The troubles that have engulfed the banking industry the last two years have created uncertainty among farmers and ranchers about whether they can count on lenders to help finance future expansion plans.
Two speakers at the Cattlemen’s College at the 2011 Cattle Industry Convention and NCBA Trade Show in Denver on Wednesday attempted to allay those fears during a wide-ranging presentation on “Financing in the Age of Uncertainty.”
Adding to the general feeling of anxiety is the distinct possibility that Congress might pass new federal financial legislation that could further complicate agricultural lending, said Rod Alt of Amarillo, TX and Jud Jesske of Omaha, NE.
“Wells Fargo does not anticipate an adverse effect on agribusiness lending from the financial legislation but continues to anticipate rapid growth,” says Alt, senior vice president and loan team manager for Food & Agribusiness at Wells Fargo in Amarillo. “Creditworthy clients will continue to find it easy to secure access to capital.”
Despite the stories about credit drying up following the banking crisis in 2008, Alt says banks have continued to have money to lend. “The problem was finding someone who was creditworthy during the recession.”
“We will always have to deal with legislative issues,” says Jesske, vice president at Farm Credit Services of America. “That’s been the case since the depression. We have to be flexible enough to work within the regulatory framework.”
Although they admit they regularly fight for business with competitors in their regions, Alt and Jesske put together a list of common issues confronting farmers and their lenders.
One of those revolves the expected expansion of the cattle herd. “The market is telling me to expand,” Jesske says. “But what will my lender think? That is a difficult question to answer but one most of us would rather the producer decide to ask than the other way around.”
“You need to know your numbers and know your story,” when considering expansion, Alt adds. “You should be able to answer questions about how adding cows will affect your operation. Will you have to add labor, equipment?”
“You need to help us understand your operation and know what your short-term and long-term goals are,” Jesske says. “The other side of that question is ‘If I want to maintain my present operation, will I continue to have access to credit in coming years?’”
Another issue concerns the structure of the operation. “Regardless of whether you want to expand or maintain your current size, someone has to be the CFO (chief financial officer) and have a clear and complete picture of the operation’s financial situation,” Alt says. “Cattlemen who can demonstrate an intimate knowledge of their financial picture; have a track record of producing profits; and operate with honesty and integrity will continue to have access to credit in the future.”