Leaders in Iowa’s renewable energy field are asking Congressional leaders to change federal law so Farm Credit would be allowed to make loans to build ethanol and biodiesel plants that do not have a majority of farmer-stockholders as owners.
This story in Wallaces Farmer says they’ve sent a letter to both of Iowa’s U.S. Senators, Chuck Grassley and Tom Harkin, and to other senators asking for support of the change to Farm Credit’s lending authority because of the problems expanding the renewable fuels industry and maintaining its profitability. The new farm bill, currently under debate, has an amendment with the change:
The current economic climate is challenging, to say the least,” says Sam Cogdill, president of Amaizing Energy LLC, an ethanol plant at Denison in western Iowa. He is one of eight people representing ethanol and biodiesel plants across the state who signed the letter.
“We understand the struggles of expanding the ethanol and biodiesel industry and trying to keep it profitable in changing economic times,” he adds. “Rising input costs and other factors are creating increasingly smaller margins for ethanol and biodiesel producers.”
But bankers are balking at the idea:
The Farm Credit System was created under a federal charter years ago and operates as a cooperative. “As a government-sponsored lender, they have certain advantages we don’t have,” says Jim Schipper, president of American State Bank at Osceola and current chairman of the Iowa Bankers Association.
The Farm Credit System has preferential tax treatment and access to funding at interest rates a commercial bank is not eligible to get. “That’s fine as long as Farm Credit lenders are within their mission–providing credit to farmers,” says Schipper. “But this expanded horizons idea goes way beyond that. If they want to finance enterprises that are not farmer-owned projects, then they should have to discontinue their federal support.”
Schipper goes on to point out that guys such as Bill Gates, who owns one-fourth of Pacific Ethanol, would be eligible for the Farm Credit loans if the change happens.