Times are lean for some farmers and ranchers, and the trend may continue for a few years.

“Hopefully, row crop farmers and livestock producers strengthened their balance sheets and made capital improvements when profit margins were better,” says David Ogletree, senior vice president of lending and field operations at Louisiana Land Bank. “And in times like these, when profit margins are thin, it pays to communicate with your lender more frequently.”

Despite leaner times, Louisiana Land Bank is not seeing significant financial stress among its customers.

“Our farmers and ranchers have been able to access operating loans and make payments,” Ogletree says. “However, should commodity prices continue their current trend, we expect less ability to meet financial obligations.”

On intensively managed dairy farms, it’s always a good idea for operators to keep in touch with their loan officer, says Brett Valentine, senior vice president at Ag New Mexico, FCS, in Clovis.

“Our producers struggle with depressed milk prices, but feed costs are at the lowest level in years,” he says. “Every challenge brings opportunity, and that’s where good communication between producers and lenders can make a difference.”

Ogletree and Valentine offer the following tips for communicating with your lender, and what to expect from the conversation.

Don’t procrastinate.

Farmers like to talk about yields, prices and expenses, but often avoid discussing the bottom line, especially when it’s in the red. Many put off contacting their lender, hoping their financial picture improves.

“We want farmers to know that we can have a conversation without negative consequences,” Ogletree says.

“The sooner we know about problems, the sooner we can find solutions,” Valentine adds.

Ask about restructuring.

If you need more time to make payments, ask to extend loan maturities. “We are seeing interest in restructuring as cash flow has diminished and the need for liquidity has come to the forefront,” says Valentine.

Be open to changing your business practices.

Find ways to cut expenses, avoid unnecessary purchases, seek help from financial experts, and use accrual accounting to assess your situation. In addition, Ogletree recommends finding new income sources.

“Louisiana farmers keep a lot of marginal farmland for personal use as hunting tracts, and this type of land is currently bringing a premium in the marketplace,” he says. “Are you willing to sell or lease nonearning assets to generate working capital or reduce debt?”

Step up communication with others.

Share concerns with your spouse, family members and partners. As Valentine says, “We’re surrounded by people with varying experiences and perspectives. Exposing your weaknesses can help you grow.”

Ogletree stresses the need to reach out to landlords: “Someone else may be willing to pay a higher rent, but the landlord needs to know that you are reliable and committed to a mutually beneficial relationship.”

Don’t lose hope.

Times have changed since the 1980s, when American farmers experienced massive financial distress. Most operators today maintain more equity.

“Farmers and ranchers are smarter and more efficient than ever,” Ogletree says. “In this age of new technology, you’re better equipped to grow and market your products.”

Provide any information that helps lenders analyze your financial situation.

As Ogletree says, “We’re looking for ways to help.”

– Nancy Jorgensen