Credit Screws Not Tightening

November 30, 2013 09:31 AM

The following information is a Web Extra from the pages of Top Producer. It corresponds with the article "Plenty of Money in the Bank." You can find the article in Top Producer’s December 2013 issue.

Top Producer: Should producers be concerned that lenders could tighten the credit screws with the drop in crop prices?

Nate Franzen, president, agri-business division, First Dakota National Bank: In the near term, no not at all. Banks are very liquid right now and farmers overall are very well positioned. The only thing that would change that would be if the $4 corn environment persists for three to four years.

Top Producer: Do you see any farm management practices that need to change from your perspective as a lender?

Franzen: We have been through period where you could make a 50 cent to $1/bu. corn marketing mistake and still do okay. We’re getting back to a period where nickels and dimes count. On farm management, some farmers are at the top of their game, but others need to make changes. Some operations have gotten a little sloppy. Some have areas where they can tighten their belts. Some producers have gone overboard in buying things to avoid paying taxes. But this is certainly the minority.

Top Producer: What questions are you asking your borrowers for 2014?

Franzen: What is their marketing plan, this is the biggest one, what is their breakeven cost per acre, can they reduce costs, such as reducing passes through the field, can they reduce inputs and can producers get by with less hired labor. Overall, though, today’s farmer is a good businessman. And how are they reducing risk with crop insurance guarantees likely to be reduced with the drop in crop prices.

Top Producer: What other costs can be cut without harming yields?

Franzen: One big one is family living expenses with money spent there speeding up the past three to four years. These are times when they need to tighten the belt. Another one: what is a farmer’s land cost? This area must be evaluated closely.


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