Be proactive: Don't wait for your lender to call you

ROCHESTER, Minn. — The numbers looked bleak at the 2016 Corn and Soybean Management meeting.

John Bhend

ROCHESTER, Minn. — The numbers looked bleak at the 2016 Corn and Soybean Management meeting.

In 2014, the average southern Minnesota farmer netted $4.29 per acre on soybeans and lost $51.26 per acre on corn.

In 2015, Riverland farm business management instructor Barry Kurtz estimates the average southern Minnesota farmer will lose $94.40 per acre on corn and $31.46 per acre on soybeans.

In 2016, he projects a loss of $58.80 per acre for soybeans and $152.06 per acre for corn.

"You can see there's not a lot of things you can do, especially if you keep the rent and same and I haven't ran into many landlords who want to lower the rent," Kurtz said at the Dec. 1 meeting attended by more than 60 people. "Don't lose sleep over it, but there's not a lot of good news there."


Kurtz used land rental rates of $247.23 for 2014 corn ground and $240.72 for soybean ground. For 2015 and 2016, he used $235 across the board.

With those numbers in mind, John Bhend, a lender with Bremer Bank in Austin, stepped to the podium and talked about the Cs of credit:

Character.Banks are looking for financial or risk management skills, marketing skills, integrity, relationship management and production skills.

Capital.Banks will look at net worth — the difference between what a person owes and owns, assets that can be utilized to generate income, and focus on the debt to equity ratio.

Capacity,or a person's ability to produce goods and services. Lenders will want to be sure a farmer has sufficient cash flow to service debt.

Collateral.Lenders are going to closely monitor the market value of assets used to secure debt.

Conditions.Be aware of what's happening in the economy. How much are you willing to lose to maintain the land?

Common sense.Be proactive rather than reactive. Restructure debt as needed. Communicate your values and vision with your lender. Be realistic. The numbers are what they are. Be a problem-solver. Look for ways to survive and thrive in this economic downturn.


Bhend challenged producers to keep working capital at 33 percent of revenue, save at least 10 percent of their earnings every year and to know their costs of production via enterprise.

Farmers are going to have to cut not only business costs, but family living costs, he said. Get rid of equipment that was purchased when prices were robust and find a way to generate more working capital. Keep debt to a minimum, he advised.

The producers who will survive this downturn are the ones who have a strong, productive asset base, have records that talk to the business, know their cost of production via enterprise and keep working capital at 33 percent of revenue.

Now is the time to lock in low interest rates on existing debt, Bhend said. Focus on productivity when it comes to investments.

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