John Phipps: Why Now Is the Time to Sit Down With Your Ag Lender

John Phipps 07/20/19
Right now, it may be hard to sit down at the computer and enter yields and prices and costs to get a peek at a possible future, but John Phipps explains why it's essential. ( MGN )

One of our most difficult tasks in the ag media is to show how farmers are doing. The idea that one chart or table of numbers will describe how any given farmer is doing has become less likely. We are an industry full of individual economic situations and averaging them out or even totaling them up can conceal more than it illuminates.

The financial industry we work with struggles with this variability as well. When you throw in outside influences like weather, it is impossible to predict how any farmer is doing financially without knowing several specifics.

For example, even in the hard-pressed dairy industry, some are doing relatively well. There are corn and soy growers who are quietly raising their income projections as prices have come off their lows. No matter how much we argue about the precise number, there are millions of acres of “good-to-excellent” crops out there. And no matter how much we complain about how prices should be higher, it is rare we don’t gripe about that, and for growers in lucky locations current and future prices are a heck of a lot better than we expected.

Our farms vary in size which has a significant effect on breakeven prices. Our farm households are quite unique as well. Depending on outside income, even farmers with miserable crops may be able to forecast a small positive outcome this year. This range of situations makes working with farmers a series of separate adventures for lenders especially. It also means farmers won’t all get the same deal from the same lender.

This is hardly news, but it reminds me of one of the most valuable lessons I learned about my relationship with my bank. Even during some really tough years, I discovered lenders were serious about wanting to help my farm survive and prosper. To be sure, they wanted to make sound lending decisions, but banks don’t make any income unless they push money out the door. What finally dawned on me, after some difficult but informative meetings with my lender during the 80s was that a big part of my job was to make her job as easy as possible. Good records, updated projections, clear goals, and detailed plans were essential to that objective. It was amazing to me how many times we found ways together to endure that neither of us thought about before we met. Right now, it may be hard to sit down at the computer and enter yields and prices and costs to get a peek at a possible future. It may be even harder to sit down with your lender. The longer we put those taskes off, the less likely good solutions will be found.