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Banking school perspectivesBanking school perspectives

Inflating expenses are the biggest threats to farm income.

David Kohl

July 14, 2021

3 Min Read
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The banking schools are in full gear, both in person and virtually. It is fun to facilitate participants on the quest for knowledge and tools to better serve their customers and producers engaged in agriculture.Through polling and invited guest speakers, a wide range of topics are presented to individuals that have responsibility both inside and outside the agriculture industry.

Dairy and beef industry: Beware

This year a series of questions were posed to the participants on whether they had eaten or drank plant-based and alternative dairy and meat products.Fifty percent of the participants had tried the plant-based meat alternative products. Moving on to the dairy alternatives, the final results revealed that 78 percent had tried the alternatives and 22 percent had not.

The tough question for crucial conversations and comparisons is, “Which tasted better?” An overwhelming 90 percent indicated that the alternative meat was not as good as traditional meat and 10 percent said it was similar. However, the dairy results were not as favorable for the traditional products. Only 65 percent of the respondents indicated that the alternative products were not as good, 33 percent stated it was similar, and 2 percent felt it was better.

The bottom line is that with the large amount of venture capital funds supporting alternative products and promotions to gain operational efficiency, this is not something that can be ignored by our protein complex. Granted, the results of this informal survey were gathered from a segment of bankers representing a large number of states, which is not a random sample. However, five years ago these alternative products were in the innovation phase. Today, you can walk into any major grocery chain and can see the inroads being made and accelerated by supply and marketing chain issues as a result of the pandemic and concentration of the traditional meat and dairy industries.

Related:How to move your farm business forward

Points and perspectives from the guest lectures

One banker from the Midwest indicated that every one of his farm customers had a positive earned net worth last year. He stated that this had never happened before in his 31 years of banking! The financial statements do not necessarily have all of the answers but will help you develop the questions that need to be addressed.

  • How were the government stimulus funds used?

  • What are your plans when government funds are not available?

  • What are your goals at 35, 50, and 60 years of age? Do the financial statements support these aspirations?

Related:Farm business planning: Tool for the times

Biggest threat to net farm income

The bankers cited inflating expenses, which can lead to margin compression or negative bottom lines, as the number one threat to net farm income. The loss of government support payments was high on the list. The bankers were concerned about the lack of emphasis on trade and supply and marketing disruptions.The lowest threat identified by the group was management by the customer. However, it is my opinion that business management and financial IQ will be the most important variables in the long run.

Source: Dr. David Kohlwhich is solely responsible for the information provided and is wholly owned by the source. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset. 

About the Author(s)

David Kohl

Contributing Writer, Corn+Soybean Digest

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