There is not much good economic news to talk about these
days. For most of 2019, the Fed has been
worried about inflation and now, all of a sudden, we are talking about the coming
recession. In agriculture, the news is
even more gloomy, our markets are in confusion, to say the least. Knowing where we stand within the agriculture
economy is never easy, and this year, between the inept crop reporting by the
USDA and Trump’s trade war with China, we are more in the dark than ever.
Having struggled through tough markets over the last few
years, many farm operations are barely surviving, and the forecast is not
improving.
Ag lenders went into 2019 without much optimism for
improvement in general farm economies. In
the spring many operations were warned that without significant financial
recovery this season, there would be no continuation of the financing
relationship. So here we go again.
During the Great Depression bankers developed a terrible
reputation in the agricultural world.
These feelings were renewed again during the economic struggles in the
1980’s. Bank’s were seen as a necessary
evil, and bankers were the enemy. Unfortunately,
banks are still a necessary evil and they are going to be harder to work with
as the economy continues its current path.
I have seen too many farms put themselves in serious danger because
they felt their bank was motivated to put them out of business and take their
land. This concern motivated defensive moves
designed to protect their land and operation, but in reality, those choices put
them in more vulnerable positions.
Instead of working with the lender to find a solution, both sides
allowed the relationship to become adversarial.
First and foremost, if you do not feel you can trust your
loan officer or bank, find a new one or at least talk to an expert outside of
that bank.
If your operation has been struggling financially, start now
to make a plan. I know fall is a busy
time and there are other critical tasks that have to be done in a timely fashion,
but the longer you wait the more limited your options become. If you start now to consider where you stand
and what your options are, you give yourself the advantage of time. You can make a plan then revise it, and
revise it again, so by the time you begin talking about a loan renewal with
your lender, you have a good solid, well thought out plan, and understand your
options.
Having options is key and they are much easier to learn by
talking to others. Talk to folks who
have been through financial difficulties on the farm, talk to your accountant, find
an ex-banker who will walk through your situation with you. At this point in your evolution, the more
information you can gather better off you will be when you put the final
touches on your plan for 2020 and beyond.
Please feel free to email me if you have questions. Thank you for reading my rant and if you have a comment, please post it so we can all learn something.
tpyle@qosi.net
