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It’s time to talk to your ag lender

Agrivision: Your lender may not know you are struggling to make payments.

May 11, 2020

8 Min Read
aerial overview of farmsteads and green fields
BE PROACTIVE: Bring your financial records up to date, and develop a plan for what you can do to make changes in your farm operation.Farm Progress

My wife and I own a 275-acre farm and milk 100 cows in central Wisconsin. We are in our late 40s. We owe $280,000 on our farm and $45,000 on a newer tractor we bought three years ago. One of the things I am reading is that we should talk to our lender and go on interest only for our loans this year to help us get through this coronavirus crisis. I am concerned about talking to our banker, because for the past five years, we have been paying interest only more years than we have paid interest and principal on our loans. Do you think he will want us to pay interest only this year? I’m concerned he may say we should sell out because we are not making much progress in paying off our loans. Also, do you think we should refinance our loans because of lower interest rates? Are there any loan programs that can help us?

Tom Kestell: First of all, congratulations on your farming success to this point in your career. Your current debt to equity should be quite favorable for future success. I strongly believe you should never be afraid to talk to your banker. Your banker is your partner in your business and should be aware of your financial situation, your plans and your concerns. You mentioned loans several times, and in my humble opinion, the best plan at this time is a single loan — combine all loans, collateralized by your real estate and refinanced at the lowest interest rate that you can lock in for 15 or 20 years. I would then negotiate an operating loan to help secure discounts on purchases such as crop inputs. You then need a plan on how to pay this back.

Whether you negotiate an interest-only loan or restructure your debt so you can cash-flow your dairy operation, it is important that you have a plan you and your banker can agree on and support. This needs to be a long-term plan with the opportunity to change it when situations change. This is the time for a reality check for all dairy farmers. How can we become sustainable and profitable, and enjoy our career choice? What changes in your operation can be made to have this become a realistic plan?

It is not realistic that every year we will show a large profit, but it is imperative that we do not spend our hard-earned equity year after year until it is gone. In your planning, look at the short-term and long-term goals; evaluate what changes you must make to reach your goals. Reach out to successful dairy producers who you respect and get their consult on what makes them successful. Most of all, do not be passive and hope things get better on their own. The best way to predict the future is to create it.

Sam Miller: The pandemic has impacted everyone in ways that continue to play out. This has obviously had an impact on your dairy business, with milk prices declining substantially. The pandemic is out of your control, but you should focus on what you can control. Bring your financial records up to date, and develop a plan for what you can do to make changes in the operation. This could include cost control measures, selling unused or underused assets, price risk management plans such as Dairy Margin Coverage or Dairy Revenue Protection, and re-amortization or principal deferral on your loans.

When you have a plan with changes you can control, then contact your banker to share it. Your banker will review your plan and likely work with you to identify some options. Some of these options could include re-amortizing debt, principal deferral for three to six months, Farm Service Agency guaranteed loans or Small Business Administration loans.

Katie Wantoch: For many farmers with loans and mortgages, there is help, but first you should assess your situation. If you can pay your loan/mortgage, continue making payments. Don’t call your lender if you aren’t facing an immediate issue. Lenders are getting a lot of calls and need to help those who won’t be able to pay their loan/mortgage first.

If you can’t pay your loan/mortgage, or you can only pay a portion, contact your lender immediately. Check the lender’s website for possible options. It may take a while to connect, so reach out via text or email instead. Be proactive during this crisis. Your lender may not know that your business is struggling to make payments.

Many financial institutions are working with borrowers who may or may not be able to meet their payments because of the effects of COVID-19. If you need help working with your lender or understanding your options, you may want to reach out to a professional. Seek advice from credit counselors, lawyers, accountants, Wisconsin Farm Center or other trusted agriculture professionals. Ultimately, the decision to accept or reject the lender’s proposal to assist you with payments is your decision as the borrower.

Problems taking a toll

My husband, our son and I milk 150 cows on our 320-acre farm in northeastern Wisconsin. We were finally able to start paying all our bills last fall, but now with COVID-19, we are struggling again. Our lender has reassured us that we will get through this, but I am worried about the toll the last five years have taken on my husband. I have tried to talk to him about talking to a counselor or our priest or somebody, but he won’t listen to me. I’m worried about him — he seems depressed. Is there anything we can do?

Tom Kestell: Let’s be honest — dairy farming is a tough business, and after early optimism in 2020, the COVID-19 situation has turned the emotional, financial and social environment in a steep decline. This situation alone would cause almost anyone a high degree of stress. Stress is caused by the feeling of not being in control — of fighting the unbeatable foes in our life with little or no hope of winning. So, my first suggestion would be to try and eliminate some of the stress triggers that weigh us down. Talking to your banker will be a good start. Develop a plan for what-if scenarios. Develop and implement strategies to eliminate as much stress as possible.

Mental health is too often ignored by farmers and other independent people. We have been taught to tough it out. Be man. I would suggest having a friend of your husband’s talk with him at first on a casual basis. Farmers’ peers do have firsthand knowledge of what both of you are experiencing.

This might also be a good time to look at your dairy operation. Have someone with a different set of eyes help to evaluate your dairy for areas to improve, change or eliminate to make it more profitable and enjoyable. It is important to tap into the reasons you chose a career in dairy farming and bring back some of the joy and satisfaction you once felt. On a final note, I think that peer groups of like farmers can be a great place to share ideas, get new ideas and be reminded that you are not alone. I do caution you to surround yourself with successful, optimistic and forward-thinking people who can help you and not drag you down with their problems.

Sam Miller: The COVID-19 pandemic has changed the way we live, and created uncertainty and anxiety all across society. The stay-at-home conditions, economic uncertainty and disruption of daily routine has an impact on all of us, and some individuals are struggling with this situation.

I urge you and your husband to reach out to the Wisconsin Farm Center at the Department of Agriculture, Trade and Consumer Protection; call 800-942-2474 or email [email protected]. The team at the center is experienced in farming, financial issues and counseling. By contacting them, you will likely speak to a former farmer or ag lender who has experience in working through challenging times. They can provide you first with someone to talk to and then assist with additional advice and services tailored to your situation. There are many other farmers who have similar experiences. Please reach out to get some assistance. We will all get through this, but sometimes we need some help to lean on.

Katie Wantoch: I appreciate your concern for your family. Stress is all too common in farming. Long hours, weather issues, price concerns and markets are among the long list of items that we are not able to control and that can negatively affect our health, sleep, relationships and communication with others. University of Wisconsin specialist John Shutske offers a few suggestions and more information on UW-Extension’s website.

When stress becomes overwhelming, it is important to recognize the harmful effects and to take personal action. You may be sensing that something is wrong, but your husband may not be able to recognize the signs of stress. Encourage your husband to recognize and work to positively address his stress, rather than avoid it. When we are stressed or distracted, it also increases risk for a farm injury or making some type of other mistake. Resources exist to help during times of a change in income or financial need. Health insurance information and options; county-specific resources for agencies and services; local resources for food, housing, child and cash assistance; and more are available. Please visit coveringwi.org.

Agrivision panel: Tom Kestell, dairy farmer, Sheboygan County, Wis.; Sam Miller, managing director, group head of agricultural banking, BMO Harris Bank; and Katie Wantoch, Extension agriculture agent specializing in economic development, Dunn County, Wis. If you have questions you would like the panel to answer, send them to: Wisconsin Agriculturist, P.O. Box 236, Brandon, WI 53919; or email [email protected].

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