Stearns County, Minnesota | TheDude - 1/25/2023 11:17 Every operation is different and it is literally impossible to talk big picture details on an operation without knowing the details. There are just so many important details left out from this entire exercise. Even more interesting is the fact that this loan was likely approved during a timeframe when many of the “lived through the 80s farm credit and banking staff” were still part of these loan committees, etc. Apparently, nothing was retained from the first go around and talk about a disservice to this borrower if this loan was truly approved coming at the tail end of a high commodity cycle. Hindsight is 20/20…I get it….but you absolutely must shock test every credit of this size. For both your borrower and your portfolio. What happens if prices fall out of bed, they lose a major contract, can they reamortization debt, sell extra equipment, how high of interest can they handle, and on and on and on. What is plan B, plan C. Entire deal seems very sloppy. After reading this, what comes to mind is the 80's, when some of the farmers got in trouble financially. They tend to blame the lenders and bankers for making them the loans. It got so bad that one banker was shot by a farmer and his son. Bankers and lenders are not responsible for the decline in prices for commodities, and also a drop in values of assets like land and machinery. This is what happened in the 30's and 80's when commodities and asset values dropped. Some of the farmers were no longer above water with their loans. A word of caution here; Federal Reserve Chairman, Jerome Powell, has made it clear, that they are going to bring inflation down to 2%, by raising interest rates. If this comes to pass and commodity and assets drop in value there could be a percentage of farmers that would be in trouble.
Edited by 99MAX 1/25/2023 14:22
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Real World/Real life Financials Course 102
