At a recent seminar in St. Cloud, MN, a farm couple stated, “My ag lender is worth 100 basis points.” With farm and ranch customers becoming more interest-rate-sensitive their response was a surprise to the audience. One participant challenged the couple saying, “It is nice for you to say that when commodity prices are high, but I bet you were not saying that when corn was $2.25/bu. and milk was $12/hundredweight.” Their passionate response was to the contrary. The farmer and his wife indicated that the ag lender had built the 100 basis points (or 1%) advantage in suppressed commodity prices and tight economic times. How did the lender do it?

First, the institution was stable in the industry in tight economic times. The institution has a top-level senior management team that understands agricultural cycles and overall industry risk. They stand behind the front line staff and point-person ag lender with a retention strategy.


Secondly, the ag lender was very insistent on good, sound farm records and business plans from day one. The lender takes time to explain his perceptions of strengths and areas for improvement objectively, not discussing information just for the sake of compliance. The lender benchmarks the couple to other farmers and to themselves through variance analysis, as well.

Third, the ag lender has an in-depth knowledge of the industry they are involved in. The lender makes a point to attend conferences and stay up-to-date on latest developments.

Fourth, the lender is mentoring a backup lender to work with the account. This has brought another layer of stability to the working relationship.

Next, the lender paid for the couple to attend the conference. This was a way to demonstrate the institution’s commitment to the industry and the individual farm business.

Finally, in the tight times, a win-win-workout solution was developed that not only allowed the couple to stay in business, but also positioned them to be more profitable when an uptick in the cycle occurred.

The lender’s response was that a long-term, bankable customer base is built in tough times, not the good times.

Editor’s note: Dave Kohl, The Corn And Soybean Digest Trends Editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at sullylab@vt.edu.