Blog   Tagged ‘agribusiness’

Historic Auction Returns to Fort Worth

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If you asked someone who had no experience with longhorn cattle to describe them, the words “friendly,” “affectionate” and “tame” probably wouldn’t come to mind. However, for those that have grown up around them, such as UMB Fort Worth Commercial Lending Officer Brady Beal (pictured right), these are qualities that he may never forget to include.

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“My family became involved with longhorns about 30 years ago when my mother and stepfather built one of the premier longhorn herds in the country here in Texas,” says Brady. “They are remarkable animals. They’re resilient, very well adapted to Texas conditions, and surprisingly tame.”

“In fact, there was actually a longhorn bull that I helped halter break many years ago, named Funny Face,” Brady continued. “He always wanted to be pet on the top of his head like a dog. It was a lot of fun, but I can also tell you that having a longhorn that is so friendly and affectionate can be a little dangerous. Imagine a dog that comes up and wants to be pet, but has two feet of horn sticking out each side of his head. I was accidentally wacked on more than one occasion. I don’t think Funny Face ever realized he was a longhorn.”

UMB is proud of its long history as a lender to both ranchers and farmers alike (recently recognized as a top 20 ag lender in the United States) and many of our associates, like Brady, have deep connections and understanding of the industries they’re involved in, including commercial, industrial and agriculture. This enables them to better understand and serve a wide range of customers and their needs.

“I like being able to drive around North Texas and see a customer’s place of business and reflect on the stories, how they began, how they expanded, grew and adapted. I think this is the most interesting part of the job. I enjoy getting to know these people as I try to help them with their businesses – I become personally and emotionally invested in the success of these companies.”

Just as Brady continues to build relationships with his customers, UMB also continues to build its relationship with the Fort Worth community, which includes sponsoring the signature Hudson-Valentine Fort Worth Stockyard Auction on September 22.

“The stockyards and Longhorns are big part of Fort Worth’s culture,” says Brady. “This sponsorship helps preserve the rich history of the Fort Worth Stockyards by bringing back the same type of cattle auction you would have seen in the area over 100 years ago.”

While Brady will be there on the first night of the longhorn auction, his days of working with cattle are now limited to attending the auction and helping his mom with the few head of cattle that she keeps at her place in Aledo, Texas.

“Oddly my work with cattle inspired me to choose a banking career. Ranch work is HARD. It’s a 24-hour, seven-day-a-week job, and you still never get it all done. My work with cattle pushed me to know that I wanted a position, where I could help people. At UMB there is an entire culture from the top down that cares about its employees and its customers and wants what’s best for all involved.  In my opinion, the feel of UMB ‘s culture is that it is a family owned organization, which sets it apart as an employer and for our customers.”

Learn more about commercial lending at UMB and our growing presence in Fort Worth.

Learn more about what ag means to UMB and see some of our clients in action.

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors.



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Are We Facing an Ag Crisis Like the 1980s?

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Our agribusiness team has been working with clients in this industry for more than 100 years. So, when we heard rumblings of a potential ag crisis like the one we faced in the 1980s, we wanted to share our insights and research with customers.

Turns out, our customers weren’t the only ones interested in this news. You can read more below for our thoughts or check out some recent media coverage on NPR’s Marketplace, the ABA Banking Journal and Missouri Farmer Today. One thing is certain: Today’s current agriculture climate is a challenge, but comparing it to the 1980’s farm crisis would be a mistake. Let’s take a walk back through history for a refresher.

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The 1980’s farm crisis was born out of the early 1970’s grain boom. Demand for nearly all grains took off in the early ‘70s as several international crops failed and geopolitical conditions made U.S. grain much more valuable.

By 1973, real farm income had reached a record high of $92.1 billion (nationally), nearly double what it was just three years earlier. Exports of U.S. agriculture products grew dramatically in the 1970s as rising incomes and liquidity in developing nations created strong demand.

In 1970, exports contributed only $6.7 billion or 11 percent of the grain produced in the U.S. By 1979, this number had jumped to $31.9 billion and was more than 22 percent of the grain raised in the U.S. that year.

Things were going so well for the American farmer that even Robert Bergland, U.S. ag secretary at the time, commented in 1980 that, “The era of chronic overproduction… is over.”

The equation that followed was simple:

  • Higher grain prices + more available credit = much higher land prices.

The boom eventually went bust, in perhaps one of the most difficult periods in the history of American agriculture. In 1981, there was only one ag bank failure among the 10 bank failures in the U.S.; by 1985, things had become so difficult that the 62 ag bank failures that year accounted for more than half of the bank failures in the U.S.

It may be unbelievable to read this today, but the prime rate averaged 15.3 percent in 1980. Higher interest rates almost automatically drove land prices down by the inherently lower value of the earnings that the land produced. If an investor could receive 13 percent on a CD in the bank, why consider purchasing farm land?

Also, export demand fell precipitously as the U.S. dollar strengthened considerably. In 1981, U.S. ag exports totaled $44 billion and then fell dramatically to $26 billion in 1986. Land values increased every single year from 1970 through 1981, but gross income per acre actually had several year-to-year decreases. Astonishingly, when land prices finally peaked in 1981, returns on investment for corn and soybeans were only one third of what they had been in 1973. Land was a laggard in terms of decline but eventually succumbed to the industry downturn.

Without question, the greatest assailant on the agriculture sector in the mid-1980s farm crisis, was the skyrocketing interest rate situation that devastated cash flows, credit availability and asset values. By comparison, today’s prime rate has been stalled at or below 4 percent for the better part of a decade. Clearly, interest rates are much more favorable for the farm sector today than in the crisis of the 1980s. This is the single greatest and most important difference between the two environments.

Another key distinction to understand when comparing the 1980s to the current environment is the recent trends and current expectations regarding

inflation. The consumer price index (CPI) took off in the early 1970s and the Federal Reserve struggled mightily to tame the beast of rampant inflation. Its only real tool to effectively combat inflation turned out to be much higher interest rates. Today’s CPI is completely dissimilar when compared to that of the 1970s and the early 1980s. As long as inflation remains subdued, rates may moderately increase, but will be nothing like the rates seen in the 1980s.

The recent ag economy has shown signs of stress including much lower grain prices, declining values for land and equipment, and modestly increasing interest rates. Lower net farm income, oversupply, and rising rates are akin to both the current environment and the 1980s. On the other hand, significant differences can be pointed to:

  1. A current prime rate of 4 percent is very manageable.
  2. Aggregate farm debt in terms of overall leverage is significantly less than it was on the cusp of the last big down turn.
  3. Federal crop insurance and other support programs have been bolstered over the past 35 years and provide meaningful support.

These similarities should cause all of us involved in agriculture to carefully make decisions and double our efforts in working together to ensure satisfactory outcomes. It is important to remember the history of our industry so we can all try to maneuver the current times and pave a way forward. By really understanding the similarities and differences of the 1980’s farm crisis to the challenges we are facing today, we can better prepare, understand and plan for the road ahead.

Our Agribusiness Division serves all areas of agriculture, including producersprocessors, suppliers and manufacturers of equipment and goods, throughout a 12-state area.

Learn more about what ag means to UMB and see some of our clients in action.

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.

 


UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors.



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Monthly Media Update – July

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NPR discusses the fears of a emerging farm crisis with our ag division, CNBC Powerlunch and Bloomberg Radio talk to UMB’s CIO, our Colorado Springs community bank president supports the city’s downtown redevelopment, and why hospitals are spending millions of dollars developing electronic health records are a few media coverage highlights from July.

Stay informed on industry trends and noteworthy company news by visiting our UMB in the News section on umb.com, which is updated weekly for timely viewing.

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UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors.



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Today’s ag climate is tough, but it’s still not the ‘80s

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If history repeats itself, we might ask, “Are we witnessing a farm decline similar to what we saw in the 1980s?” The short answer to that question is no. The current agriculture climate is a challenge, but comparing it to the ‘80’s farm crisis would be a mistake. Let’s take a walk back through history for a refresher.

Continue Reading

The 1980’s farm crisis was born out of the early 1970s grain boom. Demand for nearly all grains took off in the early ‘70s as several international crops failed and geopolitical conditions made U.S. grain much more valuable.

By 1973, real farm income had reached a record high of $92.1 billion, nearly double what it was just three years earlier. Exports of U.S. agriculture products grew dramatically in the 1970s as rising incomes and liquidity in developing nations created strong demand.

In 1970, exports contributed only $6.7 billion or 11% of the grain produced in the U.S. By 1979, this number had jumped to $31.9 billion and was more than 22% of the grain raised in the U.S. that year.

Things were going so well for the American farmer that even Bob Bergland, U.S. ag secretary at the time, commented in 1980 that, “The era of chronic overproduction… is over.”

The equation that followed was simple: Higher grain prices plus more available credit led to much higher land prices. The boom eventually went bust, in perhaps one of the most difficult periods in the history of American agriculture.

In 1981, there was only one ag bank failure among the 10 bank failures in the U.S.; by 1985, things had become so difficult that the 62 ag bank failures that year accounted for more than half of the bank failures in the U.S.

Interest rates up, exports down

It may be unbelievable to read this today, but the prime rate averaged 15.3% in 1980. Higher interest rates almost automatically drove land prices down by the inherently lower value of the earnings that the land produced. If an investor could receive 13% on a CD in the bank, why consider purchasing farm land?

Also, export demand fell precipitously as the U.S. dollar strengthened considerably. In 1981, U.S. ag exports totaled $44 billion and then fell dramatically to $26 billion in 1986. Land values increased every single year from 1970 through 1981, but gross income per acre actually had several year-to-year decreases.

Astonishingly, when land prices finally peaked in 1981, returns on investment for corn and soybeans were only one third of what they had been in 1973. Land was a laggard in terms of decline but eventually succumbed to the industry downturn.

Without question, the greatest assailant on the agriculture sector in the mid-1980s farm crisis, was interest rate devastating cash flows, credit availability and asset values. By comparison, today’s prime rate has been stalled at or below 4% for the better part of a decade.

Inflation worries

Clearly, interest rates are much more favorable for the farm sector today than in the crisis of the 1980s.

Another key distinction to understand when comparing the 1980s to the current environment is the recent trends and current expectations regarding inflation. The consumer price index (CPI) took off in the early 1970s and the Federal Reserve struggled mightily to tame the inflation beast. Its only real tool to effectively combat inflation turned out to be much higher interest rates.

Today’s CPI is completely dissimilar when compared to that of the 1970s and the early 1980s. As long as inflation remains subdued, rates may moderately increase, but will be nothing like the rates seen in the 1980s.

The recent ag economy has shown signs of stress, including much lower grain prices, declining values for land and equipment, and modestly increasing interest rates. Even so, there are three key differences between today’s situation and the 1980s:

  1. A current prime rate of 4%
  2. Aggregate farm debt in terms of overall leverage is significantly less than it was on the cusp of the last big down turn
  3. Federal crop insurance and other support programs have been bolstered over the past 35 years

It is important to remember the history of our industry so we can all try to maneuver the current times and pave a way forward. By really understanding the similarities and differences of the 1980’s farm crisis to the challenges we are facing today, we can better prepare, understand and plan for the road ahead.

Learn more about what ag means to UMB and see some of our clients in action.

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors.



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How to Prepare for Ag Challenges in 2017

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For those in the ag business, it’s no secret that 2015 and 2016 were challenging years. And 2017 is looking like it might follow suit. In an industry known for its optimism, you could be hard-pressed to find anyone overly positive about what lies ahead this year.

Producers, in particular, are going to face more challenges in 2017 given the current commodity prices and over supply of crops. In light of those challenges, here are a few steps they can take to prepare for 2017 and beyond.

1. Know Your Numbers: As lenders work with you to project what the next year will look like, it will help to be prepared with key data points, including:

  • Planting intentions – Know your acres, crop type and fertilizer application plans
  • Working capital needs – Know what is changing and ways to improve working capital
  • Break-even analysis – Know your input costs, conservative bushel projections and sales triggers
  • Expense management – Know what specific changes are being made in your operation to endure lower prices and what further trimming can be done
  • Balance sheet basics – Have a good understanding of your current amount of working capital, overall debt-to-equity ratio and value of unencumbered real estate
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2. Be a Tough Negotiator: With the significant price changes in the grain complex, those who sell to farmers are having a harder time making the next sale. This means you have an opportunity to attain better prices when you spend money.

  • Cash rents – In general, landowners will need to make some concessions on cash rents. Be willing to negotiate but not afraid to walk away if the math doesn’t work for you at renewal time.
  • Equipment – There are definitely deals to be had on used iron, but only do what makes sense for your operation. Also, aggressive lease terms are being offered and in many cases may lower cost, or improve cash flow, throughout your operation.
  • Basic purchases – Those who sell you crop insurance, seed, fertilizer, chemical, parts, equipment and more will need to know that farmers are carefully weighing each purchase. Loyalty to such suppliers is wonderful but it is also okay to encourage competition for your spending dollars.

3. Sell Items that Aren’t Contributing: The truth is there are some things that just need to go. Whether it is a poor piece of land that isn’t producing, a tractor that might not be essential or a trailer that is collecting dust, take stock of what you have and determine what needs to go.

During this period in which some producers will have limited working capital and struggle to service debt, it is imperative to critically examine your assets. Working capital and liquidity have become – and will continue to be – critically important in the coming years. Any asset sale that bolsters your liquidity position will improve your ability to endure the current commodity prices and thriving as we look forward to better days.


Lance Albin is vice president, agribusiness commercial lending officer at UMB Bank and has more than nine years of experience in agriculture financing. He has a master’s degree in business administration from Fort Hays State University. UMB Bank is one of the Top 25 Farm Lenders in the United States serving farmers/ranchers, producers, processors, manufacturers and dealers throughout the Midwest and Mississippi Delta regions.



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UMB Insights: Jim Boyle Dairy

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Jim’s passion is cows. He says the happier the cow, the tastier the milk. His family dairy in Arizona is one example of why we’re passionate about agribusiness.

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UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors.



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How to secure an ag loan

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If you’re in the agriculture business, you know that securing a loan is an important step to reaching milestones like purchasing new equipment or additional land. When you decide it’s time to borrow money – no matter if it’s your first loan or for additional funds – there are a few tips that can help make the process more efficient and effective.

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The four phases of securing an ag loan:

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1) Application Phase

Determine what you want and why. The amount, term and purpose of the loan will be essential to understanding the risks and cash flow burdens you will incur as well as for the lender to understand your needs. This may sound basic, but it is the most important and often times overlooked portion of the loan request process.

It’s okay to be a little unclear as to the right structure for the loan as this is a task that should be done in collaboration with a lender. The lender should work carefully with you to determine how the loan will work going forward and what it will be used for. Loans borrowed for one specific purpose and then used for another is the most frequent cause of stress and problems between ag borrowers and lenders.

2) Information Phase

During this phase, it is important that you be open with your lender. There are three areas you should be prepared to discuss:

  • Copies of your last three years of tax returns and a current financial statement (balance sheet) with complete and full disclosure of all assets and liabilities
  • A realistic value of your assets — Any exaggeration will make a negative impression of your approach to the borrowing process and financial matters.
  • How your operation has changed over the last several years, as well as your expectations for the years ahead — A realistic valuation is one of the most significant aspects of a lender’s assessment of your financial and operational planning capabilities. If you have been through a difficult time period, be prepared to discuss this candidly and to share the causes and cures for these troubles.

3) Analysis Phase

Meet with more than one lender. This may allow for more options on loan terms, rates and structure. Be candid with the lenders in telling them that you are talking to more than one lender.

Ask the lender’s opinion on your loan request, financial strength and plans for the future. If the lender is vague or reluctant to share an opinion, you may need to speak with another bank. Whether their opinion is good or bad, a clear understanding of their thoughts on your financial situation and the direction you are headed is critical to your financial future with this lender. This conversation is one that many avoid because it can be stressful and awkward, but this is where you can receive the greatest value from a lender. This exchange will also provide insight as to the quality of the lender and financial institution you would be working with.

4) Decision Phase

Plan on learning from this experience. Whether the decision on your application is a yes or a no, you have the right to understand the reason and the rationale behind it.

  • With a yes comes the requirement that you understand what the decision means to future operations and cash flow and whether or not it meets your initial needs.
  • With a no comes the difficult but important personal understanding of why the decision was negative and how your operation needs to change so that it will be more credit worthy going forward (at least in the eyes of this particular lender).

In all borrowing discussions, the most important aspect is candor, both with you and with a lender. A realistic third party assessment of your operational and financial affairs can be a valuable insight that can only be gained through a candid and open discussion with knowledgeable people.

For more tips on securing loans, read our lender’s inside scoop.

 

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


Mr. Watson serves as president of the UMB Agribusiness Division. He joined UMB in August of 2005 and has also served as the president of the UMB Kansas region. Watson is a graduate of Wabash College in Crawfordsville, Indiana with a major in Psychology. He has also attended The Colorado School of Banking, The National Commercial Lending School (where he has also been an instructor), and the Stonier Graduate School of Banking.



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UMB: Inspiration – Agriculture

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UMB prides itself on being a financial institution with a heartbeat. We are passionate about what we do and want to share what inspires us with our readers.

Bill Watson, president of UMB Agribusiness, kicks off the UMB: Inspiration series as he shares why he loves agriculture. Take a minute to listen to what inspires him.

“I like agriculture because of the people, because they’re solid. They’re honest. I like agriculture because it’s beautiful. I get to drive across this country and see fields of cotton, wheat, corn and soybeans growing. It makes my heart good.”

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Mr. Watson serves as president of the UMB Agribusiness Division. He joined UMB in August of 2005 and has also served as the president of the UMB Kansas region. Watson is a graduate of Wabash College in Crawfordsville, Indiana with a major in Psychology. He has also attended The Colorado School of Banking, The National Commercial Lending School (where he has also been an instructor), and the Stonier Graduate School of Banking.



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