Agricultural lending may soon face a change — and Iowa farmers have mixed reviews about it.

Rabobank, the Dutch-owned financial institution, intends to purchase Omaha-based Farm Credit Services of America. Such an external buyout is unprecedented in the Farm Credit System, which began with the Farm Loan Act of 1916.

FCSAmerica is a cooperative institution in which farmers who take out loans also own stock in the company. The purchase price Rabobank has proposed — $600 million — would be divided among stockholders in FCSAmerica — farmers who have had outstanding loans since 1999.

Steve Henry, a grain farmer near Nevada, said he views the proposed buyout as a win-win situation.

“Farm Credit Services is an excellent company,” Henry said. “I think the Rabobank buyout provides that same excellent service, and they are willing to pay me for stock that isn’t currently providing me a financial benefit. They offer more competition for my financing.”

Henry worked with the Federal Land Bank in the 1980s, which later merged to become FCSAmerica. He said that although they were unable to provide loans to farmers during the farm crisis, Rabobank was financing higher-risk loans through Ag Services of America in Cedar Falls.

“My challenge as a family producer is to increase revenue as my expenses continue to increase,” Henry said. “I need a bank who’s going to be there when I grow.”

But not everyone thinks the buyout is a good thing.

“This decision to sell is wrong, and the only one who will gain from this in the total picture would be the management of Farm Credit Service,” said Joe Lyon, a dairyman near Toledo.

Lyon said he is concerned about the success of smaller farmers if FCSAmerica is bought by Rabobank, whose lending patterns seem to favor larger corporations. Lyon is also concerned about competitive loans for land purchases.

“Over the years, they have had loan officers who understand agriculture,” Lyon said. “It has been a dependable source of credit — both short-term and long-term at competitive rates. Long-term loans are not available at every bank or institution.”

Many people are questioning whether the proposed purchase price is fair.

FCSAmerica holds $1.3 billion in assets, said Neil Harl, professor emeritus of economics and an agricultural law expert.

The $600 million purchase price would be paid to stockholders, while FCSAmerica would be required to pay at least $800 million of unallocated funds to exit the Farm Credit System.

Harl said he is also concerned about concentration.

“[Rabobank] is poised to change the concentration equation in the U.S. for agricultural lending,” he said. “We have seen in recent years growing concentration in input supply and the handling and storing of farm commodities. This would add to our concern on concentration.”

Harl said sufficient competition will remain for short-term and intermediate-term lending, but long-term lending will not be competitive because Rabobank will not get a charter to remain in the Farm Credit System. Another institution in the Farm Credit System may open new offices if the Rabobank buyout succeeds.

“We learned in the 1980s that the greater the distance between the lender and where the loan is made, the less the sensitivity to borrowers who get in financial trouble,” Harl said.

Harl said Congress may also get involved and that FCSAmerica might face major tax liabilities if the purchase is successful.

FCSAmerica makes loans in Iowa, Nebraska, South Dakota and Wyoming. Loans in Iowa account for 42 percent of FCSAmerica’s business, Harl said.

“The Farm Credit Administration must [first] approve the purchase,” Harl said. “A vote by stockholders would probably occur in December.”

Another unit of the Farm Credit System — Mankato, Minn.-based Ag Star — has bid $650 million to counter Rabobank’s offer. This would be divided among FCSAmerica stockholders, but the exit fee would not be required.