Lending in Challenging Times

Practical advice from two of our credit experts

The extent of COVID-19’s impact on the western Arkansas economy is still playing out. While the uncertainty may be unnerving, economic ups and downs are historically a part of our market system and Farm Credit is prepared.

To understand Farm Credit’s strength in challenging times, it’s important to understand our philosophy on lending.

“Farm Credit is a cash flow lender, not a collateral lender,” explains Senior Credit Analyst, Jody Almand.

“We like for borrowers to have two avenues of repayment built into their borrowing plan. Cash flow in their operation to make payments and either collateral or equity to fall back on should there be an unforeseen issue with cash flow.”

“At times, borrowers question the need for both. Our job is to explain to the borrower how this sensible approach helps protect their operation. The economy has proved to be cyclical over time and our goal is to help both members and our association weather difficult times. Historically, we know unexpected things can and will happen to the ag economy. Positioning your operation to be prepared is a good thing,” Jody continues.

Farming is typically a long-term venture and farmers may be tested by unpredictable weather, natural disasters, fluctuations in demand for their product and even the unparalleled challenge of a world pandemic.

“It’s imperative for farmers to know their break-even price. Know your true cost of production including all inputs. That’s information only you have and it’s the only way you can make good decisions to help protect your bottom line,” says Regional Vice President Jonathan Shumate.

The best case scenario would be for an economic downturn to hit producers after several strong production years when farmers have good capital positions. Unfortunately, that’s not the case for all western Arkansas farmers. Flooding, low commodity prices, fluctuating cattle prices and other production stresses have left many farmers with already lean capital positions this year.

How to protect your operation in an economic downturn:

• Review your balance sheet often

• Know your break-even point

• Know your true costs

• Don’t overspend (farm and live frugally)

• Watch sales prices

• Utilize price protection (production agriculture)

• Protect working capital and equity so it’s available, if needed

Jonathan says he’s seeing farmers in production agriculture finding ways to focus on producing good yields in the most cost-effective ways possible this year.

“This is definitely a year to farm lean,” Jonathan reiterates.

“There can also be value in talking frankly with your vendors. For instance, you may want to ask your chemical supplier how to do more with less this year,” he adds.

Farm Credit’s role

The good news is that our lending standards mean our members are normally positioned fairly well when faced with economic challenges.

“Our lending strategy equips members with options, which I’ve seen make the difference for members in difficult times,” Jonathan adds.

With a 103-year tradition of supporting rural America through all economic cycles, Farm Credit is no stranger to guiding members through challenges. Farm Credit is committed to rural western Arkansas and agriculture. We’re here for you.

“I can’t stress enough how important communication with your loan officer is. We need to hear from you to know how you’re impacted and to begin helping you make a plan,” Jody explains.

“The best part of doing business with Farm Credit is that you know us and you know who’s making your loan decisions. We value our relationships with members, and don’t take the trust our members have in us lightly,” concludes Jonathan.

Jody Almand, Senior Credit Analyst

Jody earned a business degree from Henderson State University and began his Farm Credit career in 2006. He served Hempstead and Nevada Counties as a loan officer before choosing to become a credit analyst in 2011 and was named Senior Credit Analyst in 2018.

Jonathan Shumate, Regional Vice President

Jonathan oversees credit and operations for four southwest Arkansas branch offices. He began his Farm Credit career as Vice President and branch manager of the Texarkana office in 2015 and was named Regional Vice President in 2019. He earned an agriculture business degree from Southern Arkansas University and has 20 years of experience in the agriculture sector.