) done by Raboag.com

  • Can pay dealers within two days

  • Terms set up with each ag retailer

  • Offers competitive interest rates

  • Enables growers to take advantage of incentive rates

  • Straightforward, one-page application

  • Preapproval of customer database

  • No product restrictions or limitations

ProPartners Financial's (PPF) Alliance Partner Program

(provides administration and funding for Agriliance's Partners In Production producer financing program)

  • Full range of financing — from inputs to other operating needs, term loans and other financing options

  • Competitive interest rates

  • Preapproved loans

  • Unsecured loans available up to $85,000

  • Producers can have concurrent loans, allowing for marketing opportunities and income management running for each crop season

  • Funding when customer wants it either through a check from the dealer or an ACH electronic transfer

  • Online application and electronic loan documents speed process

Ag Financing Solutions (AFS)

(seed program offered by ProPartners Financial and Land O'Lakes)

AFS offers producers discounts and extended terms. On a dealer-by-dealer basis, interest rates range from interest free to prime +3%. Tender seed wagons are also available through this program.