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  • Sep 10, 2013
    blog

    An Aussie’s view of financial, business benchmarking: Part 3: Debt levels

    If you have been following this series of articles on financial and business benchmarking, you know benchmarking is one of the top-10 best management practices worldwide in farming and ranching. Richard Heath, an Australian farmer and farm management instructor at the University of Sydney in Australia, recommended this practice to a group of FFA New Century Farmers as he was helping me present at a leadership conference in Des Moines, Iowa, this summer. Now, let’s focus on debt levels to build upon the last two articles that justified the practice and discussed profit benchmarks....More
  • Jul 30, 2013
    blog

    Where is the Work in Working Capital? 3

    A producer from Ohio really challenged a young lender the other day. He stated, “You lenders and academics preach that I need working capital reserves. However, I cannot see how working capital really works for me.”...More
  • Jul 16, 2013
    blog

    Bankers’ Views: Part 2

    In the last column, discussion centered on bankers’ views on interest rates based upon seniors enrolled in the 64th annual session of the Graduate School of Banking at LSU. The consensus was that low interest rates and an accommodative Federal Reserve in the U.S. would remain until late 2014 and into 2015. Let’s examine additional questions that were asked of the seniors through anonymous “clicker” technology....More
  • Jul 9, 2013
    blog

    Bankers’ Views: Part 1

    Everyone is watching the U.S. Federal Reserve and the central banks of the world. The bankers were asked to provide their feedback on when there would be an increase in the fed funds rate. No bankers expected an increase in 2013; however, some indicated that tapering off of bond purchases and mortgage-backed security purchases could occur....More
  • Jun 25, 2013
    blog

    Family Living Costs Gone Wild? Part 2

    In the last article, discussion centered on farm family living cost trends based upon the family living data provided by Nebraska Farm Business, Inc. The average withdrawals now exceed $100,000, with over a $60,000 variation from the top third to the bottom third of producers in the database. The largest specific line item deviations from the high to low third are in cash donations, household supplies, recreation, repairs, life insurance and, yes, the “catch-all” miscellaneous category, which was two to five times greater for the group at the high end of the spectrum....More
  • Jun 18, 2013
    blog

    Family Living Costs Gone Wild? 4

    One of the major discussion points at ag lending and banking schools is the trend in family living costs and withdrawals from farm and ranch businesses. Some lenders say that their customers are living on $40,000/year, while others state that the living withdrawals have increased dramatically, particularly in the last five years with strong grain and commodity prices....More
  • Jun 4, 2013
    blog

    Criteria for Enduring the Commodity Super Cycle and Land Value Correction 1

    If a farm is profitable and the profits are allocated properly, all financial criteria on the farm and ranch business will improve. In recent years with the extensive appreciation of land values, some have ignored profitability, or it has become a secondary priority. This is particularly true with the “millionaires on paper” as a result of inflation that have never earned a dollar of profit....More
  • May 28, 2013
    blog

    How Long Will Federal Reserve Continue "Easy Money" Policy? 4

    The stock market recently bounced to a record high of 15,000. Central banks around the world are opening up the floodgates of stimulus. In my road warrior travels, I have noticed numerous people are concerned about how long the Federal Reserve will continue their “easy money” policy....More
  • May 21, 2013
    blog

    Perspectives on U.S. Farm Debt 181

    There is considerable discussion among agricultural economists and lenders concerning the status and trends of U.S. farm debt. Let’s dig deeper into the subject and provide perspective....More
  • May 7, 2013
    blog

    Financial Shock and Stress Testing 21

    The other day a young producer was concerned because he had difficulty obtaining his operating loan for yearly operations. He stated that the lender performed financial shock tests that raised concerns about his financial status. Let’s examine some of the financial shock tests that are top of mind with your lender, and particularly the regulators that provide oversight on agricultural loans....More
  • Oct 2, 2012
    blog

    Where is the Risk?

    Many of you have faced this summer’s drought and its implications. Of course, crop insurance was a key player in this year's economics, and some producers whose land received moisture at the proper times and proper levels benefited from solid yields at very strong prices. Land values and cash rents continue to rise as profit expectations are capitalized into land prices....More
  • Sep 18, 2012
    blog

    Surprise from the Federal Reserve

    The announcement last week by the Federal Reserve’s Federal Open Market Committee (FOMC) of quantitative easing part three (QE3) came as a surprise to me and many others. I was attending a bank advisory board meeting made up of management and leading agricultural industry players, and when the announcement was made, groans were heard throughout the room....More
  • Aug 28, 2012
    blog

    Student Debt Jail House Rock

    Based on the title of this column, many of you probably think I have been listening to too much of the Elvis Channel on satellite radio during my extensive travels. No, seriously, young people in America are accumulating student debt at an alarming rate, which in turn limits their opportunities up to a decade or more....More
  • Jul 27, 2012
    video
    Corn and Soybean Digest

    2012 Drought: Financial Impact on Farmers

    While you can see the effects of the drought on the crops as you drive down the road, what you don't see is the financial impact it has on farmers. Kent Thiesse, vice president, MinnStar Bank, Lake Crystal, MN, and former Extension educator, talks about the impacts on crop farmers and their crop insurance coverage, as well as the financial impact of the drought on livestock producers. Thiesse reminds farmers to be sure to talk to your crop insurance agent during this time, as well as your lenders....More
  • Jul 24, 2012
    blog

    Perspectives on Working Capital

    I just finished teaching at the 14th annual National School for Experienced Ag Lenders in Spearfish, South Dakota. This year's group of 70 ag lenders and regulators was very open-minded and eager to learn, which was a blessing to all the instructors involved with the school. One student asked the following question, which is very relevant to lenders and the producers whom they serve....More
  • Jul 10, 2012
    blog

    Views of Risk From Your Lender’s Perspective

    Let’s go to the other side of the desk, or in today's world, the iPhone or the iPad, and view risk from the perspective of the institutions that lend you money. This perspective was drawn from a recent Farm Credit University Commercial Ag Lending class, which had participants from all across the nation....More
  • Jun 26, 2012
    blog

    What is Happening with Working Capital? 1

    At a recent Farm Credit University face-to-face meeting, Ronnie Hucks of AgFirst Farm Credit Bank asked me, “What is happening with working capital?” Let us dig deeper into his question building upon the data summaries provided by the combined databases of the Minnesota farm management education programs....More
  • Jun 5, 2012
    blog

    Euro Sector’s Impact on Agriculture

    The economic soap opera seems to be never ending for the European region's economies. Ag lenders and producers want to know how the condition of Europe will impact their loan portfolios and profitability, respectively....More
  • May 8, 2012
    blog

    Student Loan Dilemma 1

    The other day my road warrior travels took me to New England to a pre-wedding party for my son and his fiancée. After meeting everyone (boy, do they talk funny up there), a young man at the party struck up a conversation with me. He currently lives in New York City and graduated from a university three years ago....More
  • Apr 24, 2012
    blog

    How Much Working Capital Do Farmers Need?

    The other day a producer asked me an interesting question. With all the emphasis on working capital and cash lately, how much should you keep on hand? First, we must ask some specific questions. In this case, the farmer indicated that he would need a $1 million operating line of credit to purchase inputs for his 1,400-acre farm. Next, discussion focused on the lender’s advance rate. In this case the lender would loan up to 70% of the value of the producer’s assets on inputs for the operation. The lender requires the borrower to come up with 30% to margin the loan....More
  • Apr 17, 2012
    blog

    Interest Rates: What is Normal?

    At a recent Executive Producer Roundtable summit in Spokane, WA, participants asked Ed Seifried and I the question, “What is a normal level of interest rates?” Today's agricultural producers and businesses have been managing their businesses through an extended period of low interest rates. For example, the prime rate has remained at 3.5% for nearly four years. With the Federal Reserve's statement that they would keep rates low through 2014, this would be an unprecedented period of low interest rates....More
  • Apr 10, 2012
    blog

    Perspectives on Financial Liquidity

    Over the years, many of you have heard me discuss the importance of financial liquidity. In the current times of extreme volatility and global uncertainty, the rules on liquidity have definitely changed. The other day during a videoconference with producers in six locations, Mike Hosterman, an AgChoice Farm Credit business consultant who has many years of experience working with ag customers, discussed a new twist on liquidity....More
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