Protecting profitability with inclusive financing

Our expert in this episode has over 20 years of experience in the agricultural industry, John Maman is the director of sales and marketing at Nutrien Financial. He shares more about inclusive financing, managing high interest rates, digital financial tools, financially assessing crops and what financial trends to follow. Check out at nutrienfinancial.com and follow Nutrien on social media @NutrienAgSolutions. Contact us at podcast@usfraonline.org to share feedback or a podcast idea. 

Transcript

Speaker 1 (00:17):
Farmers have their hands full, managing a whole pile of items on the farm from animals, crops, new technology, succession planning, you know, the list goes on and on. Proper management is key. And today our focus is on the financial portion of management. Our expert today has over 20 years of experience in the agricultural industry. John Maman is the director of sales and marketing at Nutrient Financial. He's gonna walk us through inclusive financing, and you don't wanna miss, he's gonna share tips on how to protect your profitability despite challenges that the market and the weather can present. John, could you start off by walking us through what is Inclusive Financing?

Speaker 2 (00:55):
Thanks, Joanna. Inclusive Financing is really taking a look at an overall agronomic plan and, and making sure that throughout the year you match the right economics to that. Uh, and it includes everything you're doing from cash prepay financing and really matching it to the ebbs and flows of your agronomic cycle, making sure that anytime throughout the year when your agronomic plan changes, you revisit that economic plan as a means to, uh, provide the right cash flow, timing, and make sure you have liquidity that that matches your, your needs for your operation.

Speaker 1 (01:29):
And can you walk us through a big picture timeline of inclusive financing? And for someone that maybe is new to this, what is their first step?

Speaker 2 (01:38):
To make this easy, I would really start with, with what's common. You start with that agronomic plan and the minute you begin your agronomic plan, you should be looking for, uh, ways you expect cash flow of that plan, and recognizing that that each agronomic year, each crop cycle is different. You should be looking at asking yourself really, uh, is what I did in the past sufficient? Are there other market challenges that, that we look at that, that need to be addressed this year? And in, in light of that, the goal is to put out a profitable crop, but at the same time, are there areas in any marketplace that we can grow that we can do things better, more efficiently and expand an enterprise? And if you answer yes to any of those questions, those are opportunities throughout the year to really revisit both the agronomic and economic cycles that, uh, your crop plan presents for you as, as a farm, as a, as an entity. And so really it comes down to, uh, there's no better time than now to continuously review that. And if there's any peaks or changes in that plan, that represents the, again, the right opportunity to continue to review and perfect that plan from year to year.

Speaker 1 (02:46):
And if you're wondering, Hey, should I have my pen and paper out and be writing all of this down or writing down my plan? We're gonna talk about some of the digital tools that John can share with us on how to stay organized. What are some common challenges you see farmers facing?

Speaker 2 (03:02):
Farmers face a lot of challenges in the marketplace. I, I think that, uh, I've often said the more one gets, uh, into their career, the, the more they manage people and money and the less they, they manage what they really are passionate about. And, and ultimately farmers like to farm and put out a crop, uh, that doesn't come without challenges. Uh, from the people side, from from the economic side with what I'm seeing in the marketplace, the cost of money's changed considerably. And if the cost of money is just another input in that seasonal plan, that's added one extra layer of complexity that hasn't been present over the past few years, really with the way the market's been. You look at the way the prime rate has escalated over the last 14 months, and, uh, it's, it's provided a, a unique challenge in the marketplace that hasn't really been present for the last few crop years. 

Speaker 1 (03:51):
Is there any specific challenges you see this year that farmers might be facing in particular?

Speaker 2 (03:56):
Well, we have different weather events. We're in an El Nino year, and that's presenting different challenges and rainfall in areas that haven't traditionally gotten rain. Other areas that usually get rain are missing that, but really it comes down in my world to the interest rate change. We've seen 10 different points of change throughout the last 14, 15 months, and, and rates have risen 5%. So you think about an operating line that a grower would use as their, their primary source of repayment, the lifeblood of their organization, the cash flow, uh, everything that they do as, as an organization, that's usually a, a variable rate. And that rate has changed 10 times over the last 14 months. So you imagine going to the mailbox, which can be anxiety provoking for anybody when, when bills come in and for a farming organization, they've gotten at least 10 notes throughout the year saying, Mr. And Mrs. Farmer, your operating line is going up a month later, two months later, Mr. And Mrs. Farmer, your operating line is going up. And so that has been a consistent pressure on the financial side of the industry for, for really the last year and a half.

Speaker 1 (04:56):
Some of the items you just mentioned, the Nino year, the interest rate that's out of our control. What advice would you have for farmers to help be more prepared for items that are out of their control?

Speaker 2 (05:08):
Inevitably, within any year, there's, there's always pressures that farmers face and uncertainty. It could be as easy as, do I need to spray a fungicide or add a nutritional with a weather event? It could be, what's the weather gonna do next week if I apply this or don't apply this from the financial services side, again, we've had a lot of variability in the interest rates, but it really comes down to having the right plan, being confident in that plan, but having the agility and the levers to pull if and when you need to pivot on that plan and knowing that you have a, a team of trusted advisors surrounding you that are there dedicated to your success, making sure that at every corner you have those trusted advisors ready on hand to listen to and, and also embracing some of the technology that we have in the marketplace.

Speaker 2 (05:49):
Listen, if you've farmed for any number of years, the advancements in technology are infinite versus the way they were a decade ago. The access to information and real-time information is at our fingertips better than it's ever been. Not only having the plan, but having the right tools and resources there to be able to search out whether it's peer groups, whether it's online extension articles, podcasts, even, to be able to make sure you're checking your plan against other industry experts or other peers is critically important. And it's one of the best resources that I think we have today that can really help drive success and have people get more information at their fingertips to use effectively.

Speaker 1 (06:27):
Right. John, I think you're almost alluding to, you're not in this by yourself. You have a team that's behind you to support you. One thing you talked about was, you know, interest rates and higher interest rates have been sticking around. How can a farm manage risk with higher interest rates?

Speaker 2 (06:43):
Managing risk with high interest rates starts to access the capital. And it's not that you have to use that capital, it's you have to have it ready at your fingertips and know the options that exist that will maximize your economic plan. A couple examples, you know, at Nutrien Financial, we offer unsecured lines of credit that aren't meant to impede the primary operating line, and then operating line oftentimes has secured interest in, in a crop or in land. Our goal is to be agile, recognizing that an an operating line may not lend a hundred percent of the needs of the farmer. So in a year with uncertainty in a year where inevitably changes occur and uncertainty is, is present around every corner, access to capital is critical. And understanding the way you can maximize that capital, I think is really critical. So the opportunity cost of managing different interest rates and knowing what levers to pull are gonna be really, really important.

Speaker 2 (07:38):
With respect to our programs and offerings, we have standard rates that are as competitive or, or better than, than what operating lines might be right now. But we also have a lot of promotional rates that are driven through the marketplace with, with alignment of our strategic suppliers that can really provide savings and savings on top of what might also contribute to yield at the end of the day. And it's important to note that at the end of the day, finance programs aren't the necessary means to a greater yield, their means to cashflow products for greater yield. We still have to be rooted in agronomic integrity and making sure that we use those trusted advisors to make the right agronomic decisions for the, for the year to be most successful.

Speaker 1 (08:18):
Would your advice that you just gave be the same for a young farmer versus an older farmer?

Speaker 2 (08:24):
Absolutely. With respect to young farmers, access to capital is, is a big pressure. And understanding really the five C's of credit, uh, having their story of what they want to do, why they exist in the industry is critically important. When a young farmer sits down in front of the bank for the first time to get that operating loan. I'd like to think on our end when we lend money, we, we try to take as much as we can within our lending requirements and then maximize it and allow that grower, whether young or old, seasoned or or new, to be able to have those options that they may or may not have known exist at their fingertips to be the most successful this year and in, in, in the future as well.

Speaker 1 (09:02):
John Maman, director of sales and marketing at Nutrien Financial has been our guest. We have a few more questions as we wrap up this episode. How can a farmer leverage digital tools to help with inclusive financing?

Speaker 2 (09:15):
Well, we talked a lot about some of the, uh, the online resources that we have just as an ag industry and what always feels like a big industry doesn't have to be, it's, it's a few degrees of separation and the connectivity is present. I think about some of the tools we've put out as nutrient financial, and it always comes down to security and access to the right information at the right time. Uh, one of the biggest pressures we see in the marketplace is just an organization having confidence that their information is going exactly to who it needs to be sent to, rather than riding around in a truck. We have an online credit application. That information can go directly to just the underwriter. I don't see it, my team doesn't see it, others in our organization don't see it. So protection of that information is first and foremost critical to us.

Speaker 2 (09:59):
It's important to the relationship because at the end of the day, we mention that the degrees of separation are minimal. This is a small, tightly knit community. We wanna make sure that that information is kept private. From there. The digital tools that we've enabled allow auto scoring sometimes in seconds to be able to provide a credit limit, as well as understanding that one farm doesn't always have one account. Occasionally, and oftentimes there are multiple different accounts based on entities, parent-child relationships, affiliated businesses within our digital hub, we can actually link those accounts with an online statement so that it takes the anxiety again, outta going to the mailbox, unfurling a paper statement that can oftentimes be large. We can connect those within our digital hub to make sure there's real time information on accounts, um, aggregated in, in a manner that's best consistent with the farming operation. And so it's, it's one aspect of what we do on a financial services end that's, uh, amplified when you start looking at the different tools and resources that we could offer across Nutrien more broadly.

Speaker 1 (10:57):
Right. Lots of opportunities in the right, literally at our fingertips. One thing I find interesting that I found on your website, coming from a farming family, usually the wintertime is when you're always reviewing and analyzing, uh, what's going on on the farm and, and with your crops. But your team says that people should be focusing on a mid-session review. What should a farmer be doing now to assess crops and their financial plans with a mid-session review?

Speaker 2 (11:22):
Well, so much changes from that winter to the spring, right? You have to have confidence that the crop you put in the ground is the crop you expect to come out later in the fall, and there's no better time than after you get that crop in the ground to assess did it go in the ground at the right time? Uh, how are soil conditions, how are weather conditions shaping up with what's changed since that winter plan began? And not to mention, uh, you get into planned health season, what nutritionals, what fungicides do we need to apply to make that crop successful? I think at the end of the day, those levers, again, as we mentioned, directly contribute to yield. Having the cash flow on hand to make those decisions easier is critical. So if you feel you need to make a nutritional application or fungicide application, and you have extension data from your local land-grant universities or your, your crop consultant to help back that up and give you confidence, you should have the liquidity at your fingertips to make sure that you're investing properly in that crop. And that's where that mid-year review really, really takes effect. And ultimately things change at, at a day's notice, the second's notice within agriculture, sometimes based on weather, commodity prices and other things, having the right cash flow means to be ready for any of those uncertainties really takes the anxiety out of that season and allows you the best opportunity to be successful for that crop. For, for beyond.

Speaker 1 (12:38):
Exactly. I mean, I, you know, here in the Midwest, we have seen weeks without rain, and that's gonna be changing some people's plans just without having rain. And some of the population in the field, growth has been very low, so there might be some changes that are happening here in the Midwest.

Speaker 2 (12:53):
Well, and Joanna, we haven't even talked about how growers may or may not like to market crops and, and the cycles in which they, they contract forward or they like to sell on the backend. There's so many different aspects of a agronomic plan that are influenced by the access to capital and, you know, to be able to access the best the market has in that given year, it all takes the right cash flow. It all takes the right agronomic plan coupled with the right economic plan. And, and to your point, the more you can revisit that, uh, the better. And if there's a time of the year where you're looking at making agronomic changes, you should also look at those economic impacts and how they're gonna ripple down throughout the rest of the season.

Speaker 1 (13:29):
Right? No, you're not alone and your financial team is at your fingertips too. You can give them a call to make sure that you are on the right path. Last question for you, John. You have over 20 years of experience in the agriculture industry, very seasoned <laugh>. What financial trends are you following that you would encourage farmers to keep an eye on as well?

Speaker 2 (13:46):
Well, from my perspective, it comes down to, again, the finance markets and, and where interest rates are. Those rates impact not just an agronomic crop. They impact how people live home loans, car loans, everything is, is tied to those rates. And so I'm hyper-focused on that. The other piece that I think I I would focus on is really, again, that trusted advisor network, making sure you've got the right people in the right positions to, to answer questions at a moment's notice for you, and that you're connected with the ag community in ways that community is building those new options. You look at podcasts, you look at apps, you look at, uh, even our weather services that, that we put out through Nutrien, all of that information is at, at the fingertips of our customers to provide the best access, the best service we can, and to make sure that at the end of the day, our growers know exactly why we exist for them. And know that at any moment's notice we're there to be able to support them and in the ways that they need.

Speaker 1 (14:41):
Well, John, we appreciate you sharing your expertise on Farm Food Facts and Nutrient has several resources and timely blog topic with useful information to support your farm team and put you in the best position for financial success. You can check out their website at nutrientfinancial.com. You can also follow Nutrient on social media with the handle Nutrient Solutions. We know your time is valuable and we appreciate you spending it with us. I'm Joanna Guza for Farm Food Facts.