North Dakota State University NDSU Extension Service Questions and Answers about Agriculture Loan Officers and Farmers ' Investments in New Generation Cooperatives

Many new value-adding contract agricultural cooperatives (here-after, new generation cooperatives or NGCs) have been formed in North Dakota in the 1990s. Farmers often obtain money to invest in these co-ops from lending institutions. This report responds to questions agriculture loan officers and their supervisors have regarding loans to farmers wishing to invest in these new cooperatives. The information discussed in this report comes from a U.S. Department of Agriculture-sponsored study conducted between fall 1995 through spring 1996. It involved a survey of 388 agriculture loan officers (including those from banks, Farm Credit Services, and credit unions), 215 agricultural loan supervisors, 321 farmers who had invested in one of the NGCs, and a comparison group of 191 farmers who had not invested in one of them. For more information on research methodology and detailed results, see the 1996 report by Brooks Wilson and colleagues listed in the reference section. Before the survey process was started, agricultural loan officers in several lending institutions were visited about the concerns they had regarding farmers ' investments in the NGCs. Following are some of the questions that emerged from those visits, and the answers that were found from the surveys. 1. What types of institutions make loans to farmers investing in new generation cooperatives? Of the 118 institutions in the study, over half (54%) made loans to farmers to invest in the NGCs. Severa