This has been a major question asked of me at the lending schools, i.e., Graduate School of Banking at LSU and the Northeast School of Agricultural Lending at Cornell University.
First, it will provide the necessary cash flow to continue making operating and long-term loans to the top two-thirds of producers. For the lower one-third, pricing for risk and government quarters will be the mode of operation.
Second, land values and cash rents will continue steady to slightly increasing. You will see more asset or collateral-based lending in the Midwest as lenders become more pressed to make loans to meet marketing goals. Unfortunately, cash flow and profits eventually pay back loans, so any changes in Farm Bill tactics could result in a farm crisis like the 1980s. On the East and West Coast crescents, you will see more profit and cash flow lending practices, particularly in areas where there are few government payments.
The age wave will continue. The age of the customer base will increase as the artificial high land values make it difficult for young people to raise capital to get started. With the government payments, mechanization, and more older producers depending upon farm management services, a person could own a farm and still semi-manage a grain operation as long as major health issues are not prevalent.
Road Warrior View!
Boy, it’s been a great time of renewal of the mind, body and spirit. It’s been great listening to and conversing with academic and business leaders!
It’s been lots of fun running and playing basketball on other campuses. There’s nothing more serene than running across LSU early in the morning listening to Mike the Tiger under the stadium or running the Gorges at Cornell.
My e-mail address is:sullylab@vt.edu
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.
To see Dave Kohl's previous road warrior adventures type Dave Kohl in the Search blank at the top of the page.
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