A trip to San Antonio, TX, to address the American Bankers Association’s Agricultural Conference is always a highlight of the year. This year was no exception as John Blanchfield, leader of the agricultural division, and his staff, along with the banker planning committee excelled once again. An extra for our bankers was that the women’s basketball teams from the Universities of Tennessee, Connecticut, Texas and Texas Tech stayed at our hotel. Coaches and players were very personable and mixed well with our attendees. This represented my 32nd consecutive year addressing and being involved in the conference.
Some perspectives and highlights from this year’s conference include thoughts from many of the speakers.
Dairy prices should rebound in late 2009 and later in 2010 because dry weather in New Zealand and Australia will increase export potential.
Farmland prices will hold steady in many areas of the country, particularly with low interest rates and relatively high commodity prices.
Agricultural bankers will focus on core deposits and core customers. Federal and state bank examiners are applying pressure on reviews, particularly poor quality information from producers and substandard credits.
One community banker stated that his FDIC assessment will be more than a $4 million drain on profits. By the way, banks must prepay this assessment three years in advance.
Larry Martin of Canada stated that there could be de-globalization through tariffs, trade sanctions and food-quality issues between countries if world economies struggle. The bottom line is that protectionism is rising with no long-term winners – only losers. There will be an increase of technical issues rather than tariffs to forestall trade.
Farm debt contrasted to the 1980s is very concentrated among larger producers who generate a majority of the revenue. A major issue in the near future may be that many producers are too large to finance, rather than too big to fail.
I moderated a banker panel with over 100 years of combined experience. An interesting point raised was that there is a sixth “C” of credit other than the traditional five – capital, conditions, capacity, character and collateral. What is the sixth C? The cranium, or the mind. The bottom line is that it takes a better mind to manage a $3 million credit as opposed to a $300,000 credit.
Editor’s note: Dave Kohl, Corn & 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 firstname.lastname@example.org.