By Tim Ohlde
For most ag lenders, renewal season has wrapped up. After catching your breath, spend some time positioning yourself for next year. I’d recommend the following:
1. Talk to your borrower – Farmers like to see you in places other than your office. Farm visits are still a great way to connect with them on their terms when there aren’t any paperwork pressures to get in the way of communication. Go ride in the combine, have coffee early some morning after they finish chores, or make an effort to be visible at your county fair.
2. Stay on top of national and international ag news – Tariffs and trade discussions as well as the farm bill are hot topics right now, but next month it might be something new. Now is the time to digest information about how the larger economy, plus the weather, may impact prices going forward. Encourage your producers to stay abreast of this information as well. Fall is a great time to host a customer education session.
3. Speaking of prices, check on your customer’s marketing positions and plans – There are several steps to successfully implementing a marketing strategy. If you have borrowers who are new to marketing, check in with them. There is a temptation to not follow through with the plan or to only cover a small portion of their yield. Ask to review their plan as they move toward harvest. Encourage them to stick with the plan and discourage making frequent adjustments. They aren’t day trading, they are mitigating risk through marketing.
4. See how closely projections are matching reality – Quarterly variance testing is another great way to stay connected before renewal time. When you compare the cash flow you prepared last January with how things are actually going in July, you have an opportunity to make adjustments and have more background information before next January. As Dr. Gordon Livingston, MD, said, “If the map doesn’t agree with the ground, the map is wrong.” Now is the time to recognize that the projection isn’t holding up.
5. Go beyond an annual balance sheet – Another conversation starter might be requesting and preparing an interim financial statement. This wouldn’t be a fit for all borrowers, but for those in expansion mode, who considered selling or repurposing assets, or with extremely tight margins, it is a solid mid-year step. Pay close attention to working capital and payables as well as changes in total assets. Also monitor any new credit not affiliated with your bank.
This is the season for preparing, and that groundwork pays dividends. It reminds me of topdressing wheat in Kansas. Harvest seems like a long way in the future when you take this key step to impact yield. Likewise, with renewal season, position yourselves early for the best results.
Tim Ohlde is CEO of Country Banker Systems and CEO of Elk State Bank in Clyde, Kan. For more information, visit www.countrybanker.com.