Selling Your Lender On Agriculture

Many of you reading this column serve on bank, Farm Credit and agribusiness boards of directors. Recently an agricultural banker in Arkansas asked how one could go about selling senior management on why they should loan monies to agriculture.

First, agriculture is the leading industry in many rural communities. Historically agricultural producers have had the reputation of paying back commitments even in distressed times.

Second, many agricultural loans lead to other business such as checking, savings and investment accounts. The typical farm or ranch balance sheet averages 11.8 credit and financial service opportunities, thus they are rich for mining related services.

Many farms are family businesses that will be passed down the generations. This represents a lifetime of business to a lending institution.

Finally, to those lenders that are thinking about disassociating with agriculture for greener, more glamorous fields of business, some of the latest research by Ed LaDue at Cornell University has found agricultural loans to be very profitable, and in fact the most profitable of any segment of the portfolio.

To those who are advocates of agriculture serving in leadership positions, keep your institution on the right track.

The Road Warrior of Agriculture

My e-mail address is: sullylab@vt.edu

Editors' 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.

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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