This past week I was in Kearney, NE conducting the Agricultural Lenders School. It was my 15th time teaching there and over 800 Ag bankers from 16 states have graduated from the school.
This year’s school had 50 participants from seven states in the Midwest. I asked them to share some of their major challenges.
First and foremost was the weather. Many indicated that this fall and winter will be a difficult time since government supports may not assist their borrowers because of yield and price mechanisms.
Those loaning money to beef producers felt that the purchases of extra forages combined with the lower prices would represent a profit crunch.
Another challenge was the transition in agriculture and the lack of young people as borrowers.
The bankers were also facing intense pressure from Farm Credit and John Deere concerning interest rates and terms.
Many said that they were going to have to say no to some of their customers for the renewal of operating money.
It was surprising to see the number of bank examiners enrolled in my recent lending schools. Usually this is a sign of problem credits in agriculture.
We had an outstanding panel of producers at the school. A young couple indicated that they have lowered their total cost of production including variable cost, depreciation and living withdrawals to $1.78 per bushel of corn. On the reverse side, the price per bushel of corn was $2.15. At an average yield of 220 bushels per acre, they are still profitable with net income of $80 per acre. Now that’s effective management.
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Editors' note: Dave Kohl, Soybean Digest Trends Editor, is an ag economist at Virginia Tech. He recently completed a sabbatical working with the Royal Bank of Canada. He is now back at Virginia Tech with his academic appointment, which is teaching, extension, and applied research.
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