THURSDAY, DECEMBER 26, 2005
Bankers, farmers prepare to handle
new tobacco money
With the promise of tobacco buyout money on the way this year, some farmers already are heading to the bank for loans against the expected payment. Financial institutions are gearing up to accommodate them.
Gene Charville, president of East Carolina Farm Credit, said some farmers are starting to take out loans on their buyout payments. It is still uncertain when the payments will be made.
East Carolina Farm Credit, a cooperative owned by 3,000 farmers, is the largest farm lending institution in eastern North Carolina.
"We are assisting farmers through the buyout process," Charville said. "We are advancing buyout funds through loans. They can then use it to expand their operation, buy land and equipment, consolidate debts or save for retirement."
East Carolina Farm Credit will advance 100 percent of a farmer's buyout and
charge interest on it, Charville said.
"That is one of the advantages of this program," he said. "Farmers don't
have to take a big reduction or a lump-sum cut. With the interest rates so
low, this makes this option very attractive."
Besides, being a cooperative, most of the profits go back to the customers, so a lot of the interest rate will be paid back to members of the co-op, Charville said.
"Farmers are accepting what we are offering with the loan program," he said.
"It is well under way."
David Rouzer, senior agriculture adviser to U.S. Sen. Elizabeth Dole, told Wilson County farmers and quota holders in October that the first buyout payments likely will go out this spring or summer.
Rouzer also said some lending institutions probably will pay out a lump sum of the buyout money to individuals, but that a bank probably will take a percentage of the total amount while collecting the annual payments.
David McBryde, executive director for Wilson's Farm Service agency, said it didn't surprise him that some tobacco quota holders and growers already are taking out loans on their payments.
It is part of the buyout policy that in the event a quota holder or grower dies within the next 10 years, the buyout payments will go to their heirs.
Some older quota holders or growers might not have any heirs or might not be willing to leave the money to them, McBryde said.