Back on the Road
This week I spoke to the Wyoming Bankers Conference in Riverton. In my quarter of a century of conducting speaking engagements, this is the first time the hotel (in this case a Holiday Inn) burned down (well partially).
This is what you would call one hot conference! We moved the conference to the local Eagles Club and the Holiday Inn went out of their way to accommodate us in the rooms that did not burn. The customer service by the staff and the Wyoming Lenders group turned the event from a lemon into lemonade. This is why I always enjoy visiting this great state.
Let’s continue to visit train wrecks and financial derailments this week, concentrating on those caused by the lender.
Over the years, lenders making loans do so based on the five C’s of credit. That is: collateral, collateral, collateral, collateral, and collateral. But this is one of the major reasons financial difficulty can occur. Cash flow, earnings capacity, character, and loan conditions and terms are the other C’s that are very important in bringing and maintaining balance when analyzing a situation.
Some producers have commented lately that some of the larger lending institutions are cycling out of the agricultural industry. This frequently occurs in an economic downturn when these institutions tighten standards and seek industries with less risk and greater returns. Bottom line is to seek a lender that stays with you in good times and bad.
Loss of Account Officer
The biggest fear for many of you is to call your lender, only to discover that he or she has moved on. Not only do you have to invest more time breaking in the new person, but you also have the risk that this person will not understand your enterprise or agriculture in general. A recent academic study found that the loss of an account officer increased the likelihood of a loan going bad.
Split Lines of Credit
Having more than five different sources of credit on a balance sheet is a sign of trouble on the horizon. Frequently, communications break down and credit standards are exceeded, leading to a multiple-lender train wreck.
This is the week that Chairman Alan Greenspan is to consider lowering the rate by 50 more basis points. Don’t count on it. Productivity reports are lower, which often leads to inflation, one of Mr. Greenspan’s biggest fears.
In last week’s column, I indicated "safety first" while working in the fields.
On May 7, tragedy hit our neighborhood as a 14-year-old boy was killed in a tractor accident. I was one of the first individuals on the scene and made every attempt to help save him only to watch him die in his parents’ arms. It showed me how fragile life can be.
Make sure you have roll bars and seat belts on your tractors and don’t allow young people to drive without proper training and supervision.
I am taking a break from sports picks. But honestly, I can’t wait for football!
Next week I will report to you from both the East Coast and the West Coast! And please send comments. I would like to know what you are thinking out there. 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
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