Commodity Blog

Jun 16 2020

How Accurate Yield Forecasts Increase Profits for Ag Lenders

As technology has improved, and the ability to price and monitor a loan from anywhere in the country has emerged, more players are competing for ag lending business and more non-traditional lenders have entered the space. No longer is physical proximity and available balance sheet the only differentiator for ag lenders, but being able to serve as partners for their producers allows today’s lenders to differentiate their services and provide better grain pricing – as more cash flow and expense management as a service become a part of the lending experience. In other words, while ag lending continues to be centered around understanding the expected cash flows of the business, successful lenders will add their expertise through scalable processes and data analysis capabilities that are difficult for each individual producer to manage on their own.

This is particularly true in the case of marketing grain, as not only is it one of the most important pieces of managing an operation, but it is a key driver of the cash flows that ensure repayment of committed capital. Ag lenders that are able to provide sound crop marketing advice, not only help their growers, but they help themselves with better loan performance. This all benefits producers, as lenders with better loan performance can be more aggressive on pricing, which intuitively means that more marketing strategies will originate from the lender as the market evolves.

Key Lending Factors for Ag Lending

With the cmdty Yield Forecast Indexes, and their ability to inform estimate revisions from the USDA we provide ag lenders a powerful tool that they can use in building out competitive crop marketing plans for their producers. These yield estimates, when used alongside our forward prices for cash grain, allow lenders to better estimate production value and ultimately provide more competitive pricing, while reducing risk.

Grain Price Indexes

Additional value adds for ag lenders:

  • Collateral Valuation – Finally a simple way to value collateral both on a cash and forward basis. Use our objective pricing benchmarks to match anticipated cash flows
  • Basis Projections – Use our basis projections in combination with yield estimates to build the most advanced crop marketing model in the industry
  • Sensitivity Analysis - Use our historical production data, forward yield estimates, and benchmark pricing for grain basis and cash to help you run sensitivities on cash flow and repayment ability
  • Income Forecasting – Easily understand what price a producer will get for their crop by using our tools

With ag lending benchmarks, yield forecasts, physical grain prices, and fundamental ag data, our products reduce risk and help your clients to achieve success. Learn more about our solutions for Ag Lending here. Download our free whitepaper to learn more using Grain Yield Estimates to drive performance for your business. We’ll also be discussing our Yield Forecast Indexes in our new 2020 Grain Market Update Livestream Series, which provides insightful perspectives from industry leaders ahead of each WASDE Report. Register for the entire series here!

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