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Lender engagement

What percent of the farm and ranch customers have refinanced at least once in the past five years?

One of my favorite events is the FINPACK Lender’s Conference held every December in the Twin Cities of Minneapolis-St. Paul. The below zero temperatures, snow, and blowing wind was the perfect backdrop to engage with the agricultural lenders in attendance on pertinent topics during this economic cycle. This nationwide audience was asked a series of questions using anonymous response clicker technology. With the assistance of Rachel Purdy, one of the new FINPACK team members, some interesting findings were enumerated.

What percent of the farm and ranch customers have refinanced at least once in the past five years?

Over 50 percent of the attendees indicated that 25 to 50 percent of their customer base had refinanced debt at least once in the past five years. Many lenders indicated that debt restructures were to convert operating losses into term debt to alleviate cash flow and working capital issues. However, some lenders indicated refinances were to secure lower interest rates as we are in a period of declining interest rates. Twelve percent of the respondents indicated over 50 percent of their customers had refinanced in the past five years. Approximately one-quarter of the lenders indicated their portfolio was solid with less than 25 percent of customers seeking a refinance option.

Cost of production

One of the most surprising results of the surveys related to customer knowledge of cost of production. Nearly 60 percent of the lenders indicated that less than 25 percent of their customer base knew their cost of production. Nearly 30 percent of lenders thought between 25 and 50 percent of customers knew their cost of production. Just over 10 percent of respondents were of the opinion that between 50 and 75 percent of their customers had a handle on the cost of production.

One of the 15 building blocks of business IQ is knowing the cost production. Decision-making and execution are very dependent on the cost of production variable. Generating profits in an environment of low margins and high volatility will require attention to the dollars and cents. With multiple enterprises operating, cost and enterprise analysis is critical in the allocation of capital and labor for optimal uses.

An observation from engagement with the younger segment of agriculture finds a better grasp of the cost of production metrics and how changes in business strategy can impact the cost and bottom line breakdown.


The young person who endowed the Kohl Agribusiness Centre at Virginia Tech, named in my honor, indicated that understanding cost of production for his business allowed him to negotiate the best deals while providing excellent customer service. By knowing breakeven points, he was able to negotiate profitable transactions on a daily basis, as well as when he sold his multimillion-dollar business.

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