YOUR KBA Agricultural Law Section
Sept. 21, 2022
Your Partner in the Profession
FBN Aims to Help Farmers Survive Market Extremes Getting proper financing is the lifeblood for many Kansas farmers. In this edition, we talk with TJ Wilson, head of sales at Farmer’s Business Network Inc., who offers us his perspective on current farm financing. — Michael Fielding, Chair
Q: For those who aren’t familiar with FBN, can you briefly describe what it does? A: FBN’s mission is to power the prosperity of family farmers around the world. We are dedicated to helping these farmers maximize their farm’s profit potential with a data and technology enabled direct-to-farm commerce, community, and sustainability platform that redefines value and convenience. FBN Finance allows farmers to get the funding they need to grow their ag operation. Q: What is your role at FBN Finance and what are your dayto-day responsibilities? A: As the head of sales with FBN Finance, I oversee the team of lenders who are working with our farmers to provide different lending solutions for their operations. We are always looking for more ways to add value for our members and their financial needs. Q: The economic and operating conditions producers are facing are mind-numbing — rising interest rates, rising input costs, more extreme weather, increased global market volatility for commodities, etc. From your unique perspective as head of sales, what trends are you beginning to see that producers and their attorneys need to be aware of? A: Agriculture is in many ways ground zero for the world’s issues. Constrained supply chains, energy cost increases, 40-year high inflation, war in Eastern Europe, and a climate scenario that has yielded extremes are all factors shaping agriculture today. We see these same issues persisting for several years. As such, it is critical that producers take a strategic focus on investments that efficiently use costly fertilizer, chemicals, and energy to produce crops. Q: What do you see as the most pressing problems in your industry in the next six to 12 months? A: Farmers will face sticker shock in the near term as fertilizer values will be high heading into the 2023 growing season. This will require tough decisions about cropping plans, utilization rates, and possibly looking for alternative nutrient sources like livestock manure. Sticking to the status quo will likely not be a good solution for profitability, so doing research now about your options will be crucial. This sticker shock will also be true as farmers go to renew operating lines for the coming season as rates have risen dramatically since they secured their operating loan for the 2022 growing season.
Q: What do you see as the most pressing problems in your industry in the next one to three years? A: For farmers, focusing on investments that lead to efficient input usage will be critical. Energy prices will continue to be elevated in years to come, and fertilizer, diesel, and natural gas will be a sore spot on the farm finances. Making long-term investments in equipment or technologies that limit these expensive resources or use them more efficiently will be a good strategy. Q: FBN’s Farmland Capital product is a novel way to help farmers in foreclosure or bankruptcy situations. Can you explain how it works for those that aren’t familiar with it? A: Farmland Capital is an alternative farmer financing tool where FBN connects farmers with investors. It is analogous to having a relative invest in the land but with a totally passive approach, not having them on the deed and with a preagreed process to buy them out whenever the farmer wants. This source of capital doesn’t have any annual payments or interest. It is structured as an option to participate in the change in value of the land. It provides very flexible financing that can be used to pay off certain debts, finance the farming operation or make investments on the farm. Farmland Capital was developed to help farmers purchasing ground, but it can also help with family buyouts, succession planning, distressed situations, and financial and tax planning. On the distressed side, we see a value in this product for producers who have good equity in their real estate but may have cash flow issues. This product can be an alternative to selling real estate in a distressed situation. Q: How else can farmers use Farmland Capital? A: Helping in foreclosure and bankruptcy is one way, but Continued on next page
YOUR KBA Agricultural Law Section Your Partner in the Profession the main ones are buying new land with less down payment, using it as a second mortgage to avoid touching loans with low interest rates, refinancing expensive debt by replacing it with a product with no annual payments, and having more buffer to service debt. In addition, there is a use case in generational transitions and buying out family members. Q: What are the biggest challenges that you face as head of sales at FBN Finance? A: As a nationwide ag lender and ag platform, FBN works with a wide variety of producers and sectors within the ag industry. The broad spectrum of ag that FBN Finance works with means we have to deliver tailored solutions for each sector within production agriculture. These solutions vary widely depending on the sector. Farmland Capital is one of those solutions
that can span more than one group within the ag space. Q: From your perspective as head of sales at FBN Finance, what do you see as key items Kansas ag attorneys should have in mind as they advise their clients? A: Farming is a generational activity, and from the attorney perspective, the challenges with agriculture remain fairly consistent — asset protection and taxation. The structural and proper planning of transition and tax strategy are important for all ag producers. We wanted to develop Farmland Capital as a product that could help in both issues. The other thing to keep in mind is that there are non-traditional options available to farmers that can make sense for a number of different situations.