We're All High-Maintenance Now
By John Phipps
While we grain producers have witnessed the recession unfold at a modest distance, dominoes were falling to ensure we share in the consequences. Two examples illustrate.
During a recent land transaction, I received a call from my banker. We have been through several similar transactions and know the drill about paperwork, title policies and closing payments.
At least we used to. She phoned the morning before the closing to share her astonishment that the title company would not accept a cashier's check for more than $50,000. Not from a long-time business associate, not from an FDIC-affiliated institution, not from any bank. The money had to be wired to the title company's account.
While this was a minor hassle, the issue was the level of mistrust that now exists between financial players, even at our nanoeconomic level.
Similarly, my three-decades-plus grain customer called to "verify my acreage” because I had sold a considerable amount of 2010 crop. My customer service representative informed me they did not want me to sell more than 50% before planting.
This was news to me—and I didn't receive it cheerfully. After my initial flash of indignation, several factors came to mind. First, farmers have been walking on grain contracts, often with relative impunity. The wheat debacle of 2008 was a great example and confirmed by several producer and buyer sources. Second, when I grumbled about this to farmers in Iowa, I was told other large grain buyers had similar constraints. Third, I know litigation is a crude, expensive and ineffective remedy to farmers behaving badly. There is no upside in grain companies suing farmers.
The common thread between these and a myriad of business irritants is the overriding principle of nondiscriminating wariness. Because businesses are carefully scrutinized to make sure they don't arbitrarily penalize customers based on gender, ethnicity, etc., so too are they constrained in taking a long-standing history of performance as proof of future trustworthiness.
Not that it has been a good predictor recently.
The upshot is we have removed trust from our business relationships. Impersonal suspicion is the starting point for most transactions, often enshrined in stiff regulations designed to prevent a repeat of the practices that undid our investment system.
Like taking the terror alert level to orange, this situation will be nearly impossible to walk back, even if we all clean up our acts. To our great loss, we are now all high-maintenance financial actors.
Here are several assumptions I have now put in place:
• Good history doesn't count much. Even small business operations have stern guidance from legal advisers to create paperwork protection.
• Whining about it won't help, but understanding what the other party is now obligated to do can make you stand out as a smaller headache.
• It isn't personal—it's universal.
• Transactions will take more time. My prediction is at least threefold.
• Patience is no longer a virtue—it is the virtue. New rules mean everyone is walking in a bureaucratic headwind to get anywhere.
• Anger management is as key as money management.
• Demanding a solution from the government will be the equivalent of asking, "May I have another, sir?”
• Curb the jokes and sarcasm. Business life is now one long airport security screening.
• If you get special treatment (what used to be regular service), prepare to be called out when it's discovered.
Don't get me wrong. I'm not angry anymore, just wistful. Judging from my bank friends and grain customer, this isn't a chucklefest for them, either.
This sad devolution of our former system will take considerable time to rebuild. It's important that we devote ourselves to the reconstruction with every financial promise and contract.
John Phipps is a sixth-generation farmer from Chrisman, Ill. He is the TV host of "U.S. Farm Report.” Contact John at firstname.lastname@example.org. For local station listings, log on to www.USFarmReport.com.
Top Producer, March 2010
- MARCH 2010