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Tough decisions are being made in farm country

Ag bankers say they’re nervous about the year ahead for farmers.

Shan Hanes is a banker in Kansas and chair of the Ag and Rural Bankers Committee for the American Bankers Association.  “The biggest concern frankly, as we move into 2019 is cash flows and with these low commodity prices that we’re looking at, it’s hard to make cash flow work.  It’s hard to make something breakeven, much less profitable.”  He says lenders have been working with farmers to reduce costs and are giving rental rates and input supplier agreements a hard look for 2019.

Past chairman Curt Covington with Farmer Mac says farmers and lenders are being forced to ask tough questions about their equity.  “I’m not sure anybody expected the downturn to last this long and I’m sure trade and tariff talks that we’re having hasn’t helped much.”

He says there’s not much liquidity left to burn, and some farmers are becoming more leveraged.  “You can’t borrow you’re way out of this problem.  There comes a time when you have to strategically make very uncomfortable decisions.”  If there’s no fat left to trim, Covington says farmers might need to slow down the business or sell some of their real estate.