Finance

Finance


Jun. 23, 2022

by Mark Wilson

Last week, the Federal Reserve hiked its interest rate by 0.75% in an effort to combat inflation. And while markets are expecting a similar rate hike in the not too distant future, this is a first step to decelerate inflation which is at its highest in the last 40 years.  According to Kevin McNew, Chief Economist at FBN®, the Fed will need to do more interest rate hikes in the next 6-12 months. Join Dan English, General Manager of FBN® Finance and Kevin McNew as they discuss why the Federal Reserve decided to hike interest rates, what that means for farmers and how can help alleviate some of the uncertainties of a fast changing economy.  What you’ll learn Click on the chapter links within the video to jump to each section: Why the Fed increased interest rates (00:10) What farmers should focus on (04:39) Why to consider Farmland Capital (05:24) What’s happening in the energy market (08:05) What it means for farmers (11:48) Watch now Solutions to grow your business Farmland Capital Farmland Capital provides you the capital you need without impacting your original loan. Learn more here or start your application today . Operating lines Inflation is impacting everyone. Operating lines will help you fund your operation as you see fit. Apply today and get your approval decision instantly. Land loans Rising interest rates might not impact your decision to purchase the perfect land. We want to help you finance your dream, apply for a land loan now . Crop insurance Inflation is impactful and everything counts. Protect your crop commodity and learn more about our personalized crop insurance solutions . Read the full transcript (00:00): I'm Dan English. I'm the general manager of FBN® Finance. And I'm here today with Chief Economist Dr. Kevin McNew. Hi Kevin. (00:08): Hey Dan, how are you doing? (00:10): Good. Well I think as a lot of people have seen now last week, the Federal Reserve hiked interest rates quite a bit.  And I think even a little bit more than what had been expected, maybe two or three weeks before that. Maybe could you just walk me through what the news was that prompted the Federal Reserve to raise rates and what that means? (00:32): I think the Fed is realizing that they got a late start to this inflation issue. You know, a lot of us in the economic world have been saying for the last year that inflation is a problem and they're just now kind of getting their act together.  And they did need to raise interest rates a quarter of a point more than what was maybe expected, but absolutely it's needed.  We have inflation that is well over 8%, 8.6%, according to the last reading, which is  at or above the highest rates we've seen in over 40 years. So the Fed has a lot of work to do. I don't think this is the end of the inflation or the interest rate hike story.  Markets are already kind of expecting another similar magnitude rate hike in the next meeting next month and probably another half a point gain before the end of the year. So yeah, we've got some interest rate movement company to curb this runaway inflation, (01:33): Do you think that the Fed is going to be acting like this is aggressive enough? Or do you think that they'll have to continually revise upward what they're doing to be able to combat inflation? (01:46): Normally, the Fed is really trying to watch inflation, unemployment, the economy, and really in the last 30, 40 years, we haven't worried too much about inflation. And so having to watch inflation is a new issue. The Fed's going to  have to deal with it.  And, and like I said, they got a late start to it, obviously because of the issues around COVID. And I think they're going to  be laser focused on what inflation is doing as a result of raising interest rates. They don't wanna put the economy in a recession, but their number one priority right now is tamping down this inflation that is just really problematic for the economy going forward.  So I think it's all going to  be about inflation readings as we get new data coming out. We're going to  see some pull back and economic activity and surging prices. I personally don't think we're, we're going to  be seeing something really quickly. That's going to  change the Fed's outlook, which is they're going to need to do more rather than less in the next six to 12 months. (02:54): Do you expect that raising rates, dialing back their bond buying program, all, all the efforts that they're doing to have more restrictive monetary policy that's longer or your interest and higher, you know, baseline expectations for years to come? (03:18): That's a tough one, Dan. I mean, because some of this is definitely, you know, policy related. I was a huge proponent of you the Fed being more aggressive about interest rate hikes shortly you know, six months to a year after COVID because we did inject such fiscal stimulus into the economy and that's now having, you know, profound impacts.  But beyond that, we have what's going on in Eastern Europe, issues with energy prices and all these external exogenous forces that are really out of the Fed's hands. And so, they're trying to do this through a series of interest rate hikes and, and quantitative tightening to kind of throttle back the system, but, there's more action in the global market than the Fed can realistically control.  From your standpoint, as you kind of see and, and see what's going on in the agricultural lending space, I'd be curious if we're in this interest rate environment for the next two to three years, where should we be telling our farmers to focus on?  Should we be focusing on long term debt consolidation? You know, all those kinds of things about investment decisions become so important in this environment. (04:39): It depends a lot on the farmer's personal situation, their balance sheet. But one thing that we encouraged a lot of people to do and worked with a lot of farmers to do over the last year to two years, was to refinance at these lower rates before the most recent rate hikes.  For folks who have done that, they have a very different problem going forward, which is they have an amortizing loan that they're paying off every year where they have a very low rate. And how do they replace that? How do they cover the additional incremental costs as they, you know, either refinance that to take some cash out down the road or come in with higher and more expensive sources of debt. (05:24): One thing we're encouraging a lot of people to look at is we have a Farmland Capital program where we can take a second position and they can keep the first position in place.  At the low rate, we think that's going to  be a great option for a lot of farmers. But more generally, I would say the risk of this going even higher still seems pretty significant to us.  And just the pace at which the rates have increased over the last six months has really been astounding. I think where folks can lock in rates for the next 10, 20, 30 years, and have some certainty that they're going to  be able to remain profitable. We're encouraging folks to do that.  If rates come back down they can always prepay and refinance at a lower rate, but where they can lock in longer term, we think that's definitely the right thing now. (06:13): As I think back long term, I've been farming all my life and in the ‘80s as a farm kid, I remember the interconnectedness of coming of the ‘70s, roaring with bull markets.  The ‘80s brought hyperinflation and land values going through the roof. And then in the early ‘80s was a big farm depression. I know there's many gray-haired farmers out there that have the kind of experience that have seen these kinds of ebbs and flows.  What I've been telling them as it relates to farmland is I don't think we have a huge downturn in farmland values, and we don't see a huge recession or depression even in commodity prices, because it's a much different story today than it was in the ‘80s where we had oversupply issues. This is not that situation. We don't have an oversupply issue.  We have an over demand issue and commodity prices may back down a little bit but I think farmland values don't tank and bottom out or, or turn south quite sharply. If there's ways to capture more farmland as they fall down, or in your case you mentioned the Farmland Capital situation, that's a really intriguing concept. (07:31): I think for farmers who are looking who may be concerned about that, that's a way for them to take a little bit of risk off the table while still being able to have upside control and ownership of their farm.  One thing that we're paying very close attention to on the financing side is will farmers be able to support their farm at these, you know, lower prices? Maybe you can just talk a little bit about what the forward curve of green prices are doing. And it sounds like you think some of these prices are here to stay for at least a little while. (08:05): They're definitely catching up as we get more permanency around the demand side of the story. A lot depends on energy markets and I don't think the energy situation is going to improve dramatically.  Obviously, a lot depends on the situation in Eastern Europe. Overall we're in a much different energy paradigm.We're trying to make this global transition from fossil fuel based energy to clean energy. And that's not a simple, easy solution. It's going to involve a lot of volatility. And I think this is just the start of what will be at least another decade of volatility in the energy markets, which in my opinion means more benefits for agriculture as we are linked in the biofuel space.  For 15 years we've been linked with ethanol but now there's such a big push around renewable diesel and that translates into demand for soybeans, for example. So I don't see a ton of downside risk, as I said, it's not to say we won't have ups and downs. But the forward curves are starting to look better and catch up. I do think the days of $3 corn and $8 beans are probably pretty far behind us until something dramatically shifts either in the energy sector or other other places. But there's just so much pin up demand if you will. (09:33): That's great news for our farmers. And one thing that I know a lot of people see as one of the drivers of energy is the war in Ukraine and the resulting markets. It sounds like even if that were resolved tomorrow, we're talking about more fundamental issues than the short term issues.. (10:00): Economists will call it a knife edge solution as we try to transition from fossil fuels to clean energy. A knife edge is really razor thin. And so a nice, smooth transition is very hard to achieve because there's so much imbalance.  Just to give you some perspective, since COVID, we have seen a downgrade in refining capacity in the U.S. and that's not out of coincidence. That's because the big oil companies are recognizing either internally or from pressure from outside investors that they have to shift to clean energy.  We're still a society that's heavily dependent on fossil fuels, but the supply of those fossil fuels, whether from crude oil, from refined products, is dwindling because of this pivot. And so, again, it's not an easy solution. I do think you're right. If we did get Russia and Ukraine to resolve for some reason, there'd be a pullback. But I don't think we're done with the days of a hundred dollars crude and $4 or $5 gasoline and diesel you know, for any time period. (11:22): Well, that's good news for our farmers.  Last question I have for you. Is there anything that you know, could fundamentally alter the inflation picture in the U.S., aside from what the Fed is proposing to do, or is this going to  be something that's kind of hard fought, there's going to be rate increases and it's the situation we're in? (11:48): This is going to have a pullback in investment and all of the investment things that are driven, whether it's real estate, especially home values. But for our farms, I think we're so tied to food, which has an exceptionally highly elastic demand.  That means it doesn't respond much to prices. People have to eat is the main take home message. I think from our farm sector standpoint you know, what would change the paradigm substantially is if energy markets collapsed.  It's hard to see a scenario where that happens. If we go back to the last big energy market downturn of 2007 or 2008, we went from $140 barrel oil quickly down to $40 and $50 barrel oil.  That was really because we saw China on this meteoric rise as a global economy and we needed a throttle price where we could pull back demand.  Until we start to see real signs of demand and pull back, it's hard to see where inflation starts to get tamed. Not saying it won't happen but the numbers I watch and the things I see, we're just not seeing the demand pull back and in the commodity space, I think that's really true.


Mar. 07, 2022

by Mark Wilson

Learn how to save your farm’s employees money and save time on your payroll with direct deposit. Ann of Community Financial Resources shares her tools and advice. What you'll learn Benefits of improving financial health for farm workers Why direct deposit? Focus Card used for payroll How the card works for farm workers Focus Card savings account Savings incentive program  Watch now Learn more Please contact CFR by sending them a note at:  https://www.communityfinancialresources.org/contact or email Ann at ann@communityfinancialresources.org .


Feb. 10, 2022

by FBN Network

For veterans who are interested in information about farm related financial programs, we’ve compiled a list of great resources that may help your operation.  Financial resources Grant and loan programs for military veterans provide vital resources for beginning farmers and ranchers. Educational and training resources The USDA and numerous partners offer agricultural education and programs to help veterans gain the knowledge essential for success. Business planning resources Financial and business planning courses can significantly help military veteran farmers establish and maintain successful farming or ranching businesses. From all of us at Farmers Business Network: Thank you for your service.


Feb. 02, 2022

by Pepo Peschiera

A new alternative in the market is by ® Finance. With Farmland Capital farmers can take a loan of up to 65% of bare land value (down payment of 35%) and then cover 49% of that down payment with Farmland Capital. This means that farmers can buy land with as little as 17.85% down payment. Additionally, farmers do not have to pay any interest on the Farmland Capital investment, providing more flexibility with their cash flows to make the necessary investments in their business and to weather the ups and downs that are inherent in farming. How Does Farmland Capital Work? Farmland Capital is comparable to a farmer getting support or partnering with a relative. If the farmer gets a loan of $600,000 from the bank on a $1,000,000 farm, he still needs $400,000 to cover the down payment. If a relative covers 50% of that down payment, the farmer only needs $200,000 down to buy the farm. Both the farmer and the relative participate in 50% of the income and in 50% of the change in value (up or down). But let's be realistic. There are a lot of farmers out there who don’t have a rich relative that wants to purchase land with them.  With Farmland Capital, the farmer gets 100% of the income (instead of 50%) and Farmland Capital gets 0% to give the farmer more flexibility with cash flows. In exchange for that, Farmland Capital gets ~60% of the change in farmland value over time (up or down).  If Farmland Capital invests less than 50% it also participates in less of the appreciation and depreciation. For instance, if $100,000 is invested the Farmland Capital partner would participate in ~30% of the change in value (up or down).  The goal of this program is for the farmer to buy out the co-investment at a future date. The agreement is for up to 10 years and the farmer can buy out the co-investment at any time based on the appraised value of the property. What Would a Farmland Capital Co-investment Look Like? In the example of a Farmland Capital co-investment of $100,000 participating in 30% of the change in value:  If the land goes up $100,000 in value (from $1,000,000 to $1,100,000) then Farmland Capital receives the $100,000 it invested + 30% of the change in value ($30,000) = $130,000.  If the farm goes down $100,000 in value to $900,000, then Farmland Capital receives the $100,000 it invested - 30% of the change in value ($30,000) = $70,000. In this case Farmland Capital loses 30% of its investment.  Farmland Capital is structured as an option that participates in the appreciation or depreciation of the farm. The farmer is the owner of the property; Farmland Capital is not on the deed. The farmer makes all decisions and pays for all operating expenses, including property taxes, mortgage, and insurance. Farmland Capital is junior to the mortgage loan, so Farmland Capital can lose all its investment before the lender loses anything. Typically, the co-investment loses all its value even before the farmer. If the farm loses value Farmland Capital shares in that loss in value.  is bringing this new product to market to connect farmers looking to expand their operation with investors interested in the protection that farmland provides relative to investments in other markets. These investors value investing alongside good farmers that are aligned on farm value preservation and have majority direct ownership. Partnering with Farmland Capital makes buying land less capital intensive and as a result farmers can buy more land earlier. The contract is structured so that typically a farmer can buy out the investment within 3-9 years with the equity they have built via: Land appreciation Equity built via land loan payments Savings generated from farm income Farmland Capital gives growing farmers a path to ownership while maintaining full control of the land and their destiny. Ultimately, sees as a way to level the playing field in the ever consolidating world of agriculture, allowing farmers to compete with institutional investors and hedge funds for land, keeping U.S. farmland farmer owned and controlled.  .


Jan. 28, 2022

by Pepo Peschiera

One of the main challenges growing farmers face is securing farmland.  An easy and capital efficient way to start is by renting land. Renting allows farmers to build a land base and cash flows to ensure they can make payments for the equipment. However, it doesn’t allow you to build equity and value over time. Equipment is depreciable and loses value every year, and rents can increase or be terminated, making renting a potential riskier proposition over the long term. Buying land can be a better alternative, but it is very capital intensive. It can take multiple years to save up just for the down payment and land markets can be very competitive. There are some compelling existing and new financial tools to help farmers purchase land that can be useful in the right situation.  In this article, we’ll cover the pros and cons of FSA loans (Beginning Farmer and Direct Loans), Seller Financing, Commercial Loans (including FSA Guaranteed Loans), and Farmland Capital, a new offering from FBN® .  FSA Beginning Farmer Loans FSA Beginning Farmer Loans are a great way for eligible farmers to get started. They can cover up to 95% of the land purchase. However, they have some limitations:  FSA will finance 45% up to a maximum loan amount of $300,150. The balance of the debt may be financed by a commercial lender, private lender, or the seller. The current land owned by the applicant must be less than 30% the size of the average farm in the county (for example: less than 107 acres in Cedar County, IA).  The farmer must have operated a farm or ranch for between 3 and 10 years. The farmer meets FSA requirements .  The interest rates on these loans are very compelling ( currently 1.5% ) which might make them the right option for those who can qualify. FSA Direct Farm Ownership Joint Financing Loans FSA Direct Farm Ownership Joint Financing Loans are likely the next best option for those who qualify. They can cover up to 100% of the farm amount with very compelling interest rates ( currently 2.5% ). However, they also have some limitations: FSA can lend up to 50% of the cost or value of the property being purchased. A commercial lender or the seller provides the balance of loan funds. Maximum FSA loan amount of $600,000. Another lender would provide the remaining financing. After farmers max out their FSA loan amount, their next best option is typically Seller Financing or going to a Commercial Lender.  Seller Financing Seller Financing, usually structured as a Contract for Deed, is when a farmer acquires a property with financing provided by the seller of that property, using the property as collateral. The amount of the property being financed, the term, and the interest rate are agreed upon between the seller and the buyer. Depending on the terms negotiated, seller financing can be an attractive option for many beginning farmers.  Commercial Lenders and Banks Commercial Lenders and banks are another option ( like Finance Land Financing ). They typically lend up to 65% of the property value and up to 50% of the total assets of the farmer. To qualify for these loans, the farmer must be able to demonstrate that their farming income will be sufficient to cover all expenses and debt payments, plus a buffer of typically 25%. For farmers in expansion mode, the main limiting factors are typically being able to cover the down payment (which amounts to 35% or more of the farm value) and being able to generate cash flow to cover the loan payments.  FSA Guaranteed Loans FSA Guaranteed Loans are loans issued by Commercial Lenders ( including ) that get a guarantee from FSA, allowing them to provide loans to farmers with tighter financial metrics. They are a good option for farmers who want to buy additional land and are not eligible for a conventional loan. These FSA Guaranteed Loans have a maximum loan amount of $1,825,000, typically higher interest rates than conventional loans, and an additional upfront cost of about 1.5% for the Guarantee Fee.  Farmland Capital A new alternative in the market is ’s Farmland Capital . With Farmland Capital farmers can take a loan of up to 65% of bare land value (down payment of 35%) and then cover 49% of that down payment with Farmland Capital. This means that farmers can buy land with as little as 17.85% down payment. Additionally, farmers do not have to pay any interest on the Farmland Capital investment, providing more flexibility with their cash flows to make the necessary investments in their business and to weather the ups and downs inherent to farming. Farmland Capital is perhaps comparable to a farmer getting support from or partnering with a relative. These arrangements can vary, but typically both the farmer and the relative participate in the income and the change in value of the farm (up or down). But let's face it. There are a lot of farmers out there who don’t have a rich relative that wants to purchase land with them.  With FBN's Farmland Capital , the farmer gets 100% of the income and Farmland Capital gets 0%, giving the farmer more flexibility with cash flows. Farmland Capital shares in a portion of the appreciation or depreciation of the farm between when the land is bought and when the farmer buys out the contract. The goal of this program is for the farmer to buy out the co-investment at a future date. The agreement is for up to 10 years and the farmer can buy out the co-investment at any time based on the appraised value of the property.  FBN's Farmland Capital is structured as an option that participates in the appreciation or depreciation of the farm. The farmer is the owner of the property (Farmland Capital is not on the deed). The farmer makes all decisions and pays for all operating expenses, including property taxes, mortgage, and insurance. If the farm loses value, Farmland Capital shares in that loss in value. Farmland Capital is junior to the mortgage loan, so Farmland Capital can lose all its investment before the lender loses anything. In fact, typically the co-investment loses all its value even before the farmer.  By bringing this new product to market, aims to connect farmers looking to expand their operation with investors interested in having money invested in farmland and the protection farmland assets can give them in the face of volatile investments in other markets. These investors value investing alongside good farmers who are aligned on farm value preservation and have majority direct ownership. Partnering with Farmland Capital makes buying land less capital intensive, which means farmers can buy more land earlier. The contract is structured so that a farmer can likely buy out the investment within 3-9 years with the equity they have built via: Land appreciation Equity built via land loan payments Savings generated from farm income Farmland Capital gives growing farmers a path to ownership while maintaining full control of the land and their destiny. FBN's Farmland Capital is a way to level the playing field in the ever consolidating world of agriculture, allowing farmers to compete with institutional investors and hedge funds for land, keeping US farmland farmer-owned and controlled.  Scale Your Operations with FBN's Farmland Capital or reach an advisor directly by calling 866-619-3080 to learn more about how FBN's Farmland Capital can help grow your operation. Watch Now: Learn More About Farmland Capital In the video below, Pepo Peschiera, Managing Director of Equity Investments at FBN, shares additional details about the Farmland Capital program.


Jan. 19, 2022

by Mark Wilson

With inflation at the highest it’s been since 1982, the impact on agriculture will be significant. But the difference between 1982 and today is that the economy has changed significantly. Join FBN® Finance’s Head of Sales, TJ Wilson and Kevin McNew, Chief Economist as they discuss rising inflation and interest rates and the impact they will have on agriculture.  What you’ll learn How do rising inflation numbers impact farmers? ( 01:01 ) How inflation is going to impact input supplies ( 02:45 ) How inflation will impact interest rates in 2022 ( 04:05 ) How interest rates will affect ag loans ( 05:03 ) What farmers can do to hedge inflation ( 08:54 ) Watch now Learn more about farm and ranch loans While this year poses challenges, managing and focusing on your operation is always a smart choice. Click here to learn more about farm and ranch loans from Finance. You can apply onlin e in just minutes or work with a loan advisor to see how refinancing can lower your interest payments and help you save more money.  Audio transcript  Hey everyone. Welcome to our quick chat here today. This is TJ Wilson head of sales, FBN® Finance, and I've got Kevin McNew chief economist with me today. We're going to do a little bit of a chat about inflation and interest rates. Kevin, welcome. Thanks TJ, really interesting times for sure. Inflation and interest rates are really important as we move forward. They just came out with the new inflation numbers this week. It sounds like we were at a new high since 1982 on inflation numbers.  This is going to have a major impact on everything. And when you look back at 1982, that's a big point in agriculture, obviously going into the '80s and the downturn in agriculture in the '80s.  How do these inflation numbers play into that? And is there anything that ag producers and consumers should be looking out for? The press wants to paint parallels between now and 1982 and other than inflation being high, I think they're very different animals. If you will, around what's going on today, we're really talking about uber strong demand and supply constraints.  Back in the '80s, we had a much different economy. We had an economy that was really kind of constrained from unemployment being record high. We were coming off really high interest rates.  I think as producers think about inflation and what it means for them, I don't think we need to be fearful of revisiting the 1980s. There was a lot of farm financial debt and, and bankruptcies in the '80s really, really prolonged periods of low commodity prices. Those were the days of old government programs that tried to manage acreage and things like that were very much different in that sense today. I see an agricultural sector that's heavily underpinned by strong demand whether it's global grain and oilseed demand out of specifically China, but other markets as well. You have biofuels that are highly linked to the price of energy and that wasn't the case in the '80s.  If crude oil or energy prices went up, farmers were mostly victims of higher energy prices today. We still have some of that with fertilizer prices going up but we now have a play in the energy space thanks to biofuels.  How do you see that as far as input supplies for farmers and how is inflation going to affect that over the next year or two? We've been talking about this for months at about the supply constraints and the price increases not going away anytime soon. When we saw a little bit of a downgrade in your rear prices in the last month, but nothing akin to what happened in natural gas falling, natural gas prices have started to come up.  Crude oil prices have started to come back up again. I remain pretty bullish on energy prices going forward. I think we have a pretty big gap between world demand for energy and supplies of energy. You have this kind of push to move to green renewable fuels. But our economy as a world is really heavily dependent on fossil based fuels.  There's a big gap and I'm concerned that $80 crude is not anywhere close to what we're probably going to see in the coming months and year or so. From a farmer's perspective, what you see today in terms of input costs, I think that's what you're going to see for the better part of the 2022 growing season. Maybe in 2023, we'll see some relief if supply chains ease up a bit. Anytime we talk about inflation numbers, we turn attention to interest rates. What are your thoughts on how the inflation numbers and what that could look like for interest rates going forward here?  That's the tough one because in, in my opinion, in many other economists opinions, the Fed has really been too slow to pick up the pace on raising interest rates. We've seen inflation, we've seen numbers that were bad in terms of inflation for some time.  I think the problem with that now is that as we enter say the next 12 months, the Fed is going to have to get aggressive about curbing inflation, which means not just maybe one or maybe even two interest rate hikes. It means probably three or four fair, early sizable jumps to really try and stamp down on inflation.  TJ you're in the midst of loans and, and interest rates for farmers and producers. I mean, how are you thinking about that and what are you seeing on ag loans across the board, short term types of situations? You bet. On the longer term rates on the real estate side of things we've seen probably a quarter point to a half a point jump in rates over the last month. The treasuries have started ratcheting up, which in turn takes most of those loan rates on the longer term stuff up a little bit the short term rates of stayed steady and intermediate rates overall.  Equipment pricing has stayed pretty steady as far as rates are concerned. And your short term operating loans overall have stayed pretty steady.  I haven't seen a whole big move in that obviously we're trying to position borrowers to expect those rates to start going up. We're having those conversations day in and day out, to start preparing themselves for that. If I'm a farmer and I'm thinking about where's the biggest risk here, short-term debt long-term debt, should I be going out and locking up land and long-term loan type of situations. Are you more concerned about just kind of the short term debt exposure? Well, I think both of them have a major impact on the farmer right now. Every farmer should be taking a look at their long term debt and trying to refinance that to make sure they're in a position to take advantage of their rate environment where we're in right now. Especially with the outlook of rates going up they need to be taking what their balance sheet looks like from that regard.  There is a huge risk on the short term rates. Obviously a lot of times the short term rates when they start ratchet up, they start going up pretty quick, especially if the Fed starts moving rates. That's definitely something that needs to be taken into account.  The other major risk on the short term side of things is obviously we just talked about input prices. As inflation continues to go up, input prices continue to rise and the margins get pretty thin. If you combine higher input prices with all of a sudden, your short term rates start moving up it starts to put a major pinch on those farmers' balance sheets and their operations, no matter what the working capital portion of their balance sheet needs to have a lot of attention. And that's what helps the farmers survive the times. Lastly, I think about credit standards as we enter a phase where the Fed's going to be raising rates, they're limiting bond purchase. That kind of in my mind means that credit standards are going to go up. Do you see that coming down the pipe where there's going to be a little lesser availability of credit or credit standards? Yeah. I don't know if there's going to be less availability of credit overall. I can't see credit standards tightening too much, but what is going to happen is farmers' operations are just going to get tighter.  I think the credit standards are going to stay the same overall. You just may see that those margins continue to shrink, that operations are going to get tighter and maybe not be able to meet all of those credit standards all the time.  The flip side of that is that as interest rates are staying low, right now land values need to rise and what the risk of inflation out there right now, a lot of people have been buying land which takes those land values up.  What we are seeing is that maybe just a pullback of how much lenders are willing to loan against a piece of property. Typically that's somewhere between 70 to 80%, they're willing to lend on a piece of ground that may drop back down 60% or something in that range so that they build a little bit more cushion for these higher land values. Are you seeing any pull back in land values for the coming year, or are you seeing kind of a continuation? I anticipate a continuation of where they're at, obviously there's, there's still people with the year that everybody had in farming this year. Farmers want to continue to grow and buy land just for their operations to grow and have a hedge against inflation out there right now.  On the flip side of that Kevin, I'll kind of put you on the spot here. I was listening to an economist earlier this week and, and he was kind of talking about inflation and he was talking about values out there. He basically said that as an operator right now, you should go out and try to borrow as much money as you can right now as a hedge against inflation looking at where rates are probably going to go in the future and what that may look like. What are your thoughts on that? What kind of recommendations do you have for people looking at their balance sheets? I can't disagree with the logic, but I think the devil is in the details. You don't wanna just go out and make investments just to make investments. You have to make them wisely. And that's always true in agriculture. Land is something that is a critical limiting asset that you need for growth. I think looking at those choices very carefully under the microscope's important equipment sizing, you know, all those kinds of things that improve your ability to operate as a farm. I think those are always the things you should be looking at. And especially at times like this, where the interest rate environment is likely going to change for the coming couple years. The last thing I kind of have here, Kevin, is where can these farmers and producers go to learn more? There's a lot of information out there about inflation, about interest rates. What are some good resources for them to be able to tap into, to, to help get educated on their operation as well? If you want to follow the Fed, you know, Fed releases, its meetings, it'll give you their guidance. I mean, overall, I don't wanna say don't go read there's always good articles to read on this stuff. But I think by and large, farmers need to spend their time just focusing on their operation.  Literally it is pen to paper, get out the spreadsheet, work with your banker at , work with your crop insurance person. This year is going to be a little more challenging on the budget than last year because of tighter input costs, higher input costs. I think farmers have to just know their operation really well. Yeah. And as we've talked about before, kind of add onto that farmers have enough on their plate. They have to know a lot of things to manage their operation, but they can't know everything.  Working with a team of advisors no matter who that is definitely pays dividends for farmers as they're looking and dealing with these types of situations. Any final thoughts for our guests? It's going to be a fun year. Obviously we've been talking about the negative elements that are coming this year, higher interest rates, higher costs but commodity prices are going to be strong. We're having problems in South America that are getting manifested more aggressively every day. Hold on your hats, folks. It's going to be a good one.


Dec. 21, 2021

by FBN Network

As 2022 approaches, it’s time to start thinking about planning your farm’s budget. Proper planning ahead of time will help you make major decisions for your operation.  Join ®’s Sunday Mancini as she sits down with TJ Wilson to talk about planning ahead and building your budget for 2022.  TJ Wilson is the Head of Sales for ® Finance. He comes to from a 15 year career in the banking industry working in lending and management roles after graduating from Kansas State University. In addition to working in Finance, TJ is also part of a corn and soybean operation with his family in Northeast Kansas. What You’ll Learn Getting started ( 00:00 ) Projecting your income ( 03:03 ) Projecting your expenses ( 07:17 ) Prepping your balance sheet ( 12:23 ) Financial ratios explained ( 17:35 ) Watch Now: Building a Farm Budget for 2022 Budget Benchmarking Tools As TJ mentions, there are a number of tools that are produced annually by different universities across the country. A few good benchmarking tools include those below: Kansas State University - University of Illinois - University of Minnesota - Financing Support from When you partner with , you can rest assured knowing you're supporting your operation with affordable financing from a team that’s 100% dedicated to agriculture. To learn more about our finance solutions, we recommend: For U.S. farmers - visiting our website For Canadian farmers - contacting your Account Executive For Australian farmers - contacting your Account Executive Call 1-844-200-FARM


Dec. 01, 2021

by Mark Wilson

How much time and energy do you spend cutting checks to your farm's employees? Check out this brief overview from our partner Community Financial Resources on how integrating direct deposit can help improve your operation and the financial wellness of your farm's employees. Watch now Learn more Contact Ann at ann@communityfinancialresources.org or 510-214-3186 .


Nov. 16, 2021

by Mark Wilson

Join FBN®’s Sunday Mancini as she chats with Pepo Peschiera from Finance about a new product called Farmland Capital in this insightful video. What you'll learn What is Farmland Capital How Farmland Capital was developed How the product works for farmers How to get started Watch now Learn more For more information, please:  Visit our product page at fbn.com/capital Email us at co-investments@farmersbusinessnetwork.com Call us at 866-619-3080 Audio transcript Hi, everyone, this is Sunday with Farmers Business Network®. And I'm here today to talk with Pepo Peschiera from FBN® Finance, about a new offering from Finance called Farmland Capital.  Pepo, can you tell us a little bit more about Farmland Capital? What is it? What farmers need to know about it?  Well, thanks, Sunday.Farmland Capital is basically making capital available for farmers.It's a minority investment, or investing alongside farmers to help them own and control farmland in such a way where they can buy out . This capital has no annual payments, no interest, no rent, no payments at all on an annual basis, it just shares in the changing value of the farm in the future. Awesome, so maybe some backstory will be helpful. How did this product come about? Farmland is the most essential asset for any farmer. You need land to be a farmer, but it's also the most capital intensive one. And in recent years, farmers are having a hard time competing with investors for land. We found  in some recent surveys that we did at that 37% of the farmers are looking to buy land within the next year, and 39% of the farmers are considering buying out a family member. 69% of farmers would like to reinvest in their farming business but without taking additional bank loans. So like in all these cases, the limiting factor for farmers to grow and to make a sustainable operation is access to capital loans that can only cover a part of that loan. If bank loans typically go up to 65% of the farm value. And they come with annual payments that are a burden when farmers have borrowed things like weather and commodity prices that can change.  We created a product that gives farmers cash that they can use in their operations. We come in as a minority passive investor, we do not share in any of the annual payments, we don't charge any rent or any interest rates.  The farmer controls all the decisions on the farm, they get 100% of the income of the property. This purchase shares in the changing value of the farm in the future. If the farmer does well, this investment does well too.  But there's no interest rate or no no annual payment ever on this product.  Can you give us some real world examples of how this product would work for farmers?  We have been recently working with a farmer with a $2 million farm, where he got a $1.2M dollars in debt on the property.  He was paying a lot of annual debt payments and that was having an impact on his cash flow and the income he had available. So what we did with him is we replaced a small portion of the debt with a $200,000 co-investment. And that allowed him to basically improve his financial metrics and then qualify for a loan where he went from 6% interest rates to 3% interest rates actually, less than 3%.  He was able to reduce his annual payments. His annual debt payments went from $115,000 a year to $55,000 a year. It's like a huge reduction and it's a lot of money that this farmer has now available to use and continue reinvesting in his farming operation.  We could find situations like this across the country. This is a product that we’re offering for farmers, farmers of like crop plants all over the US of different sizes, shapes, crop types, with a really quick underwriting process for these co-investments. We can typically invest up to 25% of the farm value. We're always a minority shareholder so we never participate in more than 49% of the equity on the non-debt portion of the farm. I know you touched on some of the pain points that this will solve for farmers. But if a farmer wanted to get started and learn more, where should they begin? There are a few different use cases that we have seen for farmers with this product. One of the main ones is that farms want to lower payments with this capital injection and they can improve their financial metrics and qualify for lower interest rates. We’ve also found a lot of interest from farms that want to expand their operations.  These are farmers that need a larger down payment to buy a piece of land and help them to expand and make a sustainable operation without increasing their annual debt payments. So those are some of the main use cases.  Another big one that we have seen, it's farmers that have some family succession or they need to buy some co-owners of the property, they need to come up with the funds to do that. So with this product in combination with a loan, it works really well.  Also farmers that are at the end of their farming career, they're getting near to retirement, they own farmland and they want to take some cash off that land to use for whatever they want. But they do not want to pay taxes when they sell that land. They do not want to sell the land and get rid of it either. Like they want to continue having control of that land.  And they don't want to take that because that comes along with interest payments and has an annual burden. Those are the main pain points that we are finding this product solves and that can really help farmers in those situations.  Awesome. Thank you so much. So in order for farmers to learn more about this new offering, please visit or email to learn more.


Nov. 11, 2021

by Mark Wilson

Finance is proud to announce , a new source of funding to help farmers own and control land.  Farmland Capital gives farmers access to their farm’s equity so they have the funds they need to put towards a down payment, meet a retirement goal, or improve their operations. This isn’t a loan. So, unlike some other financing alternatives, there isn’t an interest or rent payment due at any point and it is at risk alongside the farmer.  With Farmland Capital, Finance is connecting farmers seeking capital to support their operation with individuals and institutions looking for a limited investment in farmland. An investor provides up to 25% of a farm’s value in cash to the farmer, for a share of the farm’s future change in value. The farmer may pay back the investment at market prices any time over the next 10 years. Solving the Need for Capital Without Debt Burdens Our members told us that there is a tremendous demand to access capital without burdening themselves with debt. A recent survey of members showed that 37% of farmers want to buy farmland in the next year, and almost 69% of growers want to reinvest in their operation. 39% of respondents to our recent survey told us they’re considering buying out a family member, with 19% saying this will happen in the next 5 years. 30% of farmers are looking to transition their land to take advantage of carbon payment programs. An additional 9% want to transition to organic. There is very limited access to capital in the market for farmers, which results in farmers having to make tough, no-win decisions for their farm. Farmland Capital provides critical access to funding, giving farmers unprecedented flexibility and more financial options than ever to manage their operation. We're excited to invest in the most innovative farmers on Earth: FBN members. - Dan English, General Manager of Finance How to Use FBN's Farmland Capital Buy land with a smaller down payment. Improve your operation’s finances to potentially qualify for a lower interest rate with your bank. Buy out co-owners who don’t wish to continue operating the family farm. Get ready for retirement, without selling your land or paying interest. Weather agronomic and market risk while transitioning to more sustainable practices. What Are the Terms? Finance participates in farm appreciation and depreciation alongside the farmer. Contracts are 10 years, but the farmer can settle up the co-investment portion at any time. Farmland value is determined by appraised value or market price. Who's Eligible? Eligible farms include row crop farms, permanent crop farms, and improved pasture land. The grower makes all management decisions, pays farm costs, and receives 100% of income from farm operations. How Can Farmland Capital Can Help Your Farm? The Finance team specifically designed Farmland Capital to address the unique business needs of farmers. To learn more about how the program can support your goals and future farm plans, connect with a member of our team by: Visiting our website Emailing us at co-investments@farmersbusinessnetwork.com Calling us at 866-619-3080 Watch Now: Hear From the Team About the Launch of Farmland Capital