David Kohl, Ph.D., is professor emeritus of agricultural finance and small business management and entrepreneurship at Virginia Tech, Blacksburg. Dr. Kohl has traveled more than eight million miles in his professional career and conducted over 6,000 workshops and seminars for a variety of agricultural audiences.
To stay away from the negative or substandard rating, business owners and managers need to be aware and develop a cash flow.
Someone with a fresh mindset in the business that understands marketing and is financially oriented can be a good stimulus for corrective action.
Carefully analyze the balance sheet this winter, particularly with the buildup of unmarketed grain inventory.
The key driver of agriculture profitability in 2019 will be the direction of the U.S. economy. Is a recession around the corner?
Dr. David Kohl takes a look at the economics of 2018.
Don't go to your lender's office without an up-to-date balance sheet!
First, many lenders are going to be examining the historical performance of producers that may foretell success in repaying loans in the future.
The reality of lower prices that have resulted from supply and demand imbalances, a strong dollar, and trade issues have made the "new normal" into the "old normal" in terms of marketing.
When do you market corn? During planting or harvest? Find out what a data analysis shows.
The first step in business growth is to set your goals.
What type of marketing advantage or efficiencies can the technology provide?
The biggest takeaway for the next generation is marketing and management skills.
"Do we as future agriculturalists follow the food trends or focus on commodity production to feed the masses in the U.S. and abroad?"
Three frustrations are identified when it comes to the future farmer.
Conversations about financial statements will become a high priority between producers and lenders in the next couple of months.
Your net worth, both financially and mentally, is directly correlated within your network, the people with whom you associate.
If a producer doesn't make time for refinancing, it could be a sign they are not committed to addressing the problem.
Producers can find many surprises in a family living budget.
The operating expense to revenue ration tells a story for many farmers.
Some producers are being forced to seek off the farm employment to deal with the increasing healthcare costs.
The data shows just over 60% of producers are profitable.
Blogger David Kohl takes a look at farm income and the economic pressures as a result.
Find out what signifies a cash flow problem when it comes to family living expenses.
Generally, farm values are strong, find out what could change that.
Will changes in the financial system in the next 10 years surpass what was done in the past 50?
Dr. David Kohl takes a trip back in time after he was the keynote speaker at the 125th Convention of the Virginia Bankers Association.
Be cautious when relying on your land equity in this farm economy.
Will the U.S. economy keep the expansion streak going?
Leadership is not necessarily a skill, sometimes it takes the right support for someone to be a leader.
Bench strength is what matters when it comes to building your farm.
Knowing how to use a spreadsheet program may be your best defense when it comes to planning for the future.
Planning the farm transition is one of the biggest challenges facing Candian agriculture.
If it wasn't for land, the USA would be experiencing another full-blown economic crisis.
There is one thing that is clear when it comes to the bottom line, interest rates impact it.
Farm consolidation is very important in the future, but does the next generation have the ability to take it on?
The question for many farmers is give up ground losing money or risk not getting it back when the economy returns.
Be prepared to explain tax strategies on capital expenditures.
Diversity is and will be the key to small farm survival across the USA.
Start earlier in life rather than later when it comes to investing.
One suggestion to beginning producers was to take paychecks personally out of the business and live within those means.
Many customers seek either the refinancing of operating debt, also termed "carryover debt", on an extended loan structure that is often to ten to thirty years.
Being a leader requires many attributes including listening and building trusting relationships.
Education may be the next big trend in the future of agriculture.
With so many changes possible in the future of ag, the one constant will probably be the importance of data collection in your operation.
Dr. David Kohl takes a look at the second part in a series where he looks at the trends of 50,000 farms in farm record database systems.
Benchmarking financials can be the key to a more profitable farm.
From volatility to financial management, here are predictions and revisions for your farm business.
Now, more than ever, and in the ag business, we need to hear, understand and take action at all levels of our farm operation.
Moving vans and RV sales can indicate economic trends.
Lender perspective and diverse input some of biggest benefits of the program, according to participants.
Factors to look at when looking to stretch payment terms on ag loans.
The winter of economic seasons is upon the ag industry.
Ag producers enjoyed the "summer" from 2006 to 2012.
Key indicators can offer insight into where the economy is headed, but caution should be exercised.
2017 saw widened profitability on the farm, complex business operations, resilient farm real estate, variable weather and more.
Utilizing your risk management tools can be the key to surviving market volatility.
Lesson learned: Eastern European farmers are not wasteful.
Leadership is more than just an attitude, it means developing face to face relationships and paying attention to details.
A producer who is willing to make changes in their operation will find it easier to work with their lender.
Change is happening in all aspects of agriculture from lending to education.
Dr. David Kohl gets a first hand look at farm management in New York.
Dr. David Kohl takes a look at who could be at a higher risk for divorce during these rough economic times.
Reducing fertilizer costs is helping to keep farming operations profitable for many.
Seven time-tested truths to succeed in today's economics.
Many lenders are looking at the risk and credit analysis and not the character behind it.
It's no secret, farmers are cutting costs in their personal lives. Check out where the biggest cuts are being made.
Because of the industry’s age demographic, agriculture will be one of the first to be challenged when it comes to the change in generations.
"When there is a fork in the road, take it!"
Three factors are involved when it comes to stressing lending portfolios.
Another look at where families are cutting costs in the living expenses portion of their budget.
David Kohl suggests a one-page recovery plan for producers seeking refinancing or debt restructuring.
Your version of success means taking your own path in life.
Bankers get to hear the borrower's perspective when it comes to the family farm.
When is the best time to purchase more land for your farming operation?
The first six months of 2017 created some surprising trends. What will the second half bring to the farm economy?
Students at Louisiana State University gave a glimpse of the future.
Blogger David Kohl wants producers to watch second-half 2017 economics.
A drive toward economic and financial efficiency is a rally call for businesses inside and outside of agriculture.
Determining profit on many farms may depend on the return on assets.
Commodity prices will continue to be on the minds of many farmers as a new crop season begins.
What are the most detrimental mistakes farmers make in their businesses, for themselves, or in the industry?
When refinancing your operation debt, also consider a plan of corrective action.
Proactive producers have one way of looking at finances and zombie producers have their own vision.
Boomerang producers can bring their outside the farm work experience to their operations in different ways.
David Kohl takes another look at some other financial and marketing elements that pertain to "zombie producers".
David Kohl talks about why setting goals for your farming operation is so important.
Compare your farm financials for farm profit, debt load, coverage ratio and compensation and living expense with those at 2017 TEPAP.
Producers may want to consider several things when it comes to making a "worst case" plan.
Road Warrior writer David Kohl shares some observations from his annual stop in Austin, Texas.
The future of agriculture is bright and full of jobs.
Producers know healthcare is necessary but the cost is an issue especially when it comes to a per bushel price tag.
Check out what lenders say is on their "watch out list" for high risk producers when it comes to financing.
Four questions may give a glimpse of what is happening in the agriculture economy.
America's new president, the dairy and grain industries were hot topics at an ag conference in Canada recently.
For all farming industries, marketing is not enough. Operations need a risk management plan and crop insurance in order to survive in economic downturns.
The agricultural lending history is undergoing "ground zero" this time of the year. Find out why.
Producers need to be vigilant and remove deadweight from their business. This can mean selling machinery or negotiating more affordable cash rents.
Speed kills in investments such as, land, real estate and stock market values.
A look into the future and how it may impact your farm's management style.
Getting into ag may not just be about the generational transition or low interest rates. It may be about the millennial generation and their desire to juggle multiple enterprises.
Commodity prices may be low, but it still may be a good time to get into farming. Check out three reasons why it might be the best time to venture into farming.
Recently, I was on a four-day speaking tour in the northwestern part of the United States. During the conferences, I had the pleasure of sharing the podium with meteorologist, Eric Snodgrass of University of Illinois.
Well, it is that time of year again where much of our thought is on the year ahead and beyond.
In my lectures, the importance of setting goals is often discussed.
In today’s economic environment, it is sometimes easy to get caught up in negativity where the “cup half-empty” approach almost begins to feel normal. In reality, a negative perspective often masks opportunity and vital adjustments.
This summer at seminars with agricultural lenders, I frequently encountered similar questions regarding negative margins.
In my recent travels, I continue to encounter the question, “Hey Doc, why haven’t land values dropped?” Well, this is a serious question for many connected to the agriculture industry.
The U. S. federal debt is the topic of many conversations today worldwide. Interestingly, the federal debt level has nearly doubled since the Great Recession of 2008.
Recently, a well-respected agricultural producer and business entrepreneur asked me an intriguing question, “Will the U.S. economy stagnate over the next 10 to 20 years?” Well, it is campaign season in the U.S. with negative ads, debates, and issue dissection.
While many individuals examine financials for the reasons behind a business’ success, it is often the unseen components that lead to financial fortune.
Recently, a lender in one of my classes raised an excellent point. He questioned whether recommended burn rates on working capital should vary depending on enterprise.
The “starting five” may sound like a basketball team ready to start the game, but it is actually five adjustments happening in agriculture today.
One critical aspect of this economic downturn in agriculture is the possibility of increased risk with larger farms.
Depending on the account and institution, the loan process and review can vary. Most often, a producer’s first point of contact is the loan officer.
Well, it is time once again to visit family living cost for farm and ranch businesses.
From my recent discussions with agricultural lenders, it appears that some producers may be playing a sort of “shell game” in order to meet expenses and service debt.
I recently completed my 27th year of teaching at the Graduate School of Banking at Louisiana State University.
By now, the economic reset has exposed various financial and management flaws of many agricultural businesses.
Recently, my travels have been dominated by banking and lending conferences.
In the emotionally charged era of the economic downturn, interesting exchanges occur between lender and borrower.
First, is Great Britain’s vote to exit the European Union a surprise? Two days before the vote, I was in Spearfish, South Dakota, at a banking school where I told a banker the “Brexit” was unlikely.
Wow! It is hard to believe that 2016 is almost halfway through! It certainly seems that time passes more quickly the older one grows. As a type of review, let’s examine some of the points and perspectives emerging across agriculture from the first six months of 2016.
Should I cash out my retirement account? At a recent women’s conference on agriculture, I encountered this question in several forms as people look for additional income.
Recently, I traveled outside the borders of the United States and a major question posed by farmers and bureaucrats was whether American farmers are still dependent on government support programs.
Recently, I enjoyed another trip to the neighbors of the north to conduct seminars and individual meetings with some of the top agricultural businesses of Canada. Each time I travel outside the borders of the United States, I find unique and valuable perspectives on agriculture, business and life, in general. This trip was no exception.
On a recent webcast for agricultural lenders, I received an interesting question, “Is there any hope for reduction of crop input costs including cash rent expense?” Well, this certainly is pertinent for today’s economic times.
As American agriculture continues to be challenged economically, the phrase, “willingness to repay” has begun to appear more frequently.
In today’s world of advanced technology, personal touch or the human component of business is neglected in some situations.
Now that interest rates have increased, many producers want to know whether they should fix interest rates on their loans or continue on with a variable rate. Here are five considerations when making that choice for your farm loan.
In my seminar audiences, there are usually several members of the Baby Boomer generation. Many are farmers while others are lenders, agribusiness professionals, educators, or spouses.
During the great commodity super cycle, “high prices cured high prices,” as the saying goes.
Many people know I am avid basketball player and fan, which often leads to questions regarding upcoming tournaments or players, alongside the usual economic and agricultural inquiries. Believe it or not, many times these questions serve as my inspiration, in one form or another. As they may prove valuable for you as well, below are a few questions and answers from my travels.
Well, the U.S. has entered the political season with primaries and debates leading up to the nationwide November elections. Recently, I spoke in Minnesota, Indiana and North Carolina. For these sessions, I conducted a town-hall format with a focus on general issues of concern.
A lender recently shared with me the true story of a struggling producer. Unfortunately, this producer made matters worse by passionately saying something of the like to his lender, “I do not want to hear about cutting family living expenses! This is my family and my business.”
Recently, a Kansas producer of the Baby Boomer generation asked me, “Hey Doc! When will economics stabilize?”
Previously, we examined some ways, as suggested by producers, to tackle the challenge of cutting costs. Many leading agricultural experts suggest costs must be reduced by $100 per acre, or by 10-30% over the economic reset period.
The current economic reset is in full gear with commodity prices retracting in the crop and livestock sectors and of course, the energy field as well. Along with others experts, I concur that a cost-cutting strategy needs to be the top priority for producers.
As the “road warrior,” I once again earned my title on a 1,599-mile, one-week, extended car tour across five states in Midwest region of the U.S. During this road trip, the windshield appraisal of economic conditions confirmed the discussions in seminars and meetings over the past few months.
Over the weekend, I received four calls from producers. Unfortunately, I believe they are indicative of the state of the state of today’s agricultural economy.
International trade risk is one of the top issues facing the agriculture industry today.
Groundhog Day is often a turning point, promising the return of longer, warmer days. However, this day can be significant in business, as well.
Previously, we analyzed the factors often used to gain future insight on the U.S. economy. Today, it is important to note that the leading economic indicators show concerning signs of a slowing or contracting U.S. economy. Specifically, manufacturing, energy and other basic industries will see the slowdown first. However, regardless of the industry, a recession in the U.S. would create widespread impact.
Recently, a cattle feeder from Kansas asked me to summarize the state of the state of the U.S. economy. In order to answer this question well, we have to examine the numbers. Several indicators can provide a glimpse of the future health and wealth of the U.S. economy.
In my recent travels, I continue to encounter the question, “Hey Doc, why haven’t land values dropped?” Well, this is a serious question for many connected to the agriculture industry.
Welcome to 2016! This year, we will embark on an economic journey that will be quite different than the previous 15 years. The following are some perspectives and variables that will influence the economic fortunes of agriculture moving forward.
This final column of 2015 is devoted to the first 15 years of the 21st century in agriculture and rural America.
If reading farm magazines or attending agricultural seminars, you have probably seen several financial benchmarks for cuts in per acre cost. Yes, along with other academics and consultants, I suggest significantly decreasing your per acre cost is a good measure with which to face the economic downturn.
Recently, I delivered an economic outlook for the agricultural industry at an organization’s combined board and staff planning conference. After my presentation, a participant asked, “Is it good to be a farmer?”
Since 2000, many young people have been lured into agriculture believing the industry to be one of record profits and capital appreciation. Now, economic reality has set in which can test the mettle of even the hardened agricultural veteran.
The great commodity super cycle is now unraveling and the economic reset is in place.
The agriculture industry is not the only facet of the economy that faces trials and tribulations of business dysfunction and changing trends.
Now in the final quarter of 2015, my travels and lectures continue to connect me with various lender, producer and agribusiness groups.
The lagged relationship between returns and cash rents still exists.
The other day, a participant in one of my teaching forums asked me to switch perspectives. He stated that I normally discuss the best management practices, but he was interested in knowing the worst. Well, that is an interesting twist!
To avoid losses on 2016 corn and soybeans, ag economist Gary Schnitkey, University of Illinois, recommends growers cut $100 per acre. This suggestion has garnered some questions, and Schnitkey has some answers.
One of my recent trips was to South Carolina’s Clemson University to lecture at the 32nd annual Southeastern Agricultural Lender School. This is one of the few lending schools in the country that combines bankers, Farm Credit, Farm Service Agency, academics and various agribusinesses at the same school. This is unique and extremely valuable because it brings together a broad perspective of viewpoints and solutions. This broad perspective will be vital in working through the economic challenges and opportunities over the next few years.
On a recent webcast for lenders, I hosted over 1,000 participants. Only once have I had such a large webcast audience. I believe this is a positive result of changing times and transitions. On this well-attended webcast, one of the participants asked me an interesting question about risk management.
The other day, I was asked how a producer can best determine cost. The question was posed in a dairy industry setting. However, it is also appropriate for the grain and row-crop sectors, which appear to be heading for an economic reset, post the great commodity super cycle.
My summer schedule is full with banking and lending schools that focus on subjects ranging from agriculture to small business to interpreting domestic and global economics.
Economic health and viability are at the forefront for many involved in today’s agriculture industry. While some may prefer to just eat ice cream and hope for improved opportunities, proactive management strategies will be required for success.
This time of year, I conduct many ag banking and lending schools. Agriculture is in a time of transition that will affect assets, operations and people. The ag lending industry, however, is also in a time of significant transition. Similar to agriculture, the careful management of this transition will be critical; especially, as some segments of agriculture enter turbulent economic times.
I can hardly believe we are already into the second half of 2015! So far, we have seen a severe winter followed by droughts and floods which all showcase Mother Nature as a primetime economic player yet again.
My last column highlighted the time period of 2007 to 2012 as an aberration of profits for grain producers; noting post and prior time periods exhibit more normal profits. The data I used in my previous article was from the Center for Farm Financial Management’s data system, FINBIN. In order to better understand ways to survive this economic downturn, we need to once again examine FINBIN’s excellent data.
We have a great resource in University of Minnesota’s FINBIN data that Bob Craven’s team gathers along with the diligent work done by farm management teams in analyzing and summarizing the results. That data provides some perspective on how financial results have dramatically changed since the go-go years of 2007 to 2012 for the grain industry.
The deadly H5N2 virus, or avian flu virus (bird flu), was first detected Minnesota in early March, and after peaking in early May, has now declined considerably. As of June 15, there had been no new cases of the avian flu reported in Minnesota in the past ten days.
The last column focused on global trade risk as one of the biggest risks in many segments of agriculture.
After I addressed a corn and soybean conference in Madison, Wis., this spring, a good friend, Sam Miller of the Bank of Montréal, made an interesting comment. Sam knows how to cut to the chase, and he stated that after listening to me speak that morning, he had concluded that the number one risk facing agriculture is international trade, because many facets of the agriculture industry are internationally interconnected.
Storm clouds are building as American agriculture, specifically the grain sector, is entering phase one of the post-commodity super cycle downturn. One of the first signs of a downturn is buildup of machinery and equipment inventory on dealership lots.
Today’s uncertain world rewards innovation, says Mark Drabenstott, a global economist, Federal Reserve 25-year veteran, and recognized thought leader on regional development and digital commerce. Today he’s executive chairman of MarketSquare, “which connects businesses globally for digital commerce, swifter delivery and smarter decisions,” he says.
The following question was asked of me on the speaking trail this past winter: If you look back five years, what would you have said then compared to where we are today?
If Emily Hirsch Cooper had graduated from college 15 years ago, she believes she wouldn’t have pursued the same opportunities in production agriculture that she has today.
A trip to speak at a women’s convention in the Quad Cities was a highlight of this winter’s speaking circuit.
Last week we talked about cash flow, sensitivity analyses and liquidity and how those matter when working with your ag lender. This week, lets go over the importance of a business plan, communications and productive assets.
Based on your experience, what are five points of wisdom that can increase our chances of working more effectively with our own lender and being successful?
This year was my 24th year of presenting at TEPAP, The Executive Program for Agricultural Producers, which was envisioned and strategized by Danny Klinefelter of Texas A&M University. This year I was greeted by both Klinefelter and Dick Wittman, the highly respected farm consultant from the Northwest, after a vigorous early morning workout.
Best management practices are hot topics inside and outside of agriculture. Have you ever wondered how you stack up as an agriculture producer?
In my road warrior travels interacting with producers and agribusiness leaders, there is much discussion concerning oil prices and other economic variables that seem to provide a surprise around every corner. A question from one producer was, “How is oil connected to up to 80% of farm and ranch expenses and potential revenue?”
As mentioned in my recent columns concerning family affairs, nonfinancial issues can bring businesses to a standstill, hindering profitability and economic performance. Another area that can bring fireworks to family dynamics is compensation.
In the last column, discussion focused on how lack of communication during a major expansion and failing to ask the tough questions during the business planning process can result in slightly elevated blood pressure and discord in family business. Let’s explore another case in point.
“A Family Affair” reminds me of a song from my era by Sly and the Family Stone. By the way, our basketball team used to warm up to music by the Four Tops, the Temptations, and Sly and the Family Stone, so this article put me in the mood for reminiscing.
Agricultural lenders often use the five Cs of credit as a framework for determining acceptance or denial of a loan request and to evaluate overall risk when they price a loan. The five Cs are cash flow, capital/collateral, conditions, capacity and character. While these five Cs are important criteria for credit, a sixth C is very important in terms of management, which frequently makes a difference in the five Cs of credit.
There has been much discussion in the news concerning the relationship among education level, employment, and income. In a recent seminar, some interesting data was presented concerning these topics. Here are some perspectives.
The agricultural economic transition is creating an interesting emerging trend. Farmland is now starting to turn over at an increasing pace. Older producers at seminars are asking, “Should I sell now at the peak?” Others are seeking individuals to purchase their farms to carry on their legacy because they have no family members who want to carry on the legacy. Still others have children and grandchildren who have inherited the farm and now want to cash in their inheritance while land and asset values are still strong. Let’s conduct a “sniff test” exercise that I went through recently with an individual who wanted to purchase farmland near his operation.
A few weeks ago I was in Ames, Iowa, addressing the Farming for the Future Conference with a very attentive audience of lifelong learners. One of the attendees sent me some very important follow-up questions after the conference. “What components are included in working capital? Is a farm’s operating line of credit one of them? You recommend working capital guidance of at least 33% of gross revenue. Is gross revenue taken from past years or cash flow projections?” I am glad he asked these questions because similar questions are frequently asked by producers.
Recently I was a presenter at the National Agriculture Bankers Conference in Omaha, NE. For 37 years, this has been an annual stop during my Road Warrior travels. This year’s conference had over 750 agriculture bankers and lenders in attendance; the largest event in the past 20 years. To put this in perspective, my first conference in Nashville, TN in 1978 had over 1,900 in attendance, with a peak of 2,100 in Dallas, TX in 1981 just before the farm crisis. Then the farm crisis came, and 500 were in attendance in Kansas City, MO the following year. The agriculture banking world certainly changed over that time period!
In the coming years, there will be ag borrowers who will struggle. There are three specific groups to watch...
The other day I was on a large farm operation during a snowstorm. It was snowing so hard that a satellite GPS would have had difficulty finding me. No, it was not south of Buffalo, New York, although they have had record snows this year.
The last article focused on building a business case for your lender when negative margins occur, which will be likely for some grain producers in 2015. Let’s examine five-steps for returning to positive margins in your agriculture business, in no particular order. Some of these steps can be used to build efficiency in profitable businesses as well.
The reality is setting in that some producers, particularly those in the grain sector, will experience negative margins in 2015, which is something not experienced in many years. How can a producer troubleshoot their business and work with their lender when margins are tight, or even negative?
Everyone has had their fill of football bowl games, and now we are into the college and professional football playoffs, which usually provide some surprises and upsets. This is much like thinking ahead about what to expect in 2015. The following are a few of the thoughts and perspectives that you may want to consider in your planning or conversations with your business partners.
It seems that 2014 is finishing with a furor that one could not have imagined 12 months ago. Oil prices now hovering in the $50 per barrel range with a $60 swing during the year illustrate the volatility to consider in developing projections and planning for 2015. Rapid change in oil price has been a lead indicator of every U.S. recession since 1969. Also, with 80% of all farm and ranch expenses linked in some way to the price of oil, this metric bears watching.
Here are some pointers to help you build confidence in your business financial decision making, which can increase your lender’s confidence in loaning you money.
Whether it is a young farmer or rancher starting from scratch, a growing and expanding business, a business in transition, or a business that is scaling down or exiting, a team approach between the borrower and lender is a vital element for success.
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