44 JULY / AUGUST 2019 Dinese Watson Vice President, Ag Lending Department Manager Merchants Bank of Indiana dwatson@ merchantsbankofindiana.com Merchants Bank of Indiana, Carmel, is a member of the Indiana Bankers Association. The Soybean ‘War’ Against China And the role of ag lending Soybeans used to be the single most valuable U.S. agricultural export crop. Until the trade war, China bought $12 billion worth a year from American farmers. As of this writing (May 2019), China recently announced tariffs on more than 5,000 U.S. products, including soybeans, in response to the U.S. decision to increase tariffs by 15% on $200 billion of Chinese goods. These tariffs affect a large section of our nation, including many Indiana families. Many are still filing for bankruptcy as their profits are compressing or disappearing completely. Rather than continuing to borrow money at a higher rate or becoming insolvent, agricultural lenders can use a variety of tools to help farmers make smart financial decisions – whether or not the May tariffs are still in place. 1. Open a dialogue. Financial uncertainty can lead to farming mistakes. Making sure your clients know you are there to assist them in navigating these slim financial times can be a valuable asset to their operations. Communicating about their options can mean the difference between survival and financial ruin. A few topics to discuss include payment schedules, financing options and reducing spending habits. Also, advising your customers to reach out to other experts in the ag industry – such as crop insurance agents, input suppliers and accountants – is a best practice to help make informed decisions. 2. Assess different loan types. Understanding lending options can be a complicated process for many farmers. Lenders play a key role in providing unique solutions in a time of need. Be honest when assessing AG BANKING individual situations, and provide realistic solutions tailored to their needs. This is key, as it was reported earlier this year that 19.4% of Farm Service Agency loans were delinquent, compared with 16.5% in 2018. The last high in delinquency rates occurred in January 2011, when the rate hit 18.8%. The rates this year may be higher among grain producers, who have been impacted by the trade wars that have stalled exports of corn, soybeans and wheat. Typical ag loan products to offer farming operations a variety of term and payment options to benefit them include: • Annual operating loans for crop and livestock production; • Intermediate loans (five years or less) for financing farm-related equipment and vehicles; • Real estate mortgages (25 years or less) for the purchase of farm ground or to refinance and consolidate farm debt. An additional financing option includes the utilization of the U.S. Department of Agriculture Farm Service Agency Guaranteed Loan program. This program offers longer terms than traditional financing where revolving line of credit loans to finance annual input expenses are structured for five years, equipment financing is available for up to seven years, and real estate loans for 25 years. All loan products offer options for long-term fixed rates, providing another tool to control costs during turbulent times. 3. Understand the bigger impact. In an interview with the Chicago Tribune, Melanie Fitzpatrick, a spokeswoman for the Indiana Soybean Alliance, said
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