Ready for Ag's Reset?

Agriculture is in the midst of an economic reset that will thin the ranks of some of the largest farm operators but offer growth opportunities for those who have patiently held on to cash. That was the counsel from Dave Kohl, a professor emeritus in ag economics from Virginia Tech who spoke to the 2017 The Executive Program for Agricultural Producers (TEPAP) class in Austin this week.  "Most lenders haven't seen their customers' financials for a year, but when they do, some will be saying 'Oh my God,'" Kohl said. Jan. 15 through April 15 will be a critical time for lending renewals, he added, with more and more stress appearing not just for farmers, but for suppliers like machinery dealers and cooperatives. The ag finance expert likened the situation to inning four to six of a baseball game. After experiencing cash flow issues and serious profit margin declines in 2013 to 2015, farmers are "calling in their working capital" as their relief pitcher and draining much of their liquid assets. If losses continued in 2016, operators will need to dig deep into their core equity and use their farmland wealth to stay in good standing for their next credit renewal.