More Lenders Accommodating
Farm Marketing Plans

By Betsy Jensen

Marketing your crop is difficult enough, but it can be even more so if your lender doesn’t understand your marketing plan and methods. Some lenders do have limited understanding of commodity marketing, but it is improving.

Joe Burgard is marketing specialist for Ag Country Farm Credit Services, Jamestown, N.D.  The position was created three years ago to educate not only affiliated lenders, but customers as well.  Burgard sends out market updates several times a year to keep the lenders updated, and those same updates are forwarded to borrowers. 

Burgard recommends that farmers who have problems with lenders should look elsewhere for their credit: There are enough lenders out there who understand marketing, and will work with farmers.  “As long as they have a plan that makes sense, we will work them,” says Burgard. He mentions the carrying charge in wheat and corn as one example of that last year.  Farmers wanted to sell their crop for later delivery such as March or May because prices were higher in those months.  Since the farmers had a plan, the lenders were willing to extend credit.

Dave Vilmo is a farmer, marketing group participant and lender for FCS in Ada, MN. Vilmo encourages borrowers to participate in marketing groups and examine different marketing scenarios. “Be well read, and don’t be swayed by one broker,” he recommends.  “There are always several different ways to market your crop, and you need to choose the correct method for your risk tolerance and financial needs.  Show me a plan and expected results to see if it is realistic.”

Bob Quissell is a loan officer for Fin-Ag Inc. in Sioux Falls, SD, and he believes marketing plans are becoming more important to lenders. “All lenders need to be astute of marketing and farm plans. We do cash flows and balance statements, but marketing is a new frontier.”  Fin-Ag Inc. is associated with Country Hedging, so his borrowers work closely with both the lender and broker. Quissell’s clients sign a security agreement when opening a trading account, so trade statements are sent to the farmer, and the lender.  This assures the lender that the trading account isn’t being abused. 

Quissell also recommends farmers find their break-even prices before developing a marketing plan. “You have to know your break-even before you can protect it,” he says, and that can make it easier to start marketing your grain.  Quissell agrees that break-even costs for grain are difficult because of yield risk, but if you don’t sell anything because you don’t know your yield, then you are at the risk of the market.  “Have a game plan that protects the farmer and the bank,” he says.

Indeed, just like farmers, bankers are in business to make money, and that is what your marketing plan needs to show them. If they don’t understand your plan, invite them to your marketing group, or have them call your broker or elevator manager.

Tim Hoefer, loan officer with Red Lake County State Bank, Red Lake Falls, MN, says he has heard of some lenders who have worked with customers to actually set up a separate hedge account. Typically, however, producers will use cash on hand for marketing if need be. Money for marketing purposes can be established in the line of credit and in a producer’s operating budget.  “If someone has a good history with us, we could usually work out something like that,” he says.

Hoefer says LDPs, government support payments, and crop yields have had the biggest impact on farm balance sheets the last few years.  “And if they’re lucky enough to get a decent crop price on top of their LDPs, most have been able to make it work.”