More in Finance

  • Nov 3, 2015

    Financial ratios for ag operations

    Producers who manage for profit and sustainability should use ratios to measure performance. Then, identify the source of any problems and proactively develop strategies for solutions....More
  • Oct 13, 2015

    The great commodity super cycle impact on family living cost

    While navigating your business through a commodity price reset, it is important to ask where your finances stand. Do you have separate personal living and business expense budgets?...More
  • Oct 6, 2015

    Ag lender dilemma: Increased oversight, regulation

    Increased oversight and regulation limit your lender’s flexibility. Be aware of this situation and be prepared! Make sure your financial records are up to date and accurate. Maintain adequate working capital....More
  • Sep 8, 2015

    Complete, accurate farm financials necessary for ag lenders

    In the past, the lender may have completed the financial records for the borrower in reaction to stiff competition or perhaps, did a simple credit score check before allocating credit. These methods, however, are now history. Lack of complete and accurate financial records is indeed a serious issue; both for the lender and the producer....More
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    Aug 31, 2015

    Advice for new ag lenders 1

    Increasingly, new lenders will be less familiar with agriculture and farm backgrounds. Further, expect individuals from varied backgrounds, national origins as well as perspectives to enter agricultural lending....More
  • Dec 2, 2014

    What happens when repayment fails?

    Throughout the country many lenders and producers dealing with the grain industry may face situations when repayment is not possible this winter and into 2015. With high cash rents and leases, along with input cost creep, there is a strong possibility that 2014 and 2015 may not cash flow and may show negative repayment capacity for many grain producers. Now what?...More
  • Oct 28, 2014

    Tips for farmer-lender meetings, communication

    Recently, a farmer asked a panel I was a member of, “How often should farmers and lenders communicate during the year, particularly during the planning season?” The panel recommended having a meeting during planning season followed by a quarterly or semi-annual assessment, along with a year-end evaluation, which is imperative to determine financial success....More
  • Jul 22, 2014

    Back to the Future, Part 2: Ag lending and financial management

    An interesting trend in both the 1980s and today is that late in the economic cycle, many lending institutions saw opportunity in the agriculture industry, and thus came into the field of agriculture for profits....More
  • Jun 10, 2014

    Working capital: The shock absorber

    While 33% working capital to revenue is appropriate for cash grain and market livestock businesses because of significant inventory, is this level of working capital too aggressive for dairies, since milk inventory is picked up every day or every other day?...More
  • Mar 18, 2014

    Farm management, finances make difference in profit

    After analyzing a data summary of farmers in low, middle and high income brackets, David Kohl shares some core perspectives on asset turnover, coverage ratio and debt servicing ability and profit margins in agriculture....More
  • Mar 11, 2014

    3 Benchmarks farmers and lenders need to know

    There are three benchmarks every producer and lender needs to know when handling the moderating grain industry and the positive economics of the livestock sector: the current ratio, net working capital and working capital to gross revenue ratio....More
  • Dec 17, 2013

    Perspectives on Farm Finance: Part 1 1

    The great commodity super cycle has kicked in with high prices. However, the top 20% of producers have developed a total system of management which includes operations, risk management, finance and marketing....More
  • Dec 3, 2013

    Farm Balance Sheets: 2010s vs. 1980s

    The U.S. farm balance sheet from a debt and equity position is much stronger now than it was in the 1980s. The debt to asset ratio in the 1980s ranged from 20% to 24%, compared to 10% today. That being said, debt was dispersed over a larger number of producers in the prior periods....More
  • Nov 26, 2013

    Tips for high-quality balance sheets 31

    High-quality balance sheets initially can be difficult and time-consuming to prepare, particularly given all the livestock and crops involved in diversified and multi-entity operations, but if updated in a timely manner, they're a good financial management tool for farm operations....More
  • Nov 19, 2013

    Business tips for low-equity, young farmers: Part 2

    If you're a young, low-equity farmer, David Kohl recommends examining incentive programs specifically for beginning farmers, building capital when experiences are profitable and seek a relationship-based lender....More
  • Nov 12, 2013

    Business tips for low-equity, young farmers: Part 1

    What advice would you have for a low-equity young producer either launching or growing their business? This was a question from a group of 34 lenders representing nine states in our Farm Credit University blended course which includes online and face-to-face training. Dr. Alex White from Virginia Tech and I tag-teamed this challenge with rapid fire responses....More
  • Sep 17, 2013

    An Aussie’s view of financial, business benchmarking: Part 4: Liquidity

    Net working capital, measured by current assets minus current liabilities, is a measure of the current economic times in agriculture. To make it a relevant measure of liquidity, net working capital must then be divided by the business revenue. It is important to calculate this metric each year at the same time of year to maintain consistency....More
  • Sep 10, 2013

    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

    Where is the Work in Working Capital? 10

    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

    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

    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

    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

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