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Corn+Soybean Digest

Lenders’ View of Best Management Practices

This year at the Wisconsin Advanced Ag Bankers School, participants were asked to identify best management practices of customers who are profitable, but also pay their debt on time. The following were their responses.

  • Producers are very adept at managing expansion. They develop cost and investment budgets, structure the debt properly and build in extra monies for the unexpected or cost overruns. Variance analysis involving a comparison of budgeted expenses to actual expenses is used as a management tool.
  • More producers are using consulting teams as a valuable tool. Advisory teams consisting of an accountant, lawyer, crop or livestock specialist, lender and other specialists as needed are growing in popularity.
  • Growing and developing the next generation of the workforce is a major trend. Producers are realizing education and experience outside the family and agricultural industry is a process just like growing a crop or livestock. More formalized planning in this area is a trend that will impact most family farms.
  • People management was listed as a characteristic becoming important in the profitability model. This attribute ranges from the local community to laborers, lenders, suppliers and marketers.

I’ll bet you are surprised, like me, that the lenders did not list many financial management-related characteristics. Soft factors often drive the quantitative bottom line results.

Editor’s note: Dave Kohl, The Corn And Soybean Digest Trends Editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at sullylab@vt.edu.

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