This week I had an opportunity to spend four days with agricultural lenders. Here’s a view of agriculture from their side of the desk.
It’s interesting to note that lenders, like producers, have very similar issues that impact the success of their businesses, such as government policy, technology, competition and the economy. Some lenders are also producers or have part-time businesses that give them special empathy for agricultural issues.
Lenders were asked to tell of some of the biggest producer train wrecks they’d observed over the years. Here are some of the more popular ones.
Many lenders indicated that withdrawals to buy unnecessary items have increased dramatically among producers who can ill afford them. Many are seeing the buying of killer financial toys not needed in the business, such as airplanes, SUV’s, oversized trucks, snowmobiles and boats.
Those who have neither the income nor ability to afford a high-living style are resorting to credit cards.
Another favorite derailment: that producers purchase capital assets and then finance them for tax reasons. As one lender indicated, producers will go broke attempting to minimize taxes.
Next week we’ll discuss train wrecks and derailments caused by the lender.
Tip of the Week
When estimating family living withdrawals, figure on a monthly basis and add 25% for a good ball park estimate.
Financial Benchmark Perspective
Average farm family living costs for a family of four are about $40,000 annually.
I still enjoy watching Karl Malone and John Stockton using the pick and roll. I wish they had a better supporting cast to win a championship.
P.S. Be careful in the field. You all are putting in long hours. Think safety first.
My e-mail address is:firstname.lastname@example.org
Editors’ note: Dave Kohl, Soybean Digest Trends Editor, is an ag economist at Virginia Tech. He currently is on sabbatical and working with the Royal Bank of Canada.
To see Dave Kohl's previous road warrior adventures, click here