Good decisions key to surviving economic cycle IN REVIEW
different from other recoveries,” he said. “It’s been much slower, more shallow and it continues to be very fragile which will be why the Fed Reserve is cautious about interest rates ahead.” When it comes to land purchases amongst AgStar customers, Hebrink indicated that 80 percent of purchases have been by farmers as opposed to investors. “Investors are much more cautious,” he said. “With recent profits in farming it was only logical that farmers would see these opportunities. However those record-setting prices that got into the news were usually on an 80 acre next door parcel. We’ve seen some softening in land prices recently particularly with more marginal properties and that likely will continue for the near term.” AgStar Financial Services, headquartered in Mankato, Minn., is a cooperative owned by over 23,000 client-shareholders in Minnesota and Wisconsin. Visit www.AgStar.com for more information. ❖
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ering. It was well received,” said Hebrink. “The event had presenters from across the country. And it wasn’t just limited to AgStar clients. All farmers were invited.” In fact, AgStar has already planned the 2016 event for Jan. 20-21 at Hilton Hotel in Minneapolis. Interest rates When asked about the cost of money for next season, Hebrink didn’t dodge the question. “Everyone is watching the Federal Reserve. The bet is when they will raise interests rates, not if. We are now into our sixth year without a change in the discount rates to the Federal Reserve. That is unprecedented,” Hebrink said. “So interest rates will start nudging up but it will be modest is our expectation.” He added that the U.S. economy is still weak but the dollar is strong. Rising interest rates will only make the dollar stronger relative to other currencies. “That creates a lot of head winds for the economy. This recovery has been
THE LAND, AUGUST 21, 2015 “Where Farm and Family Meet”
By DICK HAGEN The Land Staff Writer MORGAN, Minn. — Farmfest speakers acknowledged that agriculture is in an economic squeeze right now. Most had difficulties predicting how long the squeeze would last and land purchase you have to what would be the shake out. believe there is a strong future in Rod Hebrink agriculture,” said Hebrink. “The But Rod Hebrink, president and CEO of AgStar Financial Services, statistics on the doubling of food demand addressed the tough agricultural eco- within the next 30 years worldwide means that agriculture has to be the nomics head on. provider for this growing population.” “The reality is that in almost any set However, that market potential is of economic circumstances we have tempered in the minds of farmers farmers who do well and farmers who do not do well. There can be a range of because of the financial circumstances, reasons — weather, managerial deci- explained Hebrink. sions, marketing mistakes,” said Hebrink recalled the financial pains Hebrink. “This situation too will have of the 1980s with interest rates balfarmers who weren’t prepared for these looning up to 20-22 percent. circumstances and others who were.” “We are certainly not expecting a sceLogically you can expect more stress nario anything like that ever again,” on younger farmers, but this too said Hebrink. “The balance sheet of depends upon partnerships with their agriculture is frankly as strong as it parents. has ever been.” “But it’s as much about their manaFinancing farm land also has gerial skills as it is their financial changed since then. capacity,” said Hebrink, emphasizing “Today we finance land on what we that if they have been making good view will be its sustainable value, not production decisions, AgStar will be on what it was selling for. Typically we hanging with them. are financing land with more than 50 But if young farmers were thinking percent down,” he said. “We’re more the golden years of this past decade were cautious now. I think our farmers the new reality of agriculture and lake understand they need a lower debt cabins or vacation homes got included in load as well.” their lifestyle, those decisions may come Technology back to bite, he suggested. The impact of technology is staggerAgStar, a farmer-owned cooperative ing, according to Hebrink. He cited a serving Minnesota and northwest Wis- recent U.S. Department of Agriculture consin, is part of the Farm Credit Sys- item that said the input of labor going tem. AgStar partners with a number of into agriculture has dropped 78 perfarm credits and other lenders across cent over the last 65 years. the United States. “Offsetting this is the significant “We actually have financial assets in increase in capital investments in techabout 40 states,” said Hebrink. nology and equipment to make these dramatic improvements in efficiency Cycles Hebrink has 36 years experience in possible,” he said. “At each of our stockagricultural financing. Economic holder advisory group sessions, discuscycles have always played a role in his sions always include technology and precision agriculture. And not just for work. purposes of increasing yields but more “We go through these cycles and importantly how does this technology always the question is ‘how long will make me more profitable.” this one last?’” he said. The large amounts of data being gen“We just came through one of the erated for farmers is a growing challongest stretches of prosperous times for lenge. He said that the key question agriculture that I have ever seen. The from producers is “How do I utilize this last decade has been very prosperous.” data?” What goes up ususally comes down. “Earlier this year we put on a TechStill in these turbulent times, farmers noledge Conference in Minneapolis. are keeping a positive attitude. We weren’t selling technology; the pur“Farmers are eternal optimists, and pose specifically was how can producthey really have to be. If you’re making a ers better use what technology is deliv-
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