Editor’s Note: Growers Edge Financial, Johnston, Iowa, is carving a path as an innovator in melding financial technology into the ag sector. BankBeat spoke with Joe Young, its co-founder and president, about how these two worlds come together.
Q: What areas of agribusiness are improved through technology?
Joe Young: Improving cash flow is a critical issue for the U.S. farmer. Community banks and smaller institutions are being pressured to pull back financing, in effect, making it more difficult for a farmer to qualify for attractive rates, or in some cases, get any financing at all.
On the other hand, larger financial institutions are demanding more from the farmer and cherry picking the easy loans. Growers Edge believes embracing technology, and funding the consumption or purchase of it, will help improve cash flow and go a long way toward helping keep the family farm in the family.
Q: How can community banks increase their tech offerings to help farmers?
J.Y.: Community bankers have played a critical role in the lives of America’s farmers. It’s the community banker’s personal connection to the community and its farm families that are so important.
Community bankers can encourage farmers to embrace technology, not run from it or avoid the temptation to cut costs indiscriminately.
Q: How does the ag industry generally react to new financial technologies? And how do you communicate your ideas and services with producers?
J.Y.: The wait-and-see approach is all too common. The problem is lenders are pressuring farmers to reduce costs to improve cash flow. In the United States, decisions that have a temporary positive impact to cash flow have a negative impact on yield — and it stays in a farmer’s production history. The current rating algorithm uses a 10-year average, so a bad performing year stays with the farmer for a long time. We use a data-driven approach to guarantee an outcome for farmers that follows the prescribed ag practices designed to generate an improved ROI.
Q: What areas of ag finance remain underserved by technology?
J.Y.: The ag sector has embraced technology to improve the administration side of ag financing by automating some of the more manual processes associated with applying and approving an ag loan.
The current economy has ag lenders and regulators doubling down on conservative approaches that have served them well in the past. The “new ag economy” would benefit from engaging in a more data-driven approach to make sure capital is deployed to farmers who use the best genetics, follow the best practices, and manage their operations in the most efficient manner.
Q: What’s the sense of urgency in Iowa (and among ag customers in general) over how long the current trade war might go on? Does tech offer solutions during the most turbulent of times?
J.Y.: Trying to predict the length of time and financial impact to growers across the United States, and in particular in Iowa, creates a lot of coffee shop talk but is not useful beyond that. Times are tough and financial pressure continues to mount as working capital has hit 10-year lows. Trade agreement uncertainty has had a negative impact on the markets and debt-to-asset ratios have declined for the past six years.
New technologies and solutions provide an opportunity for farmers to make data-driven decisions that can improve efficiencies, conserve valuable resources, and meet the demands of feeding 10 billion people, while reducing risk and increasing profitability.
Q: Attracting the next generation of farmers has always been a challenge. Do you see younger farmers embracing tech tools and gaining advantages that weren’t available, say, 10 years ago?
J.Y.: Ag schools are doing a great job preparing the next generation of farmers with technologies that can improve effectiveness. Younger farmers have had technology in their lives since they became interested in the profession, so they are much more comfortable [with technology].
Today, technology has many different meanings. The days of technology meaning “auto steer” or “improved singulation,” while still important technologies, is very much in the past. Technology today means seed treatments, imagery, artificial intelligence, machine learning and data, data and more data. The future of farming is bright and it will be impressive to see what the next 30 years has in store for the industry.