CALF_News_December_2019_January_2020

24 CALF News • December 2019 | January 2020 • www.calfnews.net at whether there is sufficient equity to overcome prior years of depressed income and increased cattle prices for feeders,” he says. “If an operator sees depressed equity resulting from the lower earnings, he or she will need to provide sensible projec- tions that can be achieved.” Gretchen White, Rabo AgriFinance’s managing director for the Mid Plains region in Wichita, Kan., says 2019 eroded equity for many feeders.“There- fore, obtaining financing to the level at which they may have operated in the past could be difficult,” she says. “To overcome obstacles they may get from a lender – be prepared. Develop a plan for your program before you ask for financing. Determine the number of head, risk management strategy and how it all fits with your operation. Having a plan keeps us all from having emotional reactions to the market as the year progresses.” “No matter what the situation, produc- ers and feeders will still need equity,” adds Glynn Tonsor, Kansas State University livestock marketing economist.“Cow-calf producers were probably in the breakeven category for 2019, so equity probably didn’t change much for them. “Feedlots faced more price pressure. For someone not hedged, there were Are You Ready to Visit Your Banker? Be Prepared for More Lender Questions By Larry Stalcup Contributing Editor notable losses for multiple months. Equity drain probably occurred. Lenders will take note of that.” White says operators may encounter more questions about their business plans when getting their financing this year. It may involve discussions that focus on how to keep the operation viable and what the long-term goals are for the operation. “Is there a succession plan?” she asks. “If you’re near retirement, is it best to retire now and rent? Is your crop mix profitable, or should you let an unpro- ductive quarter go even if you’ve rented it for many years? Margins are so tight that operators have to evaluate not only inputs, but each enterprise and the whole picture. “Just because something worked 10 years ago doesn’t mean it will today. Show your lender that you’ve done your homework. Lenders want to see spread- sheets and other documents to make the conversations easier on both parties.” How will quality of cattle impact financing? “Agriculture is a margin busi- ness. No matter what quality level you chose, you have to manage the margins,” White says.“Advance rates on cattle are typically the same, so it’s important for producers to know cost of gain and aver- age daily gain. G etting financed to continue running a cow-calf or stocker operation isn’t easy. And if you’re a cattle feeder, be ready for a longer appointment with your lender. After continued feeding losses and no long-term profits to bank on, it may come down to available equity to obtain an operating loan. The Wall Street Journal recently reported that financial stress is growing in crop and cattle country. Some produc- ers are being forced to seek alternative lenders to operate another year. Some call it “shadow financing.” Farm and ranch bankruptcy numbers are rising. And a ter- rible winter for many crop and livestock producers, coupled with depressed prices, didn’t boost anyone’s confidence. Those predicaments place added pres- sure on producers and feeders seeking financing for 2020, according to several large ag bankers. Equity, or what’s left of it, will be a huge factor. So will having all your ducks in a row dealing with assets, projected inputs and marketing strategies. Brad Johnson, vice president and commercial/agricultural loan officer at Amarillo National Bank in Amarillo, Texas, says the loss of equity could be a factor in whether a producer or feeder gets financed.“Lenders will likely look