DES MOINES, Iowa — Eight Iowa biofuel leaders wrote to U.S. senators Charles Grassley (R-Iowa) and Tom Harkin (D-Iowa) and presidential candidates in the Senate to support expanding the Farm Credit System’s authority to lend to state ethanol and biodiesel plants.

“The signers became interested in the issue because of the changing economics surrounding renewable fuels; bigger plants that require larger amounts of capital are becoming the industry standard, which makes the 50 percent farmer ownership level nearly impossible to attain,” said Caleb Hunter, an associate with Lincoln Strategies Group, a political public relations firm in Des Moines representing the eight leaders.

With the high cost of corn and soybeans and the price of ethanol declining, he said competitive credit is important for ethanol and biodiesel plants in Iowa, which leads the nation in both production of both.

“Our firm helped pull together like-minded individuals who supported expanding Farm Credit’s role with regards to ethanol and biodiesel,” he said of the eight Iowa leaders’ request, which was recently addressed by Republican Georgia Sen. Saxby Chambliss in his amendment to the 2007 farm bill.

“The signers have become involved in different times throughout the year in different capacities, but all the involvement has happened this year,” Hunter added.

On Oct. 25, the Senate Agriculture Committee approved its portion of the 2007 farm bill, which included the renewable fuels package that would provide 80 percent of total project cost with a loan cap of $250 million. The bill would also expand markets for biobased products, as well as investments in farm-based energy research and development.

To date, Farm Credit Services (FCS) of America is one of the 100 cooperatively-owned financial institutions that make up the Farm Credit System, with FCS serving farmers, ranchers and rural businesses in Nebraska, Iowa, South Dakota and Wyoming.

“Farm Credit was created by Congress more than 90 years ago to ensure that America’s farmers and ranchers had access to competitively priced credit in good times and bad,” said Doug Stark, Farm Credit CEO, at the March 27 hearing of the U.S. House Subcommittee on Conservation, Credit, Energy and Research. “Over the years, Congress added to Farm Credit’s mission to ensure that farmer-owned cooperatives, farm-related businesses, rural homebuyers and rural utilities also enjoyed the benefits of a lender dedicated to meeting their financial needs.”

According to Hunter, the Chambliss amendment would provide the agriculture-based renewable fuels industry and rural homeowners with greater access to the Farm Credit System.

“(Farm Credit) has been active in this area for many years and they want to continue to their involvement in agriculture and expand their role in renewable fuels investment,” Hunter said. “Senator Chambliss is a supporter of increasing capital for renewable fuels, as well as more capital for rural housing. With the current credit crunch, (Chambliss) wants to help rural America prosper, and this is a way he can do this without a cent increase in the farm budget.”

The eight Iowans included Bruce Rastetter, CEO of Hawkeye Renewable Fuels in Iowa Falls; Jeff Stroburg, president and CEO of West Central Co-op in Ralston; Michael Duffy, vice president of the East Fork Biodiesel board of directors in Algona; Sam Cogdill, president, and Don Sonntag and Robert Camblin, board members, of Amaizing Energy in Denison; Gregg Connell, executive director of the Shenandoah Chamber of Commerce; and Tim Burrack, an Arlington farmer.

“The renewable fuels industry understands the struggles and the difficulties of expanding this industry and maintaining its profitability through changing economic times,” the eight signers wrote. “The current economic environment is challenging, to say the least. The rising input cost and increasing commoditization of ethanol and biodiesel create increasingly smaller margins for the industry.”

They added Farm Credit, which has been operating for more than 90 years in agricultural lending, understood the challenges and variables in agriculture and because of that experience, would have the ability and capacity to construct loans that account for the variables in the industry. But under current regulations, in order for Farm Credit to lend to a start-up ethanol or biodiesel plant, 50 percent of the plant would have to be farmer-owned.

“This requirement was reasonable in the early days of the renewable fuels industry, when 25- and 30-million gallon plants were being built,” the signers wrote. “Today, however, the industry standard for ethanol plants is 120 million gallons at a cost of approximately $200 million per plant, making it impossible to achieve 50 percent farmer ownership.

Another reason they gave for expanding Farm Credit’s lending authority was the rise of ethanol and biodiesel industries in their state, which they said has had a “significant, positive impact on farmers and rural communities in Iowa.”

But not everyone is supporting the Chambliss amendment. In a Sept. 24 letter, Camden Fine, president and CEO of the Independent Community Bankers of America (ICBA), along with 38 state independent and community banking associations, urged Chambliss and Harkin to reject expanding Farm Credit’s lending powers.

“The FCS proposal would allow FCS institutions to engage broadly in non-farm commercial lending, non-farm mortgage activities in cities and suburbs throughout the country and eliminate or minimize borrower stock purchase requirements to the detriment of both farmers and taxpayers who are protected by current requirements,” Fine wrote.

In addition, Fine claimed the FCS proposals would also shift the focus of CoBank, the bank for cooperatives, away from farmer-owned cooperatives toward investor-owned corporations, a move he said wouldn’t represent a compromise.

“Instead, the FCS proposals are aimed directly at the heart of community banking and would allow FCS institutions to utilize their enormous advantages as a direct-lending government-sponsored enterprise to cherry-pick business loans and mortgages from community banks,” Fine wrote. “FCS has not provided any evidence that there is a lack of credit available in rural America. FCS proposals do not target any proven credit need or underserved sector.”

On Nov. 1, FCS reported its earnings for the first nine months of 2007 totaled $140.8 million, a 40 percent increase over the earnings it reported for the same period a year ago, with total assets at the end of the nine months at $12.3 billion and total capital hitting $1.9 billion.