Webinar: Farm Credit in 2020: A Lending Institution Perspective (Nov. 5, 2020)
Mark Jensen, president and CEO of Farm Credit Services of America
Ben Herink, farm loan manager with the USDA Farm Service Agency
Ken Mehlin, executive vice president and chief credit officer of Bruning Bank
Daryl Wilton, executive vice president and chief credit officer of Cornerstone Bank in York
With wide swings in the stock market, employment, GDP and other economic indicators, 2020 may be one of the most volatile years since the Great Depression. This panel discussion will focus on how farm lending has changed in 2020 and what agricultural lenders who provide credit to Nebraska producers anticipate going forward.
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[00:00:10.530]Larry Van Tassell: Good afternoon, and thanks for joining our webinar today. I'm Larry Van Tassel. Head of the Department of Agricultural Economics
[00:00:18.510]Larry Van Tassell: This series of webinars is produced by our extension farm and ranch management team and typically runs every Thursday at noon.
[00:00:26.160]Larry Van Tassell: You can find recordings of the sessions a schedule of upcoming webinars and other email@example.com l.edu
[00:00:36.690]Larry Van Tassell: One resource that we would like to highlight is the Nebraska rural response hotline in times of stress, knowing when to reach out is essential.
[00:00:47.130]Larry Van Tassell: The Nebraska rural response hotline can provide many mental health counseling information regarding legal assistance financial clinics.
[00:00:58.170]Larry Van Tassell: Mediation and more the hotlines toll free number is 1-800-464-0258. In addition, a wealth of resources related to stress and wellness can be found at rural wellness.us l.edu
[00:01:18.990]Larry Van Tassell: During today's presentation, please use the chat box or a Q AMP. A located at the bottom of your screen to ask questions, which will work to address at the end.
[00:01:29.760]Larry Van Tassell: With rights White's swings in the stock market employment GDP and other economic indicators 2020 may well go down as one of the most volatile years since the Great Depression.
[00:01:43.770]Larry Van Tassell: How have financial lenders and their customers in Nebraska agriculture handled these shocks and what do they expect going forward.
[00:01:53.850]Larry Van Tassell: We're glad to welcome a panel of industry professionals to help answer these questions and more. I'll ask them to unmute at this time and introduce themselves first band herring welcome Dan
[00:02:08.430]Ben Herink: Welcome. Thanks for having us to all good afternoon and good morning to our producers and agribusiness men joining from the western part of the state.
[00:02:18.510]Ben Herink: As Laura mentioned, my name is Ben herring. I'm a farm loan Specialist with the USDA Farm Service Agency and I'm located here in our state office in Lincoln.
[00:02:27.660]Ben Herink: I've been with FSA for 15 years I've held various roles across the state of Nebraska, but really the last several years here.
[00:02:36.660]Ben Herink: I've been in our state office and my role here is is I I handle really the debt collection and in the portfolio servicing for our entire direct loan portfolio across the state of Nebraska for FSA. So again, thank you to all. Thank you.
[00:02:53.130]Larry Van Tassell: We're also glad to be joined by Mark Jensen, Mark.
[00:02:56.940]Mark Jensen: Thanks, Larry. And good afternoon to everyone, thanks for taking time out of your schedule to join us today.
[00:03:02.610]Mark Jensen: As Larry mentioned, I'm Mark Jensen, on the president CEO Farm Credit Services of America we're headquartered out of Omaha.
[00:03:09.540]Mark Jensen: I've been with the organization 28 years started off as an officer and and serving the CEO role today. I grew up on a dairy farm and Eastern Nebraska. Now my Syracuse and am a 1992 graduate of university Nebraska with the Aggie come degree.
[00:03:27.120]Larry Van Tassell: And thank you. Next we have Ken Malin, good afternoon camp.
[00:03:31.800]Ken Mehlin: Oh, Larry. Thanks for inviting me to join.
[00:03:35.700]Ken Mehlin: Appreciate the opportunity
[00:03:38.370]Ken Mehlin: I am the executive vice president and chief credit Officer for the Bruning bank, I am located in Carney. I grew up on a farm in the extreme southeast corner of the state humbled.
[00:03:52.050]Ken Mehlin: And that has shaped some of my philosophies and certainly a shape my lending career.
[00:03:59.790]Larry Van Tassell: Hey, we're also joined by Darrell Wilton Darrell thanks for joining with us.
[00:04:05.580]Daryl Wilton: It's my pleasure. Larry, it's, it's nice to be here, Darrell. Well, I grew up in. Now on a small dairy dry land farm in southern Nebraska down by superior
[00:04:17.460]Daryl Wilton: Graduated from you and Ellen 76 and I've spent that time since then and the agricultural industry. The last 28 here at Cornerstone bank in New York. I work in the London area and all different types of lending.
[00:04:36.150]Larry Van Tassell: All right. Thank you. Well thanks again to for all of our participants today for taking the time to be with this.
[00:04:42.480]Larry Van Tassell: The format of today's webinar will we have a series of questions that we'd like to just put out there and let the let our guests respond to them.
[00:04:53.580]Larry Van Tassell: First question 2020 may go down is one of the most volatile years since the Great Depression with wild swings in the stock market employment GDP, etc.
[00:05:04.950]Larry Van Tassell: What if any adjustments have your lending institutions made to deal with the increased uncertainty and validity, especially as it relates to farm business borrowers ask mark up to address that first for us.
[00:05:21.780]Mark Jensen: Yeah. Thanks, Larry. So can't agree more. This is clearly one of the most volatile and unfair sort unforeseen years we've ever seen. I'm sure all of you would agree and
[00:05:32.010]Mark Jensen: You know, I did maybe just start off by answering the question of, you know, honestly, I can't really say that we've made huge adjustments and let me tell you why.
[00:05:40.920]Mark Jensen: You know, agriculture is all we do you know we're AG lenders and
[00:05:44.850]Mark Jensen: You're not in the Atlantic business if we aren't used to some level of volatility. It seems like at any given time you've got an industry that
[00:05:51.270]Mark Jensen: May be going through some psychic type of cycle. So what we've really focused ourselves on is just positioning the organization to be here through those cycles.
[00:06:00.390]Mark Jensen: You understand it's a vibe. It's a volatile business and really try to understand how those cycles impact producers and then what it's going to mean to you know the future performance of both them and their organization.
[00:06:12.450]Mark Jensen: You know, our overall philosophy is to, you know, be conservative during the good times and courageous during the challenging times so that positions us to be, you know, available through those cycles and
[00:06:22.650]Mark Jensen: You know, we feel like we've, you know, positioned our capital position our earnings and our overall capabilities and people
[00:06:28.350]Mark Jensen: To be there during whatever agriculture throws at us. Now with that being said,
[00:06:33.540]Mark Jensen: The things we have done specific to this year and in light of what's occurred is, you know, I think one of the biggest things all of us could do is AG lenders is be there and be present.
[00:06:42.780]Mark Jensen: And be there for your customers when they're going through those type of time. So, you know, I would say this year we've tried to focus on that more than ever.
[00:06:50.010]Mark Jensen: We tried also you know server role in education, whether it's the PPP program or some of the other
[00:06:55.260]Mark Jensen: You know, government programs that came out with, you know, webinars or videos or whatever we needed to do to try to connect
[00:07:01.950]Mark Jensen: You know the customers with as much information as you can because, you know, during those volatile times it's usually that vacuum of information that you know becomes the most challenging for a lot of folks.
[00:07:12.300]Mark Jensen: You know, during this time, we've got a standard Disaster Assistance Program that we pull off the shelf. When something, you know, really drastic occurs, which
[00:07:19.890]Mark Jensen: If you take a look. Look at the floods last year and the pandemic this year. It feels like we never put that program back on the shelf.
[00:07:26.070]Mark Jensen: It seems like we're trying to deploy it all the time. But, you know, it offers cash flow asst loans and working capital assistance and
[00:07:33.030]Mark Jensen: An infrastructure loans, like what happened over in Iowa. When we have a lot of facilities and Vincent were blown down so we deployed that program we participated in offering the PPP
[00:07:45.090]Mark Jensen: really emphasized, and you know, try to be out there with our crop insurance programs and education over this last year, you know, crop insurance still is the underpinning foundational risk management tool for our producers.
[00:07:57.780]Mark Jensen: You know, lower interest rates did off and offer an opportunity for customers to readjust their rates if that's available. So we tried to proactively get out there and
[00:08:08.100]Mark Jensen: And make customers aware that, hey, there are opportunities to lower your rate right now. So, you know, doing some type of conversion might be the right thing and
[00:08:16.890]Mark Jensen: I think we did about 22,000 of those for about $7 billion, which saves our customers about $20 million worth of interest. So that was a you know a big effort this year.
[00:08:25.890]Mark Jensen: And then, you know, our ongoing focus on, you know, beginning programs and
[00:08:29.700]Mark Jensen: You know, particularly during these more volatile times, making sure that those programs are available that people are aware, and we're, you know, making sure people understand we're here to help.
[00:08:38.790]Mark Jensen: Not only the industry, but the young producers, which represent the future. So, you know, all Larry that's probably how I it was somewhat up with. I wouldn't say there's massive changes. I think we tried to deploy the capabilities we have which are needed during these times more than ever.
[00:08:54.240]Larry Van Tassell: All right, thank you. Darrell, do you have anything to add to that.
[00:08:57.840]Daryl Wilton: Well, much like Mark. There was a lot of uncertainty within the industry within the banking industry as well. We tried not to we just tried to be stable.
[00:09:08.760]Daryl Wilton: And be proactive for our customers. We did not make any changes as far as things that we were doing or things we were asking for
[00:09:18.270]Daryl Wilton: It was just basically a case of just being there for them for whatever they need and trying to be proactive. Again, with all the government programs and the available resources to them.
[00:09:31.770]Larry Van Tassell: Thank you. Van Punjab.
[00:09:35.010]Ben Herink: Oh, I mean I'd echo the comments of Mark and Darryl
[00:09:39.090]Ben Herink: You know as important as it was an FSA reacted and and did some different things, and I'll touch on those flexibilities. It's also important not to overreact. And so
[00:09:47.730]Ben Herink: You know, an example of not overreacting. I think on our part is, you know, we have planning prices that we set every year.
[00:09:54.210]Ben Herink: And at the onset of the pandemic when we saw a lot of volatility and prices and it was important for us not to overreact and adjust those prices.
[00:10:02.700]Ben Herink: You know, we recognize a lot of the loans that we make an FSA can be longer term loans. And so I think it's important for us to recognize that
[00:10:11.430]Ben Herink: You know, we know everyone's probably experiencing short term stress and an operation and cash flow problems.
[00:10:18.150]Ben Herink: But does that operation show long term viability or or has it shown you know viability in the past. And so we want to make sure
[00:10:24.840]Ben Herink: You know that we're here in those times and able to continue to extend credit to do those who, you know, may not be able to obtain commercial credit for the same reasons.
[00:10:34.350]Ben Herink: We wanted to make sure we had all options on the table. And so some of the flexibilities that we, you know, kind of rolled out nationally and certainly in Nebraska here is is we allow for extended time frames for both loan processing for response to servicing requests.
[00:10:51.360]Ben Herink: We Institute. A lot of you know we're by nature FSA is kind of a customer facing agency and we really had to think outside the box. You know, like the webinar today. We used to do a lot of virtual closings
[00:11:04.110]Ben Herink: The use of, you know, authenticated digital digital signatures. You know where we're not legally prohibited to do so, you know, to close loans and so
[00:11:12.270]Ben Herink: We wanted to make sure that we were as flexible as possible. We also still have a moratorium.
[00:11:17.910]Ben Herink: On any new accelerations and foreclosures and that's kind of kept getting pushed back at currently goes through
[00:11:23.760]Ben Herink: You know the end of the calendar year. And we could see that go you know well into 2021 and i think that you know de stresses, some of our producers, a little bit, knowing that that they that they've got some time there to work with.
[00:11:36.630]Ben Herink: One of the big things that we probably new to the board is you know as natural disasters are announced we historically have had a program that allows a producer to set a payment aside to the back of their loan.
[00:11:47.700]Ben Herink: And that's for dedicated national disasters. We also were able to declare really coven a presidential disaster and so that allows an operation.
[00:11:57.090]Ben Herink: That we have a borrower that was impacted by coven 19 which you know there's a lot of impacts and we see that quite widespread.
[00:12:04.440]Ben Herink: To take the payment and set it aside to the back of their note to provide you know immediate relief in their cash flow without a lot of, you know, undue hardship or extra paperwork from the producer.
[00:12:16.230]Ben Herink: Are guaranteed lenders were allowing deferrals and forbearance is there, you know, in some cases,
[00:12:22.680]Ben Herink: And I just want to touch one you know moment on the program side which is, you know, kind of a separate entity of the phone loan side of therapists say
[00:12:30.300]Ben Herink: You know, we have a myriad of safety net programs that are out there and disaster programs. And so, you know, CIF app and see if they have to have been major disaster programs.
[00:12:40.680]Ben Herink: And really undersea FAB to almost every Nebraska raised commodity, whether it's Cropper livestock is eligible under the that program.
[00:12:50.220]Ben Herink: And sign up for that program will continue through December 11 and so I can't urge producers enough that if you haven't already signed up for that.
[00:12:57.360]Ben Herink: You know, that's certainly money that's going to be out there and available to you that could be very critical for your ability to repay not only this year but but for your cash flow prospects for next year.
[00:13:07.920]Ben Herink: 2021 arc PLC sign up is going on right now enrollment. And then we also have programs like dairy margin Coverage Program. So take advantage of those programs. They're there to help producers.
[00:13:23.070]Larry Van Tassell: Can any any additional thoughts there.
[00:13:26.490]Ken Mehlin: Um, I think one of the things we we really need to do is is educate customers.
[00:13:33.750]Ken Mehlin: On on their financials and what we see and trends and the financials and really have honest conversations about what we see. And, you know, if something isn't working.
[00:13:47.760]Ken Mehlin: We need to try to figure out why it's not working and and you know we've been in pretty tough AG economy for the last few years, so
[00:13:57.060]Ken Mehlin: You know, it's, it's this year is, you know,
[00:14:01.740]Ken Mehlin: A tough year for some different reasons, but the main things are just communication, communication with the customers.
[00:14:12.060]Larry Van Tassell: All right. Thank you. Our next question. Have some substantive changes to underwriting been implemented to maintain or improve the quality of credit in your loan portfolio Darryl we'll start off with you.
[00:14:27.090]Daryl Wilton: Well, thank you. Honestly, we did not make any changes within our underwriting and the one thing we've started again and singing the praises of having a marketing plan.
[00:14:40.620]Daryl Wilton: Just for customers use and being able to have a plan for how you're going to market your grain, as opposed to waiting until it gets close to cleaning out the band and selling. So, otherwise there hasn't been any change.
[00:14:58.500]Larry Van Tassell: All right, Ben.
[00:15:00.420]Ben Herink: Yeah, I agree with Darryl you know as an FSA, you know, major changes to underwriting, you know, just by the nature of our clientele. You know,
[00:15:09.540]Ben Herink: 70% of the the loans that we made last year and a direct basis in Nebraska were to beginning farmers and ranchers. So someone in their first 10 years of operation and then really, the other part of our clientele is is distressed producers and so
[00:15:22.590]Ben Herink: We, we, by nature are supervised credit lender that works pretty closely and has pretty thorough underwriting standards.
[00:15:30.690]Ben Herink: It's, you know, so no major changes there, you know, access to land and access to capital are are always barriers.
[00:15:39.150]Ben Herink: That producers who come to us are seeking. And so I think more of just a renewed focus on that supervise credit, you know, a renewed focus
[00:15:48.510]Ben Herink: As we move forward and kind of maintaining our communication as we've touched on with our borrowers, making sure we're getting out there when we can to see them.
[00:15:57.330]Ben Herink: Because when when times get tough and stress starts to mount it really does fall back on communication and and you know that that reduces a lot of stress when I think that the borrower knows what options they have available to them and what their lender is thinking
[00:16:15.810]Larry Van Tassell: All right, Ken. How about you.
[00:16:18.900]Ken Mehlin: One fact I've heard a lot of already this morning from the folks on the panel is stability.
[00:16:25.770]Ken Mehlin: You know, not making a lot of wholesale changes just being consistent underwriting consistent treating
[00:16:35.520]Ken Mehlin: Customers consistently and not panicking during the tough times, and I certainly think that's what I'm hearing from the panel this morning, so
[00:16:47.310]Larry Van Tassell: All right, Mark.
[00:16:49.140]Mark Jensen: Yeah, probably have a lot of similar comments or echo some of the same things of
[00:16:54.600]Mark Jensen: I would say we made any changes. I think for all of us. We all build our underwriting standards to kind of through the cycles and you know built around long term viability. So you know really what we've been emphasizing is really a focus on the fundamentals and
[00:17:09.270]Mark Jensen: You know, I agree with earlier comment that you know marketing management is part of that, if you think about
[00:17:15.510]Mark Jensen: You know, a three legged stool some really important skill sets that producers need today is one they need really strong production management skills which
[00:17:23.370]Mark Jensen: You know, frankly, would, in today's world. That's pretty prevalent out there, a lot of people produce a really good crop in fact us producers, you can argue are really good at production.
[00:17:32.940]Mark Jensen: Maybe sometimes maybe too good, but we do a really good job of filling the band, but a lot of times you know the other two legs in that school
[00:17:41.730]Mark Jensen: Marketing Management and financial management are just as important, if not important. So the decisions you make when you pull the grain out of the band is
[00:17:49.680]Mark Jensen: Maybe as important as the production decisions you made to fill it. So anyway I focus on the fundamentals and those skills is what we really been reinforcing
[00:17:58.470]Larry Van Tassell: All right. Thank you.
[00:18:00.660]Larry Van Tassell: Our third question, as we wind down the 2020 harvest and began to think about 2021 operating lines, what's different. If anything from years past.
[00:18:13.320]Larry Van Tassell: And are you seeing are expecting anything different amongst your customer base in in regards to their financial condition. Ben will let you start off there.
[00:18:22.650]Ben Herink: Appreciate it.
[00:18:24.540]Ben Herink: You know, we kind of. We kind of touched on it. Unfortunately, you know, yeah, this is a pandemic here, but we've been
[00:18:31.320]Ben Herink: In somewhat of a depressed economy now for the better part of a half a decade and so
[00:18:37.080]Ben Herink: I don't know that we're going to see a whole lot differently, we're fully expecting operations that fall short in being able to close out the year and make their payments. Well, we're fully expecting
[00:18:47.730]Ben Herink: That, you know, we're going to have to utilize all those tools in our toolbox, as I mentioned, to be flexible. We're expecting additional servicing actions and then frankly we're expecting additional you know distressed and problem cases and in bankruptcies continue to rise.
[00:19:03.240]Ben Herink: You know, producers liquidating maybe on their own or or or for other reasons but but I think another part of this that
[00:19:12.030]Ben Herink: You know, is really starting to build on top of the last several years, and with the flooding last year.
[00:19:17.760]Ben Herink: And now within the pandemic is really what you alluded to Larry at the start and putting the screen up about, you know, the real response hotline and the Suicide Prevention Lifeline
[00:19:27.420]Ben Herink: You know, in talking with those folks that run those programs. I mean, they're seeing record calls into those and so
[00:19:33.780]Ben Herink: You know, the financial stress that we've seen over the last several years and and that we're going to see this fall. That's tangible and we'll see that and will continue to see that. And we'll know exactly what that is.
[00:19:44.550]Ben Herink: On those financial statements. But the you know the intangible, part of that is the stress. I think that's really starting to mount from a personal and emotional standpoint, with our producers and
[00:19:55.590]Ben Herink: It's going to get to a point here where that stress really starts to affect. I think the ability of producers to make sound decisions.
[00:20:05.370]Ben Herink: And lenders, you know, we're we're honored and maybe not as much stress, but their stress in lending as well.
[00:20:12.030]Ben Herink: When your portfolio is doing some of the things that are doing. And so that stress can lead to decisions, you know, by your lender that that may otherwise not have happened. So I think learning to cope with that stress and communicate is going to be important as we go forward here.
[00:20:27.780]Larry Van Tassell: All right, can
[00:20:29.940]Ken Mehlin: I think one thing we might see this year some earlier renewals
[00:20:34.860]Ken Mehlin: Producers coming in, maybe a little earlier. Since harvest is largely done
[00:20:41.520]Ken Mehlin: Well maybe see people coming in early and I would recommend the producers to certainly come in early
[00:20:50.700]Ken Mehlin: You know, let's let's get a jump on the renewal season and and if there are some decisions are tough decisions that need to be made.
[00:20:58.920]Ken Mehlin: It's a lot easier doing that in December and January, rather than April or May. So I would recommend to
[00:21:07.860]Ken Mehlin: Producers to come in early we, you know, one of the things we haven't seen that we have seen a lot of this year's is the government help that some producers are seeing with PPP loans, the CFA
[00:21:22.260]Ken Mehlin: Money, some of those things so that that kind of puts a little bit of a question mark. It'll help obviously
[00:21:31.560]Ken Mehlin: But how much we don't really know yet so
[00:21:36.030]Ken Mehlin: Hopefully we we with the government help. We'll see some positive
[00:21:40.800]Ken Mehlin: Equity changes and some positive working capital change numbers.
[00:21:47.400]Larry Van Tassell: All right. Thank you, Mark.
[00:21:50.070]Mark Jensen: Yeah, probably. Echo, you know, Ben and Ken's thoughts of
[00:21:54.750]Mark Jensen: You know, I think we're going to see a little bit earlier renewal season, which is a really nice concert in the last couple of years. I think all of us have been pushed behind by a couple months.
[00:22:05.370]Mark Jensen: But with that being said, I think we're anticipating this renewal season and maybe it is variable as we've seen,
[00:22:11.610]Mark Jensen: In other words, that, you know, if you're in one of those areas that had really strong yields maybe took advantage of some of the marketing opportunities as last year and then the payments on top of it.
[00:22:21.510]Mark Jensen: You know we anticipate. We'll see some, you know, fairly decent profits. With that being said, if you're one of the areas that you know didn't get the yields and
[00:22:30.120]Mark Jensen: And, you know, maybe the marketing opportunities weren't
[00:22:34.320]Mark Jensen: Weren't there, then I think we're still going to see a stress and started with some of the portfolio, which is really kind of a repeat of what we seen the last few years. I think one of the things that we're probably
[00:22:43.770]Mark Jensen: You know, maybe the most unsure of is just what are we going to see around balance sheets around the livestock producers.
[00:22:52.320]Mark Jensen: I think we're going to see anything and everything. This week is that unfolds over the next few months because I you know how
[00:22:59.160]Mark Jensen: The timing of where you're at in your in your cycle and marketing your livestock, you know,
[00:23:04.710]Mark Jensen: The arrangement you had either in place or during the pandemic. I think you're going to have a lot of variability is but
[00:23:11.970]Mark Jensen: I think clearly the protein sectors where we're going to see, you know, a lot of volatility and a lot of inconsistency and performance of producers of
[00:23:19.020]Mark Jensen: jada's on the phone, you know, at the at the break of, you know, the pandemic and when you know when we were losing the packing plan capacity and you know prices were collapsing and obviously
[00:23:30.690]Mark Jensen: Profits were, you know, right behind that, you know, I was on the phone with one dairy producer and they were losing at the peak of that around 10 million a month will
[00:23:39.720]Mark Jensen: You know, just a few months and you're basically insolvent. So, you know, fortunately that you know that recovered quickly and, you know, patients was important and all that but you know just how that all played out relates to the balance sheet this winter. I think you're yet to play out.
[00:23:55.230]Larry Van Tassell: Right. Darrell additional thoughts.
[00:23:57.540]Daryl Wilton: I don't have too many we have seen so few of our financial statements so far this year just just limited numbers in. But the three we've seen have been excellent.
[00:24:09.870]Daryl Wilton: As far as what the year has provided for them. I know we're not going to see that all the way through. But at this point, it makes you feel a little bit positive and I think that was helped by the different government programs that were out there just really made a difference.
[00:24:27.750]Larry Van Tassell: Alright, well can will let you start off on this next question. Have a farmland values in Nebraska held up this year is there been a change in the number of foreign purchase transactions, for example, more retirements
[00:24:45.210]Ken Mehlin: Well to be honest it and a little bit with this question, I called our largest realtor land broker and auctioneer in our area, they probably cover about 100 mile radius area from Carney.
[00:24:59.280]Ken Mehlin: And what their what they told me, they're seeing so far this fall are steady land prices in all all categories of land.
[00:25:08.610]Ken Mehlin: In this area, at least they do think that maybe even increase just a tad
[00:25:17.040]Ken Mehlin: As as the winner goes along those those prices obviously are being propped up by low interest rates, you know, a little boost and commodity prices here recently.
[00:25:28.980]Ken Mehlin: The government payments additional government payments that were received. So those are helping prop up up the real estate market in this area, anyway.
[00:25:41.340]Ken Mehlin: You know, they said that the most sales are coming with the state.
[00:25:49.290]Ken Mehlin: States selling some land, maybe some investors looking to come into the market an ag real estate SINCE THE STOCK MARKET HAS BEEN DOING WELL MAYBE liquid eight and then taking some of those games moving into the inner AG real estate and there are retirements
[00:26:07.650]Ken Mehlin: You know,
[00:26:09.210]Ken Mehlin: I have a customer that was looking at retiring this year and would like some younger folks to take over the operation.
[00:26:18.180]Ken Mehlin: But all year that's been pretty tough to think that will work when land purchases or machinery purchases will need to be made by those young folks, it's hard to make anything pencil.
[00:26:32.460]Ken Mehlin: You know, with a little bit of increase in
[00:26:36.900]Ken Mehlin: Commodity prices. Now you know there's maybe a little bit more talk of that, but I know at least two cases where a planned retirement. Where was going to be the last year, it's delayed for another year. So we'll see how that trend comes comes to fruition.
[00:26:56.520]Ken Mehlin: You know, I do think there will be some retirements just with the financial stress that there will be
[00:27:02.820]Ken Mehlin: Maybe a little sooner than they they were planning, originally, but
[00:27:08.400]Ken Mehlin: You know, we'll see how that plays out.
[00:27:11.550]Larry Van Tassell: Mark
[00:27:13.590]Mark Jensen: Yeah, so we've got
[00:27:17.790]Mark Jensen: A series of what we call benchmark farms located all over, Nebraska, that our appraisal team goes and reappraise is every few months and the latest information showing
[00:27:27.690]Mark Jensen: Our that's coming out of that data would show that you know basically like the last six months or so, and even the last year that Nebraska.
[00:27:36.270]Mark Jensen: cropland properties have basically been relatively steady
[00:27:40.890]Mark Jensen: We are showing a little bit of downward pressure on ranch properties or grass properties and Lester, Nebraska.
[00:27:47.940]Mark Jensen: But both irrigated and dry land. Have you could probably be steady or maybe just a slight you know upward pressure, but I think overall, you should you could say it's steady
[00:27:59.070]Mark Jensen: You know, we, we've been sitting around speculating on what we might see doing in this winter and
[00:28:03.930]Mark Jensen: If anything, we probably would project, maybe a little bit of upward quick take a little bit upward pressure going in into the winter months. Just because of the availability of some of the profits by producers will stronger. I think overall than maybe what we see in the last few years.
[00:28:19.320]Mark Jensen: And then I you know one offset to that I had, we're pretty close contact with a lot of the real estate brokers and
[00:28:26.670]Mark Jensen: You know what they're saying and, at least early indications are the sale inventories are going into the winter as high as we've seen the last few years. So there may be more property on the market.
[00:28:38.760]Mark Jensen: You know, for variety different reasons. A lot of those are estate sales for the most part. So, you know, will there be enough inventory that you know may, you know, prevent prices from showing any type of uptick. We'll see. But that's kind of our thoughts so far, Larry.
[00:28:55.260]Larry Van Tassell: Thank you. Appreciate that. Darrell
[00:28:57.810]Daryl Wilton: What we're saying is our irrigated ground and predict, we were in 43 locations. So we kind of have a little bit of everything.
[00:29:07.050]Daryl Wilton: But the irrigated ground has been stable to up slightly, but where we're seeing an issue is irrigated ground, maybe with water allocations or dry land ground and southern Nebraska. We're seeing that fall off this year. So hopefully
[00:29:25.620]Daryl Wilton: Hopefully will not see the deterioration and the customers so much, but that is what we're seeing within our portfolio anyway.
[00:29:34.950]Larry Van Tassell: Then what are you seeing
[00:29:37.350]Ben Herink: Not a lot to add. I mean, I certainly would defer to the expertise of the other panelists. I would just say, you know,
[00:29:42.840]Ben Herink: Again, I see all corners of the state here to say as a general observation and I agree with the others that I think good ground.
[00:29:50.850]Ben Herink: You know, good quality ground is holding firm, you know, maybe even an uptick but I think poor quality ground you know that's where we've seen some sales come off a little bit.
[00:30:01.740]Ben Herink: You know, at FSA this past year. And so that's basically October one of 19 just until this last September 30 you know we made 133 more from ownership loans real estate loans than we did
[00:30:15.240]Ben Herink: The year prior fiscal year 19. And so I think that speaks to the demand that's out there. We are seeing small retirements, you know, we're seeing some liquidations of real estate in order to offload you know some of that debt and make the operation more feasible. So
[00:30:29.880]Ben Herink: And I think just in talking with some of our offices here this fall, last two weeks, you know, we're still seeing those applications for real estate purchases come in the door. So I looked at that, to continue
[00:30:42.420]Larry Van Tassell: Alright, great. So Mark will let you start off this next question, is there a sector of Nebraska agriculture that has experienced more challenges than others. As a result of coven
[00:31:02.670]Larry Van Tassell: Mark, you're muted.
[00:31:06.420]Mark Jensen: Thanks lyric. Sorry about that.
[00:31:09.240]Mark Jensen: Yeah, you know, maybe I've mentioned a couple one have already hit on but maybe I'll start with the ethanol industry.
[00:31:15.480]Mark Jensen: You know clearly ethanol demand, you know, drop like a rock when oil prices did and
[00:31:20.130]Mark Jensen: Production was nearly cut in half so you know what we've returned to higher levels, we're still not back to where we were. Prior to the pandemic, so
[00:31:29.160]Mark Jensen: You know that's one. Obviously, I think, was a direct impact. And then the other one I already mentioned, is just the protein sector, I think we were weeks if not a couple months away from the potential disaster.
[00:31:41.940]Mark Jensen: From two or three different angles. One disaster and just terms of profitability and the protein sectors.
[00:31:48.960]Mark Jensen: You probably say we were close to a disaster, just from an environmental standpoint.
[00:31:54.360]Mark Jensen: Of if we hadn't gone down the path of having to euthanize animals on mass scale, I, I can't imagine what that would have been like. And then the third angle is just long term demand, had we, you know, gone through that type of a
[00:32:08.370]Mark Jensen: You know, long term demand in terms of crop crop prices and and where the green industry would have been if we had
[00:32:14.940]Mark Jensen: You know, had to cut out a large section of the of the protein sector. So anyway, you add all that up. I think we were you know really diverted a real disaster. And if nothing else, we found out how essential food is
[00:32:26.430]Mark Jensen: And how essential our producers are making sure we've got a you know a safe and abundant food supply in this country so
[00:32:33.510]Mark Jensen: You know, fortunately, we didn't get to the point where you know that happened, but
[00:32:37.440]Mark Jensen: When you start hearing predictions of, you know, 50 million people standing and food bank lines, you know, if we had gotten further down the curve on that. I think that that could have been a real disaster for the country. So fortunately, we didn't get there.
[00:32:50.160]Larry Van Tassell: Alright Darryl
[00:32:51.720]Daryl Wilton: I would agree with Mark the livestock sector seem to take the brunt of it, at least initially with the ongoing tariffs, as well as the break of the markets and the and the packing plan fires, but
[00:33:06.900]Daryl Wilton: Otherwise, I think it was
[00:33:08.370]Daryl Wilton: pretty evenly shared you don't you don't want everybody to have to have problems, but it, it seems like it went across the board.
[00:33:17.490]Larry Van Tassell: All right. Ben jevington dad.
[00:33:19.500]Ben Herink: Yeah, not the major Adam I do agree with Darryl I really think almost every sector at some point was impacted
[00:33:25.260]Ben Herink: At some level, and some of it was just when during the pandemic maybe timing was more of an issue for some than others, but you know, I think we've all been impacted and even our ag business.
[00:33:37.200]Ben Herink: Businesses have been impacted certainly so
[00:33:40.860]Larry Van Tassell: Can
[00:33:42.600]Ken Mehlin: I agree with everything that's been said that kind of a little story of
[00:33:48.570]Ken Mehlin: How that
[00:33:51.240]Ken Mehlin: Happened in in our world. We had some producers that were thinking they may have to use a nice and some hogs and so
[00:34:01.650]Ken Mehlin: Be in a group of six other individuals got together and bought five hogs from a producer and one Saturday we went butchered hogs. So I can say that that's something that I'll never forget and
[00:34:17.280]Ken Mehlin: I'm with Mark, I'm glad we never got to the point where that was a major issue, but at the point we butchered the hogs. We didn't know if that was going to happen or not so
[00:34:29.190]Ken Mehlin: I'm with Mark and glad that obviously that didn't happen.
[00:34:34.260]Larry Van Tassell: Alright, the next question and thinking about this past spring when covert first entered the public's consciousness and planting season was nearing
[00:34:45.780]Larry Van Tassell: What was the thinking of each of your institutions for how to deal with the uncertainty.
[00:34:51.810]Larry Van Tassell: How has that thinking changed as we've learned more start off with Darrow
[00:34:57.810]Daryl Wilton: I don't know you know we we talked previously on an earlier question about stability and if you're if you're a lender in the agricultural industry you're used to uncertainty.
[00:35:10.740]Daryl Wilton: And so are the people out there doing the planting and growing and harvesting. So it's really isn't anything unusual for them to face.
[00:35:21.180]Daryl Wilton: Sometimes you wonder, how do you can sit there and loan money on a farm operation where it's guaranteed to lose money according to the cash flow, but that's not always that's not truth and to get to the end. So we did not. We didn't play into the uncertainty at all.
[00:35:43.650]Larry Van Tassell: All right. Alright, thanks a band. What about FSA.
[00:35:46.830]Ben Herink: I think our initial thought was, you know, buckle up and and we'd love to have a crystal ball but you know all joking aside.
[00:35:54.960]Ben Herink: You know,
[00:35:56.850]Ben Herink: We just wanted to make sure that we were going to be as flexible as possible. You know AG certainly production and you know it doesn't stop in Nebraska. When a when a pandemic hits and so
[00:36:06.600]Ben Herink: As we've gone on. We just want to make sure that we're communicating with our borrowers and producers that they know what's all available to them.
[00:36:15.240]Ben Herink: And so I think, you know, I challenge people to over communicate that just don't think you can do it, especially during it here like this. And so as we go on. It just comes down to, you know, we have a lot of tools in the toolkit.
[00:36:27.450]Ben Herink: As Mark mentioned that you dust off some old ones you come up with some new ones. But, but at the end of the day, you have to make sure your borrowers know what those options are to them and that they exist.
[00:36:38.460]Ben Herink: And then help them make a decision or let them make a decision about which ones you know make up their operations so
[00:36:45.780]Larry Van Tassell: Can. How about from Bruning bank's perspective.
[00:36:50.040]Ken Mehlin: We are, you know, call through the middle of the pandemic as adversity was starting to hit pretty hard. You know, one of the things we talked about was
[00:37:02.580]Ken Mehlin: You know, looking for opportunity and in the face of adversity.
[00:37:07.890]Ken Mehlin: Whenever you hit some tough times. Somewhere there's an opportunity and just trying to and I feel that way for farm operations to there. There are some points in time where there's an opportunity. One thing may not look very good.
[00:37:25.740]Ken Mehlin: But somewhere there's an opportunity. So, you know,
[00:37:30.870]Ken Mehlin: State staying stable.
[00:37:33.450]Ken Mehlin: You know, being consistent with our underwriting and looking for potential
[00:37:40.890]Ken Mehlin: diamonds in the rough
[00:37:43.290]Larry Van Tassell: Right, Mark, how about Farm Credit
[00:37:46.590]Mark Jensen: Yeah, I don't know if I've got a whole lot of new things to add, I probably echo same things. I mean, if nothing else.
[00:37:53.040]Mark Jensen: You know, is a great reinforcement of the fundamentals and how important they are both in terms of lending practices and
[00:37:59.940]Mark Jensen: And preparing yourself for all the volatility as well and as well as you know what that means. On the producer side of things. I think this has mentioned earlier to patients.
[00:38:09.660]Mark Jensen: Not overreacting and having confidence and your, your customers and your ability as an organization to to adapt.
[00:38:19.050]Mark Jensen: And then you know if there was a reliance on anything that I think we all found out how critical it was was our reliance and how successful we are
[00:38:27.780]Mark Jensen: Using technology, both to run our business as well as work with customers that I don't think we ever could have imagined we would be having as many meetings with our customers via zoom
[00:38:37.440]Mark Jensen: I think traditionally we've always seen that as across the desk or, you know, across the pickup. Good. So
[00:38:43.230]Mark Jensen: You know how that played out and how we were all able to provide
[00:38:47.370]Mark Jensen: You know credit to agriculture during a time when it needed most. When the country needed the most and it was essential is really important, which
[00:38:54.630]Mark Jensen: Probably leads in just the last day, hopefully as a country with. It was a good wake up call to the fragility of a food supply at how important it is
[00:39:03.330]Mark Jensen: And even think about the loss of that, you know, again, I hope that was a wake up call to the, the importance of agriculture and agricultural production long term.
[00:39:13.200]Larry Van Tassell: All right. Thanks, Ben will let you take the first shot at the next question have delinquencies ticked up during 2020 and especially the third quarter. How about defaults. Do you anticipate an increase in financial hardship from far businesses in the fourth quarter and next year, then
[00:39:33.030]Ben Herink: Now, I mean, the short answer is, is it's hard for us right now to to measure kind of the third quarter at this point but but in general, yes. I mean, we've seen
[00:39:40.620]Ben Herink: Defaults and delinquency rise and if I just kind of look at it from a production your standpoint, I mean an FSA.
[00:39:47.460]Ben Herink: You know, our first year installment delinquency for for basically new loans that we made last year.
[00:39:52.590]Ben Herink: Is 5% right now and and really the three prior years that averaged out to about 3.7% so so you know definitely you know we're seeing her eyes and
[00:40:03.060]Ben Herink: I think it's important. Remember again you know 70% of those borrowers that we work with are beginning farmers and ranchers and then we've got some distress producers that we help so
[00:40:11.430]Ben Herink: The nature of who we help certainly as for that risk. You know, our, our balance sheets are going to be a little tighter or liquidity is going to be a little less in our clientele.
[00:40:20.310]Ben Herink: You know, our, our dollar delinquency in our, in our entire direct portfolio at FSA is only about 1.1% and that's relatively small given again the last half decade that we've seen, but
[00:40:33.390]Ben Herink: You know, it does represent an increase over point 6% from the three prior years. I mean, it's almost doubling. So we're certainly seeing
[00:40:41.520]Ben Herink: You know, a significant jump in those delinquencies on our guarantee side, you know, for lenders that we provide guaranteed credit to or support to
[00:40:51.990]Ben Herink: The three prior years we've been kind of hovering right around that point 9%, you know, kind of overall portfolio delinquency in 2020 here that's been elevated to
[00:41:02.280]Ben Herink: 1.5%. So again, relatively low but you know a decent spike there. So I think we look for that to continue
[00:41:10.500]Ben Herink: Hopefully, you know, some again the disaster payments that we've talked about the government assistance.
[00:41:15.570]Ben Herink: Just the flexibilities that some lenders like FSA and others have been able to provide some forbearance and set asides and payments, you know, maybe that cures a little bit of that delinquency.
[00:41:26.670]Larry Van Tassell: All right, can
[00:41:29.310]Ken Mehlin: You know, we haven't seen too much of an uptick in in delinquencies
[00:41:34.830]Ken Mehlin: Little bit of an uptick and the fault.
[00:41:40.020]Ken Mehlin: But really, not on not on in the ag side.
[00:41:44.730]Ken Mehlin: Have a few commercial businesses that have struggled through the pandemic with a severe loss of revenue and and that kind of thing. So
[00:41:55.830]Ken Mehlin: We have seen a slight uptick but really nothing that we're we're terribly concerned about
[00:42:04.380]Larry Van Tassell: Hi, Mark, what are you seeing
[00:42:06.510]Mark Jensen: Yeah, I would say really thing to add. I mean, three quarters really been steady I really couldn't say you've we've seen anything significant that worse mentioning but
[00:42:14.490]Mark Jensen: You know, really, it'll be next, you know, April, May where we'll have a better indication of that with a lot of the lot of the payments coming up over the next few months, you know, we'll get a better sense. So yeah, kind of same comments.
[00:42:26.730]Larry Van Tassell: Darrell anything different from cornerstone.
[00:42:30.690]Daryl Wilton: Our delinquencies are not related to cope and they were we brought those in over the course of the years before this. So it's nothing related to the pandemic, but it will. It'll be interesting to see as we move forward. We're not seeing a very big uptick in anything so
[00:42:52.590]Larry Van Tassell: All right. Thank you. Well, the thousand dollar question. Now what everybody came to hear will let you start off with this can
[00:43:00.810]Larry Van Tassell: Can you offer some advice to customers or potential customers about things they can do right now to help position themselves for the next year, knowing that we likely will have some ongoing uncertainty due to the political cycle and the pandemic status. So, can
[00:43:21.420]Ken Mehlin: Marketing. Marketing. Marketing is one thing that we see that can can significantly change the outcome of a farm operation.
[00:43:33.270]Ken Mehlin: We, we try to talk to our customers about
[00:43:37.620]Ken Mehlin: You know having a marketing plan and and executing it and understanding it. And, you know, being consistent with the marketing plan.
[00:43:48.120]Ken Mehlin: That's a huge risk.
[00:43:50.580]Ken Mehlin: For our borrowers and we do see this, this happened with a customer that maybe wasn't using
[00:43:56.640]Ken Mehlin: Or didn't have a marketing plan or wasn't using a marketing professional and then they decide to a year or two later, and you can see in in the balance sheet and cash flows typically that they do improve. So it does help and and with the volatility, we see in the commodity prices.
[00:44:18.120]Ken Mehlin: You know, taken, taken advantage of some opportunity when they arise. Very important.
[00:44:26.130]Ken Mehlin: And making sure you understand the marketing plan what the risks and the rewards are in that plan and executing it
[00:44:34.170]Ken Mehlin: One of the things to that we've talked a lot about over the last few years, so maybe an enterprise analysis where maybe you look at the green side of the operation or the livestock side of the operation and
[00:44:48.960]Ken Mehlin: Does each side, do they, do they, do they make money. Are they are they profitable and
[00:44:57.300]Ken Mehlin: You know, in the last couple years we've even had talks with customers about, you know, different pieces of land that they find doing an enterprise analysis on those farms to see if they are profitable for the operation or or or not. And if they're not, then maybe get the market.
[00:45:18.690]Ken Mehlin: Properties from the operation.
[00:45:23.820]Ken Mehlin: One of the most important things to surrounding surrounding yourself with a solid team.
[00:45:30.660]Ken Mehlin: The team.
[00:45:32.550]Ken Mehlin: Few of those people on the team should be lenders accountants, lawyers agronomists
[00:45:40.170]Ken Mehlin: You know, somebody with with some expertise in technology.
[00:45:44.880]Ken Mehlin: So surround yourself with a solid team and and
[00:45:50.190]Ken Mehlin: You know, just this manage the business. It's a business and you know do everything you can to manage the business.
[00:45:59.310]Larry Van Tassell: Thank you, Mark, what advice do you have for the audience.
[00:46:03.840]Mark Jensen: Well, you know,
[00:46:04.650]Mark Jensen: The first one I probably mentioned, uh,
[00:46:07.560]Mark Jensen: You know, since we got football game coming up this let me use the term pylon because I'm probably piling on Ken's comments around skill sets.
[00:46:15.810]Mark Jensen: You know, I'll go back to, you know, the fundamental skill sets of being a really good production manager, being a really good marketer and being real good. Really good at financial management. I just think are going to be imperative.
[00:46:28.080]Mark Jensen: Going forward, so what skills do you have to develop or what in terms of those skills do you need to hire out one way or the other. You need to need to have those. I think to be successful. And, you know, financial management is just as important and Kim was talking about, you know, enterprise.
[00:46:44.790]Mark Jensen: Enterprise management or having the ability to kind of dissect your operation and understand where the profitability is or isn't
[00:46:52.560]Mark Jensen: Is really essential. So, you know, just talk about this all the time, but
[00:46:57.330]Mark Jensen: You know, if you're selling corn and four bucks and your break is for 10 don't brag too much about that sale. So that's really what it comes down to. So you got to have all those all those skills.
[00:47:05.760]Mark Jensen: You know, the second one I probably mentioned this, just thinking about your overall business model, you know, let's say, five, seven years out.
[00:47:13.200]Mark Jensen: You know, how is it, how does it need to evolve. How does it need to change. How does the evolution of further technology fit into it. How does the use of data.
[00:47:22.110]Mark Jensen: Fit into it and how you're going to run things in the future, how our consumer demands changing. And what does that mean for agriculture and
[00:47:29.430]Mark Jensen: You know, the types of crops and diversification, you may need in the operation, longer term and then that all fits into just the structure your operation on
[00:47:37.770]Mark Jensen: How you run it and you know how you leverage labor and everything else. So I think all those things are part of a, you know, longer term thought process that you know I'd encourage everybody to think about
[00:47:48.090]Mark Jensen: And then, you know, just another one and kind of goes along with each of them is how do you define success in your operation, you know, longer term. So, you know, for example.
[00:47:58.110]Mark Jensen: Are you looking at trying to maximize our away. Are you trying to maximize our early and those could be doing different things. I mean, is it about asset accumulation
[00:48:06.660]Mark Jensen: Or is it about, you know, leveraging and trying to get the highest return off of, you know, the finite use of capital that you have and
[00:48:14.010]Mark Jensen: You know, there are different ways to try to maximize your existing capital to grow your operation and grow your earnings versus, you know, by another farm to, you know,
[00:48:21.780]Mark Jensen: During enough money to buy the next farm. I mean, what is your goal, and how are you going to measure success. I think in the future with, you know, the capital intensive Enos of the industry, thinking about how you leverage capital.
[00:48:35.610]Mark Jensen: And you know what you define success around it is going to be really important. So that's my response lyric
[00:48:42.150]Larry Van Tassell: All right. Thank you. Appreciate that. Darrell, what would you have dad.
[00:48:45.630]Daryl Wilton: Well, I would echo the marketing and knowing what your costs are our production is so that you can make a wise decision when the time comes.
[00:48:54.930]Daryl Wilton: The other side is in times like this expense controls kind of important, and whether that be family living or within the farm operation itself and the third big thing that really sticks out is, Are you fully employed, and that's a hard decision for you to make as a as a producer.
[00:49:15.240]Daryl Wilton: Because you're thinking, well, I'm busy. Well, but not older during the year, maybe in your operations. So making sure you're fully employed or is there space there where you could do something else to bring in additional money into the operation.
[00:49:32.010]Larry Van Tassell: Band before you add your bits of wisdom here.
[00:49:37.920]Larry Van Tassell: Excuse me Ben before you add to your bits of wisdom here I'd like to remind the audience that if they have any questions to go ahead and
[00:49:47.010]Larry Van Tassell: type them in the Q AMP. A or the chat. This is the last question we have, so we're open. Any other questions that the audience may have. So Ben, do you want to go ahead and take us on this.
[00:49:59.100]Ben Herink: Yeah, I mean, I certainly would echo what the others have said, I mean about about being proactive and marketing, I would echo what I know what Ken said earlier in the webinar about
[00:50:08.700]Ben Herink: You know, making sure you get in early, you know, we're at November 5 right now if you're done with harvest. I mean, it's not too early to start planning for next year and it's important. I think that when you build your plan and your cash flow.
[00:50:22.410]Ben Herink: Because I do think it's important right now to have a cash flow. First off, but when you build that plan, make sure it's your plan.
[00:50:28.140]Ben Herink: And if that plan is is not feasible, you know, for 2021 then what are your contingency plans, you know, have thought about Plan B have thought about Plan C. So when you work with your lender, you know,
[00:50:40.140]Ben Herink: There aren't surprises and there's too many surprises outside of, you know, things that you can't control, but maybe things that you can control. Try to try to reduce those surprises. So
[00:50:50.640]Ben Herink: You know what we talked about enterprise analysis. What things can you do to improve efficiency to improve visibility. Are there any non income producing assets that you have that are just sitting there, that that could be liquidated to to reduce that debt load.
[00:51:06.090]Ben Herink: It. And I think, you know, especially for FSA.
[00:51:10.710]Ben Herink: Folks and borrowers that we deal with, you know, we're usually not the only lender. They have there's there's dead on the street with suppliers and CO ops and we're participating with other you know commercial lenders or Farm Credit
[00:51:22.740]Ben Herink: And so I think it's important that when you talk to maybe just your primary lender. You've also communicated to the other suppliers.
[00:51:30.420]Ben Herink: And creditors. You have because if you're going to have trouble making your payments, you know, again, be proactive what what opportunities or plans might they have available to extend repayment terms.
[00:51:44.040]Ben Herink: You want to have all that stuff. Maybe worked out. And maybe it never comes to fruition that you need it. But if you do, you know, you don't want to be behind the eight ball you know next April.
[00:51:52.350]Ben Herink: When it's time to get back on the field. And now you're just having the first communication with the lender, you know, in three or four months about not being able to make your payment so
[00:51:59.760]Ben Herink: So I would just, I would echo the thoughts of the others. But just make sure that you know you have a plan, a plan B and Plan C here.
[00:52:10.830]Larry Van Tassell: All right, thank you so much. We do have a number of questions that have come in so far. I'll read some of those. And I'll just open it up to
[00:52:19.560]Larry Van Tassell: To any of our panel members here. First one is, if the Federal Reserve, whatever. Get the ability to manage finance to financial institutions and quote unquote separate bands.
[00:52:33.270]Larry Van Tassell: For example, the top 20 financial institutions versus community banks, where would you prefer farm slash egg credit institutions be placed in a separate ban or where
[00:52:55.380]Daryl Wilton: My hope would be that we would be in the separate been away from the largest institutions they do things a lot differently than we do. They have a whole lot different.
[00:53:09.360]Daryl Wilton: They have a different operation than we do. And it's nice to be in an area where you are working with other banks or other operations that are similar.
[00:53:23.370]Larry Van Tassell: Anybody else have anything to add on that one.
[00:53:27.570]Mark Jensen: You know, Larry. So maybe put what Darrell said maybe even a little bit different way. But I think gets across the same point is a the risk and in Financing Agriculture are unique and probably unlike any other industry.
[00:53:43.740]Mark Jensen: You know, particularly with weather events and the kinds of things that face our industry that a lot of industries don't so wherever you bucket you put it, you better have an understanding of that.
[00:53:53.940]Larry Van Tassell: Right.
[00:53:56.430]Larry Van Tassell: Alright, the next question our local farm lenders and good source to find property. I've been looking for property for more than a year due to the unique requirements for truffle farming in Tennessee.
[00:54:15.630]Ken Mehlin: I would say the more sealers you can put out two different, two different places, the better your opportunity will be defined something
[00:54:25.800]Ken Mehlin: There will be from time to time that as lenders, we have customers that we know are looking to sell some some real estate. So just touching base and talking with a local lender.
[00:54:42.840]Ken Mehlin: May be helpful. It may, you know nothing may become of it, but it certainly could. So doesn't hurt out her to reach out and and put out feelers
[00:54:52.800]Larry Van Tassell: Okay, next question I'll ask in two parts. The first part, what do we do once CFA PCF AP to PPP and the ideal loans that evaporate.
[00:55:06.750]Larry Van Tassell: We're where we going to be as an industry.
[00:55:13.980]Daryl Wilton: Well prices are going to move up during that time. So we don't have to worry about that right
[00:55:18.840]Daryl Wilton: So I will make it in the markets know I think there is, there's always been a
[00:55:25.200]Daryl Wilton: A government led for their cultural industry where they have been able to put things out as needed. Maybe not what we wanted. But as they felt needed. And I think going forward. We're going to continue to see that and we find stability within the agricultural markets.
[00:55:46.230]Ben Herink: Yeah, and I agree with Darryl. I think that's a question that we all ask
[00:55:50.880]Ben Herink: And it's nice that the government payments are there in times of need. But I think if you're a producer.
[00:55:56.910]Ben Herink: You know, the goal is to try to plan to have a productive and feasible operation.
[00:56:03.000]Ben Herink: That doesn't need those payments and that they're only there as a bit of a saving grace in the time to need. And so it's challenging, we're certainly in a timeframe. I think with those
[00:56:12.870]Ben Herink: Payments are helping and I know on our portfolio. They've allowed for us to kind of keep our delinquencies down and some of our loss rates down
[00:56:23.130]Ben Herink: I think to some degree, they'll always be there in times of need, but it's about I think looking internally at your operation and figuring out, you know, without the use of those
[00:56:36.120]Ben Herink: Were again that enterprise analysis where we can be feasible going forward.
[00:56:40.980]Larry Van Tassell: Okay. And the second part of this question. What incentive. This China have to fulfill its obligations, now that we potentially have a change in presidents.
[00:57:01.350]Mark Jensen: Well, maybe. Maybe I'll make a few comments and I'm going to stay away from any of the whether that
[00:57:08.010]Mark Jensen: Means we have a different to change the president nods. I guess we'll see how that plays out. But I, I probably go back to
[00:57:13.950]Mark Jensen: You know there's there's the aspect of our trade agreements, but then there's also the reality of the needs of China and you know they're they're trying to rebuild a swine heard over there right now they're trying to
[00:57:25.290]Mark Jensen: Feed that swine her they're trying to
[00:57:29.070]Mark Jensen: reestablish some of the stock.
[00:57:32.910]Mark Jensen: Inventory that they had on hand that they completed quite significantly. And, you know, you've got a growing country both population wise and economically so
[00:57:43.740]Mark Jensen: You know there's there's an aspect of the trade agreements and the political side of how we work with China, but there's also the reality of the
[00:57:51.780]Mark Jensen: The needs back and forth between these two countries and you know how that plays out how politics impacted. We'll see. But
[00:57:59.160]Mark Jensen: There's a, there's also the reality of the needs that China has that in some way or another, either directly or indirectly probably are going to be filled by the US, that's my thoughts.
[00:58:11.010]Larry Van Tassell: Okay, next question. Any comment on the potential amount of land ownership transition which will occur over the next 10 to 20 years now I can answer this, he typed in, and said, I believe, at least 40 to 40% of the land ownership will turn over in the next 10 years
[00:58:30.510]Larry Van Tassell: Anybody else have any thoughts on that. Would you agree.
[00:58:35.460]Ben Herink: Yeah, I mean I would agree. I think if you just look at, you know, the baby boomer generation and you know where that age ranges right now.
[00:58:44.310]Ben Herink: That transition is going to have to happen. So, you know, the baby boomer generation kids are getting to that point in there.
[00:58:51.060]Ben Herink: You know, life where you know they're starting to accumulate some assets and have a little more flexibility to go out and grow their operation. And so I think that is going to lead to
[00:58:59.970]Ben Herink: Purchasing Power one end, but on the on the baby boomer generation, you know, the, the, the sale off the cell. So I think when you combine those two, you're going to see plenty of ground movement.
[00:59:13.620]Larry Van Tassell: Alright, next question. I think Mark, therefore I recall correctly, this is a question response to one of your comments.
[00:59:21.720]Larry Van Tassell: Can you expand on the comment of maximizing ROI or our own he where would want to invest if maxed out on available labor resources and wanting to keep those dollars invested in the operation and not in the stock market long term.
[00:59:38.190]Mark Jensen: Yeah.
[00:59:39.990]Mark Jensen: You know, probably the best like respond to those kind of what we're seeing is, you know, I think it really depends on the operation itself. So, you know, how is that individual operation capitalized and
[00:59:51.150]Mark Jensen: And really structured for the long term. But in terms of what you know some of the things we are seeing and some producers, they're wanting to focus at least just as much on, are we
[01:00:00.660]Mark Jensen: As our LA is they're taking a look at, okay, well, how can I
[01:00:04.890]Mark Jensen: How can I diversify my income stream, whether that's, you know, investing in some of the type of enterprise or off farm labor or off farm income or whatever that might be.
[01:00:13.920]Mark Jensen: Or, you know, what's another type of business that may or may not, you know, integrating with my existing business or do I want to fully diversify into something else.
[01:00:23.580]Mark Jensen: We see you know some producers, looking at agritourism as another one of those you know avenues and I'm just using that as an example and
[01:00:31.140]Mark Jensen: I, I guess the point I'm trying to make is I think those are individual choices based on the type of operation.
[01:00:37.530]Mark Jensen: But, you know, overall, the point I was trying to make is I think that's a reality for producers in the future.
[01:00:43.260]Mark Jensen: I'm not sure that you know 99% of the producers in the US or in the Midwest long term are going to raise corn and soybeans.
[01:00:50.730]Mark Jensen: You wonder about how that's going to evolve over time. And you know, I think the challenge for producers is just thinking about that and thinking about how their
[01:00:59.040]Mark Jensen: Individual operation fits into how that evolves to the future, both in terms of how it evolves, economically, but it evolves around consumer preferences.
[01:01:09.720]Larry Van Tassell: OK.
[01:01:11.490]Larry Van Tassell: The next question, what in your opinion, would be the advantage of taking lower interest rate loans over a longer amount of time. For instance, he ID L loans.
[01:01:24.690]Larry Van Tassell: net positive or net negative. And what would. What would, what should we be aware of not doing what should be aware of not doing it or accepting that he idea alone.
[01:01:39.540]Larry Van Tassell: But he got any thoughts.
[01:01:41.190]Ken Mehlin: So one of the things with the idea alone that
[01:01:45.030]Ken Mehlin: Can create an issue is, is SBA will take a security interest on UCC assets machinery equipment livestock.
[01:01:56.910]Ken Mehlin: Those types of things and and
[01:02:01.440]Ken Mehlin: You can you can do that. But that may may kind of limit your borrowing power down the road. If you need to, to
[01:02:11.670]Ken Mehlin: Have some additional additional borrowing on those assets because FSA or SBA will have a lien potentially a lien ahead of you. And so I think that's one of the things that that we found out, at least early on some folks didn't understand and and
[01:02:32.250]Ken Mehlin: Can create some issues down the road SBA would have to approve.
[01:02:39.690]Ken Mehlin: You know, a subordination to allow a lender dude jump back ahead of them on a subsequent well done after the idea alone.
[01:02:49.260]Larry Van Tassell: Okay.
[01:02:50.010]Ben Herink: Ken raises a good point. I mean, I would also just add that I think you know every operation is different.
[01:02:56.100]Ben Herink: They're different point in their lives are at different levels of strength that they may have in their operation. And so for some operations, maybe that that have some real estate equity.
[01:03:06.330]Ben Herink: Maybe it's better for them to restructure some debts, put it against that real estate at a lower rate at a fixed rate and go about it that way.
[01:03:15.120]Ben Herink: There's gonna be some operations. Maybe they don't have that availability of having, you know, real estate equity to turn that out over and so maybe for their operation.
[01:03:22.860]Ben Herink: They need a quick infusion of short term cash into their operation and in those situations you know loans like that the ID DL alone.
[01:03:33.030]Ben Herink: Are going to be used. Okay.
[01:03:36.000]Larry Van Tassell: Well, we're at the end of our, our time here. We appreciate our panel and all that they have done for us today here got a lot of great insights and thank you everyone for joining with us today.
[01:03:49.470]Larry Van Tassell: Reminder that recording of the webinar will be posted it farm.eu and al.edu where you can also register for other upcoming webinars.
[01:04:00.180]Larry Van Tassell: The series continues next Thursday at 1pm with a look at livestock risk management and livestock risk protection coverage presented in collaboration
[01:04:10.710]Larry Van Tassell: With USDA and the national extension risk management education program you'll be receiving a short 32nd survey in your mail.
[01:04:20.730]Larry Van Tassell: Email and we would really appreciate your feedback on today's webinar and your input on future sessions. Thanks again for joining with us. And I'll let our, our panel members.
[01:04:34.020]Larry Van Tassell: Make a final comment or just say goodbye. If you want ban, we'll start with you.
[01:04:39.720]Ben Herink: Know, I thank you, Larry and university for for hosting these webinars. I think they're great for everyone involved. And we just appreciate it. Anyone that was able to join today and certainly the questions. They're all great questions.
[01:04:54.000]Mark Jensen: Same thing that you. Thanks, Lori for the opportunity to speak to the group. And thanks, everyone, for joining us. And thanks for your support of agriculture. It's essential right
[01:05:03.180]Daryl Wilton: Darryl I would just say what the other side. So I'll pass it on to Ken
[01:05:10.440]Larry Van Tassell: Ken
[01:05:11.940]Ken Mehlin: Thank you, Larry. And thanks, thanks everybody for attending the fact that you attended
[01:05:18.330]Ken Mehlin: Is a good good show.
[01:05:21.630]Ken Mehlin: You know, it's important for management purposes and your management of your, your operation or business or whatever the case may be. So thank you for attending.
[01:05:31.260]Larry Van Tassell: Alright, thanks again for our audience, and I apologize for those questions were not able to get to, but I think we had a great discussion today. Hope everybody has a great afternoon.
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