Can You Trust Your Banker's Instincts?

May 5, 2016 12:00 PM
Can You Trust Your Banker's Instincts?

If you’re wondering whether your banker really knows what is really happening with the farm economy, you’re not alone.

The team at farmdoc Daily were wondering much the same thing. In “How Well Can Bankers Predict Future Farm Loan Volumes?” authors Todd Kuethe and Todd Hubbs examined surveys from the Federal Reserve Bank of Chicago. They looked for trends in farm loan volumes and how well bankers’ expectations matched up with reality.

The answer: Pretty close, “which suggests that banker’s expectations are a good predictor of observed loan volume.”

Given that conclusion, what do lenders think farmers will be borrowing money for in the months ahead?  Operating loans, according to the farmdoc Daily article, which said that “bankers expect reductions in loan volumes for feeder cattle, dairy, crop storage, farm machinery, and farm real estate.”

Click here to read the full article. 

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Spell Check

Pasco, WA
5/7/2016 11:23 AM

  If your banker ends up with the farm it's because it couldn't service their debt and that isn't good for either party, as it likely means the farm is not profitable. Unprofitbale assets are not easy to sell and the bank will likey take a loss. In short, the bank doesn't want to own your farm.

Tulsa, OK
5/11/2016 10:02 AM

  Agricultural Bankers usually have a lot more detailed approach to cash flow analysis than most farmers that I know. A good banker says "NO" to bad purchases. Lenders need farmers and a majority of farmers need lenders. This article comes at a time when everyone is stressed with the state of the nation's farm economy and plays on the tension created by a market that dictates the margin for an entire industry.

mosinee, WI
5/12/2016 09:33 AM

  Well first I just paid off (in last 45 days) the last of my farm loans and it feels great. Lenders are now at my door ready to put me back in debt. They need my assets on the books for auditor to be pleased with debt ratio. Offering to loan 60% of assets which I feel is ok by me. But lenders are getting ready for the upcoming blood bath unless government steps in with bailout. In the dairy end lenders chose who expanded and who didn't but now with so many bleeding they have been caught with heir pants down. Do I want to get back in to dairy no. I see processors starting to produce milk for themselves and lenders are there to help them take over these dairies. With all the food plant takeovers it is beginning to make me believe that we have one hell of a collapse coming. It's not that I'm a vulture but my next debt will come when it happens.


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