Speakers at Ag Bankers’ Conference Share Thoughts
While members of this Association gathered in Kansas City at the end of October, the Ag Banker's Conference also was underway in Kansas City. In an article for Farm Progress, Mike Wilson wrote that bankers who spoke focused on caution and risk management in the context of their farmer-clients facing increased
financial stress.
"As we look ahead, what can we anticipate in 2016 and beyond?”, asked Mike Pearson, a Grinnell, Iowa ag banker and the host of Market to Market, a weekly ag show on Iowa Public Television. “Let's start with accepting the reality that the global super cycle is done. The outside money that was driving that supercycle is gone, even though the demand is still there—people still need to eat. It doesn't mean we're heading into a permanent market, it just means fewer highs and fewer lows."
Nathan Kauffman with the Federal Reserve Bank of Kansas City said at the meeting that the "risk profile of U.S. ag has increased and appears poised to increase further."
In recent banker surveys in the Kansas City Fed district, lenders say they are seeing higher short-term lending needs resulting from weaker profits and reduced cash flow. All non-real estate farm loans jumped from around $65 billion to around $88 billion from 2013 to 2015, the Farm Progress article reported.
Moreover, the story said increased demand for non-real estate loans has come primarily for larger loans. The share of non-real estate loans above $100,000 at commercial banks has doubled from 2005 to 2015.
An important take-away message came from University of Minnesota ag economist Bob Craven: farmers who make the most money have slightly higher yields, do a better job of marketing crops, and have lower overall costs.
"It's not about home runs, it's about hitting lots of singles," says Craven, who based his comments on benchmarking figures pulled from FINBIN, a database that summarizes actual farm data from thousands of farmers, the story said.
Those factors may seem small but they make a huge difference to a farm's bottom line—and that will be critical in 2016 if weak grain prices continue. Farms in the bottom 20% of the database (multi-enterprises) lost on average $61,926 in 2014 while the top 20% netted $292,015; the average profit among all farms was $43,129. S