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n. Illinois | The yield reports during harvest was very helpful so in that light I wanted to shed some light as to the real financial results that the 2019 crop caused.
Northern Illinois with areas that were heavily impacted by prevent plant and areas that had minimal impact from prevent plant. The financial results are starting to come in. Results in the area that were heavily impacted with prevent plant are all negative Losses as high (so far) of $150/ac. Due that on 1800ac and you have just lost $270,00, The results in areas with no impacted by prevent plant results are all less than last year, Yields down across the board on corn and beans. Range on corn is 10bu less to 70bu less per acre on planted acres, most typical result is 25-35 bu/ac less. Based upon current corn price that alone is $95to $115/ac. Soybeans typically are 10-15bu/ac than the average. Also $90 to $130/ac less, Have yet to see anyone have greater earnings than last year.
Ag Lenders faced with customers whose last five years of earnings are insufficient to support current debt payment let alone the loss that needs to be amortized, Negative Working capital, Customers still want to extend and pretend vs. making some strategic asset selling decisions Most Ag lenders themselves are in denial as well. IE yes he lost a lot of money in 2019 but he will be profitable going forward because he is going to magically reduce his operating expense ratio from the average of the last 5 years prior to 2019 of 89% to 74% and his family living needs will only be $30,000/yr(Farmer Mac guideline) when we have been given documentation that it was over $100,00 last year .The Healthcare premiums are eating up $20,000/yr.+ for a lot of operators that don’t get coverage from the spouse’s off farm job.
Yes there are operations that are financially solid with good equity and solid working capital (working capital exceeds yearly gross sales), Yes they continue to be profitable but its a lot less than last year. These operations are rather rare too. Most acres operated by the operations described above.
Keep an eye on the financial reports from the Farm Credit institutions in the Midwest, They have to report their credit quality and its been declining and this year isn’t going to improve them. FCS America reports that over 25% of their operating and machinery loans are consider as less than acceptable and 16% of their real estate loans are consider less than acceptable. (Banks commercial credits typically run less than 5% less than acceptable) Similar results can be found at some of the good size Ag Banks in the corn belt too if they are Publicly traded and have to file SEC reports. Wells Fargo is getting out of AG lending in the Corn Belt. BMO Harris has over lent to many large customers (I have seen too many requests from current BMO Harris customers who have no earnings no working capital who are being managed by the Special asset department, New bank: Why are you wanting to change? Farmer: We have a new loan officer, (yep its the guy who’s job is to get rid of you).
Hopefully your reality is different/better. | |
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preliminary 2019 financial results
