Navigating Uncertainty: Views from the 73rd Ag Bankers Conference by: Dr. Dave Kohl

The American Bankers Association’s 73rd Agricultural Bankers Conference convened at the historic Union Station Hotel in St. Louis, a beautifully converted old train terminal. The last time this venue hosted the Ag Banker conference was in the aftermath of 9/11, when attendees gathered amid considerable anxiety as the U.S. and its allies responded to the September 11 attacks. This year brought a similarly weighty atmosphere, though the concerns had shifted. Bankers arrived facing geopolitical conflicts, trade wars, regional and military tensions, and significant financial uncertainty throughout the agriculture industry. Despite these challenges, the conference sessions and attendee interactions yielded valuable insights and practical takeaways through collaborative problem-solving discussions.

Goalposts 

In recent years, accelerated consolidation has emerged as a major trend in farm and ranch agribusinesses and the agricultural lending landscape. Drawing upon FINBIN data from the University of Minnesota, the financial performance goalpost for larger operations over $1 million in revenue continues to shift. When measured by accrual net farm income, larger operations appear to generate either significant profits or significant losses at opposite ends of the spectrum. Discussions on the conference floor with bankers from 24 states and Canada revealed a clear pattern: operations with one or two sources of revenue, such as grain, row crops, or specialty crops, often find themselves in a negative income position. Meanwhile, those with three to six sources of revenue and greater diversification are typically profitable, particularly when beef is generating income.

The Four Pillars

The FINBIN team identified a combination of financial management practices that often determine which goalpost an operation reaches. They described these practices as blocking and tackling in the trenches with no magic wand involved.

Pillar One: Production Efficiency

Producers in the top half of profitability consistently exhibit incrementally higher production than their peers through operational efficiencies.

Pillar Two: Cost Management

These same producers maintain above-average cost management across fertilizer, rents, seed, and other input costs. Small differences compound significantly at the bottom line.

Pillar Three: Marketing and Risk Management

Whether dealing with crops or livestock, successful producers achieve prices 5 to 10 percent higher than others in the database. As operations scale larger, this advantage compounds across acreage or livestock units. Their risk management strategies typically include crop insurance and livestock insurance appropriate to the owner-manager and the operation's ability to manage both upside and downside risk.

Pillar Four: Capital Efficiency

Data presented at the preconference session highlighted the importance of capital efficiency. Successful operators shed underutilized capital assets and human resources, which improved their fixed cost per unit. Others operated with the objective of spreading fixed costs over more acreage and livestock to lower the fixed cost per unit. I overheard bankers discussing cases where three producers share a CFO as a means of reducing fixed costs per unit.

As producers plan for 2026 operations, focusing on strategies and tactics within these four pillars will be critical for navigating chaotic market cycles. Jason Henderson, an agricultural economist from Iowa State University, summarized these points by indicating that the distribution of profits will only continue to widen. Success will depend less on big picture variables and more on the micro factors that producers can control within their businesses.

Successful Restructuring

Based on discussions with banks in the room that finance grain crops, the percentage of operating loans requiring refinance or restructuring ranged from 5 to 40 percent. This variation is often linked to producer diversification, location, and market conditions. Some bankers indicated the percentage would be much higher if producers took a proactive approach.

The producers who achieved the most successful restructuring outcomes or developed an effective bridge for cash flow had prepared a workout plan backed by a detailed operational game plan with specific cash flow projections. Equally important was their willingness to maintain open communication and transparency with their bankers and other managers and stakeholders.

Veteran agricultural lenders in the session strongly emphasized that producers must monitor the plan and make proactive adjustments as needed. A successful plan always focuses on positioning the business to weather the next positive or negative economic cycle.

Consumer Trends and Market Shifts

Moving forward in 2026 and beyond, there will be increased focus on consumer choices, particularly here in the U.S. Consumer preferences change according to household income. Those earning under $50,000 annually prioritize convenience, taste, and price. Households earning over $100,000 prefer low sugar and carbohydrate options, high protein, and fresh foods. While the average household spends 13.6 percent of income on food, those earning under $50,000 spend over 30 percent.

Women in Agricultural Banking

At a women's agricultural banking session, stress emerged as a common theme, with many attendees feeling overwhelmed by the imbalance between business demands and personal life. Despite these challenges, many expressed their enjoyment of the agricultural banking profession, not solely for the salary but for the fulfillment that comes from working with customers and communities and experiencing personal and business growth over the years.

A major challenge mentioned repeatedly throughout the session was the ability to delegate tasks effectively. Participants emphasized the importance of ensuring delegated work is completed in an acceptable manner while also giving grace, allowing mistakes, and creating systems to prevent repeated errors. These were highlighted as critical management characteristics for success.

Lenders Approaching Renewal Season

Nontraditional lenders, who provide approximately 32 percent of operating capital, are tightening credit standards rapidly. Agricultural lenders will be closely scrutinizing information for transparency, documentation, and accuracy. For producers who lack collateral in the form of land, a focus on working capital and financial liquidity will serve as plan B. The critical question becomes: What is the plan to preserve working capital and mitigate profit risk?

The Role of Artificial Intelligence

AI (artificial intelligence) dominated conversations on the conference floor. The key to success lies in how one prompts the engine, followed by the essential practice of trusting but verifying the output. Many are reaching the conclusion that when new technology is applied, we must double down on the human component and interaction to set your bank apart from the competition.

Looking Ahead

The 73rd ABA Agricultural Bankers Conference reinforced several critical themes for the year ahead. Success in agriculture financing will increasingly depend on operational diversification, disciplined execution of the four financial pillars, and proactive communication between producers and lenders. As profit distributions continue to widen across the industry, the difference between thriving and struggling operations will come down to the micro factors within producer control: production efficiency, cost management, marketing acumen, and capital discipline.

For lenders, the path forward requires balancing technological advancement with the human relationships that remain at the heart of agricultural banking. As credit standards tighten and economic uncertainty persists, the partnerships between bankers and their agricultural clients will be tested and strengthened through transparency, realistic planning, and shared commitment to long-term sustainability.