Greetings fellow Ag Bankers! In this month's edition of "From the Fields," I'd like to share what continues to be a focus in conversations I have with customers. With the fourth consecutive year of ag commodity prices in a trough, a common reaction of farmers may be to simply bury their head in the sand so-to-speak and wait for prices to improve. After all, the Class III milk price isn't set by farmers, nor is the price of a bushel of corn or soybeans. When conversations turn to price, which they nearly always do, I instead like to steer the topic toward focusing on what our customers can control. And in reality, there remain many parts of their farming operations where they can have a significant impact.
Of course, as we all know, what it really all boils down to is maximizing revenue while minimizing expenses. Now more than ever, our customers need to rely on the network of professionals who are a part of their team. From nutritionists to agronomists, from the veterinarians to the genetics folks, every penny spent on the farm must be spent carefully. While the base price for milk can't be controlled, the premiums paid can be influenced by working toward better milk components, lower SCC, and a higher quality product. This may mean adopting new protocols on the farm, but if the milk procurer is willing to pay more for milk produced within a certain set of standards, the farm business can reach for this by adopting new methods. This is within their control.
At the same time, producers can access their feed advisors to determine whether raising every heifer calf is the best option. Perhaps now is a good time to raise fewer replacements if they are not needed to maintain herd size. Instead of selling all the bull calves, if there are facilities, feed, and labor available, raising dairy beef may be a possibility. Or, breeding a percentage of the herd to beef bulls with the intention of raising some crossbred cattle is another possible opportunity. Working with their agronomists, farm families can pencil out whether purchasing corn is a better deal than renting land to grow corn. Perhaps now is the time for a farm to refocus on its marketing plan. The list is endless really, and, no two farms are alike so each farm will have different answers to what might work best for them. The point of this is to help producers see that, in spite of commodity prices, there are a great number of avenues they really can control within their farm business.
As ag bankers, we too are part of the team of network professionals for our customers. At a seminar a few years ago, Dr. David Kohl said that to be an effective ag banker, we not only need to understand our business (of banking), but we need to understand our customer's business as well. It's important that we stay on the cutting edge of both banking and farming by continuing our education. From reading farm publications to listening to farm radio, participating in webinars, and attending workshops and conferences, our customers depend on us to bring them answers and suggestions regarding the sorts of things that affect their business. Yes, we need to be cognizant of 'lender liability,' but at the same time, our customers look to us for a lot more than financial analysis and ratios.
I shall end my writing for the October "From the Fields" by sharing an insight I picked up at the WBA Ag Bankers Conference this past April. As the event was winding down, I had the privilege of being part of a conversation with some of the top-rated speakers from the conference. One of the speakers compared what is going on in the ag industry to white water rafting. He likened the commodity prices to the rough waters. He went on to say that producers are in the raft and they have one of two choices: they can either bury their chin in their chest, crouch down, hang on for dear life and hope they don't capsize and drown, or, they can put on a sturdy life vest, take their oar, and do all they can to steer down the rapids, deflect the rocks, maneuver the waters, stay afloat and still come out in one piece once the waters (commodity prices) improve. Point being, as much as none of us likes these continued challenging prices, there are things our borrowers can do to improve their situation. As a trusted team member, we can help empower them to see that they really can "take the bull by the horns" to deal bravely and decisively with the difficult and unpleasant situation we are experiencing in these trying times.
Sikora is senior vice president - agricultural banking at Citizens State Bank of Loyal.