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Kohl: Farm Market Recovery Will Take Group Effort
Wisconsin Ag Connection - 04/09/2020

One of the country's renown ag economists says it's going to take government, agri-business, lenders and producers all working together to get through these tough times. During Wednesday's Dairy Signal presentation hosted by the Professional Dairy Producers of Wisconsin, Dr. David Kohl said all the players involved in the agricultural industry will need to help one another in making a recovery possible.

"None of it can be done without all entities coming together," Dr. Kohl noted during the online session. "On the government level, it will require action by both federal and state in terms of monetary policy. Lenders may be willing to make payment deferments or interest-only arrangements with their customers. From there, they may need to consider SBA or other government programs for assistance."

As for the producers, Kohl says they will need to be proactive by keeping good records if they want to have a better chance of getting adequate funding from the bank or government programs.

"Right now we're in that shock mode, as if someone threw a huge rock in the pond and made a big splash," he said. "But from June 15 through around September, we're going to get that second ripple and it's going to be interesting to see how government and private business adjusts to this. A third ripple is expected after September through next June, where there could be a reemergence of something else that will create possible bio-shocks in cash flow."

When asked about how farmers should react to falling interest rates, he said with trillions of dollars entering the economy in the form of stimulus relief, it is bound to result in higher rates down the road.

"I would advise locking in at lower rates, but be careful of variable interest loan agreements," he warned. "Each producer has a different tolerance for interest rate risk. You need to know in advance if you can handle a two-percent rise in rates--and ask yourself if you can handle it emotionally, as well."

Jason Karszes of Cornell University's PRO-DAIRY program also addressed the Internet audience. He advised farmers who are trying to plan for the next 90-120 days to know their numbers (for both last year and long-term averages) for benchmarking and budget purposes.

"Dairy farm managers need to be communicating with their lenders," Karszes advised. "If you're projecting a deficit and need to borrow money, the banker will need to know your full financial situation."

He also said the Payroll Protection Program could be an opportunity for financial relief, but urged farmers to make sure they document where the money flows to because they may need to pay it all back if it's not used for the intended purposes.

PDPW Director Shelly Mayer brought a positive perspective to the conversation, saying that the Spanish Flu of 1918 is not mentioned much in history books, but they do talk a lot about the roaring 20s.

"It gives us hope and promise to know we've been through tough times before," Mayer said. "What pulls us through is faith in our God, the people we surround ourselves with, and our community that pulls us together."

To which Kohl added, "There's a lot of positive coming out of this because mother nature is hitting us right in the solar plexus and saying we're 'too over scheduled' and we need to take some time out of life and enjoy the simple things."

The Dairy Signal will hold a third program on Thursday at noon, featuring economists Dan Basse of AgResource Company and Jay Joy from Milk Money LLC. They'll talk about practical tips and strategies for making decisions in an uncertain, chaotic environment.

All programs are free and being archived on the group's website at: www.pdpw.org

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