‘Tough discussions’ ahead for bankers, farmers

It's part of agricultural bankers' job description: Work with borrowers and offer constructive insights into how to financially strengthen clients' farming operations.

It’s part of agricultural bankers’ job description: Work with borrowers and offer constructive insights into how to financially strengthen clients’ farming operations.

Expect more -- possibly a lot more -- of that as area farmers and their lenders prepare for the 2019 crop season. Weak farm profitability, aggravated by poor soybean prices, will cause some  lenders to ask tough questions that could require difficult decisions on everything from the timing of fertilizer purchases to potentially giving up farmland.

“With the headwinds we’ve been facing, our level of engagement with clients has been rising for the past several years. That will continue this winter,” said Nate Franzen, president of the Agri-Business Division of First Dakota National Bank in Yankton, S.D.

“We’ll be encouraging producers to take a hard look at their operations and to make adjustments as necessary,” he said.

The extent of bankers’ closer involvement  will vary across the region, said Kent Thiesse, senior vice president of MinnStar Bank and farm management analyst in Lake Crystal, Minn.


Some farmers enjoyed relatively good yields and, if they also sold some of their 2018 crop in advance of harvest at relatively good prices, may have come through the crop year in fairly good shape. Consequently, these producers may face smaller challenges going into 2019 and might not need as much input from bankers, Thiesse said.

In contrast, farmers whose yields were hurt by bad weather or who may not have sold as much 2018 crop in advance, or both, probably are dealing with greater financial concerns and may need more input from lenders, he said.

But ag bankers, on balance, will work more closely with clients this winter, Thiesse said.

Among the topics that ag bankers say potentially might be discussed with clients: paying less to rent land, giving up rented land, selling some land, selling some machinery, restructuring loans and better timing the purchase of fertilizer to lower costs.

Giving up land might be particularly difficult for producers, Thiesse acknowledged.

Often, they bought or rented additional land with the goal of making their operation more efficient, so giving it up may seem illogical or counter-productive, he said.

“But if doing it increases your working capital and strengthens your operation, it might be an option to consider,” he said.

Ag bankers realize that clients may not like what they hear, Franzen said.


“It’s never enjoyable to have these tough discussions,”but doing so is part of ag bankers’ job, he said.

There have been reports that some ag bankers will strongly encourage clients, especially ones who have relied heavily on soybeans in the past, to cut back on beans in favor of other crops in 2019.

Franzen, asked about that, said bankers will urge ag producers to consider all options, including which crops to raise. He also said he thinks 2019 soybean acreage will drop in areas where producers have a number of viable options.

Thiesse said sound agronomic practices and crop rotation will influence whether a farmer plants fewer soybeans next year.

Lender suggestions for farmers Ag bankers offer these suggestions for farmer-borrowers:

  • If 2018 was difficult financially, don’t postpone going to visit your banker. In fact, the greater the financial challenge, the more important the need to begin addressing it quickly.
  • Extension, U.S. Department of Agriculture and state agriculture departments have a great deal of information on financial challenges facing producers, as well as the emotional problems those challenges can bring.
  • Remember that ag lenders and farmers have the same goal. “We both want your operation to succeed,” Thiesse said.
  • The region has many good, experienced ag lenders. “If you don’t have one now, find one you're comfortable with and then roll up your sleeves and get to work,” Franzen said.
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