Ag Lender: Restructure To Make Your Farm Last

January 4, 2018 01:39 PM

2017 seemed to be a repeat of 2016, and 2018 could mirror those years. Ag economists and ag lenders think 2018 could bring much of the same from 2017: low commodity prices and high supply.

Farmers have weathered four years of a seven-year down cycle, and ag lenders are wanting farmers to survive this downturn in the ag economy.

Alan Hoskins, president and CEO of American Farm Mortgage & Financial Services, wants farmers to understand their numbers and to create a full budget.

“That will aid in developing breakevens if they haven’t already,” he told U.S. Farm Report host Tyne Morgan.

That budget should be an all-in budget, added Keith Knudsen, president and CEO of Security Bank.

“You want to include all of your input costs, your living expenses, but also your payments or equivalent payments for machinery…so that your breakeven would cover all expenses,” said Knudsen.

When some farmers prepare their budget, sometimes they make the mistake of not exploring all their options on how to most effectively use their land or not cutting the right expenses.

“Look at everything possible as far as cutting expenses—get as efficient as possible and look at every alternative,” said Chris Floyd, CEO of First National Bank of Syracuse.

Watch their full comments on U.S. Farm Report above.

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Spell Check

bad axe, MI
1/8/2018 06:07 AM

  USDA just came out and said the prices and supply wouldn't change for 5 years , Maybe the ag lenders should start charging some of the debt they hold off like they ended up doing in the 80's.

Eastern, NE
1/8/2018 11:26 AM

  Seven year down cycle? Really? You believe everything runs in cycles? We are so global today, I don't think you can look back at history and say we're in a 7 year down cycle. The boards of trade aren't going to magically start increasing prices after 7 years. With our current geopolitical atmosphere, it is going to take a major crop disaster around the world, knowing exactly what China has in storage or the financial collapse of the Soviet Union to pull us out of our current "down cycle." With as much technology that we've exported, if the US has a disaster, Russia, Ukraine, Argentina, Brazil, Australia, China, Canada, India, France or some other European Union country will step in and fill the void we create. The destruction of NAFTA will cause the producer serious issues too. Trump is our current geopolitical storm! My advice is to know your cost of production, take an off farm job if necessary and bail as much debt as you possibly can. The old rule of thumb being, if you generate $500k in revenue, don't have more than $500k in total debt including operating loans. It has served me quite well over 40 years in farming! In today's lending climate with land poised to crap out in value as interest rates rise, it may be worth only having debt equal to 1/2 your gross earnings!

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1/10/2018 08:10 AM

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