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A Farm Lender's Perspective

Farm profits are all over the spectrum these days. Customers with negative profit margins are probably giving some lenders sleepless nights. But, it depends on their perspective of the situation.

Tim Koch is senior vice president and chief credit officer at Farm Credit Services of America. He says he doesn’t panic when agriculture is in a slump because he knows it’s a cyclical business.

"You know, if we go back over the last 6, or 7, or 8 years, our focus was on insuring that we saw what was coming. We knew that $5 and $6 corn prices was probably not sustainable over the long term. So, we really focused on insuring that we didn’t work with producers to overleverage them," he says. "We’ve been preparing for the cycle that we’re in, and so there’s really not a value in panicking."

From his perspective, Koch says it’s unlikely that prices will lead us out of this current cycle, so they’re working on cost reduction with their customers. However, being a good counselor is just as important as crunching numbers.

"There’s no doubt that when you’re entering the 3rd or 4th year, there’s individual producers who experience more stress than others. We really view that as helping them see what their options are, and that’s really part of their planning and understanding," says Koch. "Where their costs are, where the market is today, and what their options are. We like to work with producers to understand, and share with them what we see as their options."  

Koch says they will continue to be patient as producers make the adjustments needed to get back to profitable levels. 

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