Ag leaders compile outlook, share industry snapshot
Thursday, December 10, 2020
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This story appeared in the Edge December newsletter. Click here to view the digital version of the newsletter.
Written by By Fred Hall, extension and outreach dairy field specialist, Iowa State University
 The Tri-state and Siouxland Ag Lenders Seminars were combined into a virtual seminar in early November due to health concerns from the coronavirus pandemic.
Lenders, consultants and academics from five upper Midwest states heard four presenters, including: Mike North from ever.ag, Dr. Wendong Zhang and Dr. Chad Hart from Iowa State University and Dr. Mark Stephenson from the University of Wisconsin-Madison.
Participants represented over 50 lending institutions, 15 consultants from other ag businesses and eight academics and researchers from universities and extension specialists. An online retrospective program evaluation was used to collect insights from those attending. From the data it was estimated that their clients represented 7,033 ag producers. Those producers cropped over 4.8 million acres and milked 381,767 dairy cows.
For the past two years, the evaluation asked what percentage of their clients had plans for expansion in the next five years. In 2019, the average was 40 percent and in 2020 that edged down to 37 percent. Other clients had plans to exit the industry; in 2019 that number was 13 percent and in 2020 that number was 12 percent.
Concerning dairy clients, the lenders were asked how many planned to add automated milking systems (AMS). In 2019, 12 percent indicated that was being considered. In 2020, that number had dropped to 8 percent.
For the past three years, we asked several questions focused on agricultural loans to better understand the state of farm loans in the Upper Midwest. Chart 1 indicates the responses. The lenders were asked to indicate the changes they were making to respond to the changing farm income. They were given six options; chart 2 shows the responses.
The lenders were asked to rank their economic concerns for their dairy clients. They were given these seven choices: working capital, debt-to-asset ratio, feed prices/availability, milk prices cash flow, profitability and other. Working capital and profitability tied for the top concern with cash flow clearly in second, followed by milk prices.
In 2019, lenders were asked if they had seen indication of personal stress in the farm families they served and found 71 indicated they had, and 13 percent had been prompted to take some action or intervention. In 2020, that number has increase to 91 percent seeing stress in families and 20 percent had been prompted to take some action.
Not surprising, over the past three years the percentage of females attending has increased each year. It is interesting that the age of participants is changing with more 35-to-44-year-olds attending. However, those 45-54 years of age are the highest demographic and has remained constant at about one third.
While the advent of the coronavirus has affected the dairy market with new highs and lows over the past eight months, in fact, the market has reacted as it should; adjusting prices to clear commodities from the market.
Lenders have reviewed their lending requirements and continue to serve the industry. With the improved 2020 milk prices they have slowed collateral increases and are increasing the size of operating loans, slowed interest increases or lowered some interest rates.
However, continued volatility has contributed to “at risk” loans in their portfolios and as a result, producer risk management strategies have become even more important to acquiring the capital to survive and grow their enterprises.
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