Farmer Buying Behavior: What Dealers & Lenders Need to Know | Brady Brewer

Andy Campbell and Brady Brewer discuss the role of non-traditional lenders in providing capital to farmers and the potential risks associated with elevated interest rates. Brady discusses his background in agriculture and finance, as well as the impact of interest rates on the farming industry and the factors that influence interest rates, such as inflation and housing starts. He provides insights into the future of interest rates and emphasizes the importance of strategic equipment purchases for farmers and advises them to shop around for the best lending options.

Brewer highlights the significance of farm characteristics in determining lending risk and the benefits of spreading loans across multiple institutions. He analyzes different types of farmers and their buying behaviors when it comes to purchasing agricultural equipment, categorizing farmers into three segments: relationship farmers, performance farmers, and cost farmers. Relationship farmers prioritize trust and value the relationship with the salesperson, while performance farmers are early adopters of new technologies and equipment. Cost farmers focus on saving money on inputs. Brady and Andy wrap up with a discussion of the current farm financial conditions and the potential impact on equipment sales moving forward.

Key Takeaways

• Non-traditional lenders play a significant role in providing capital to farmers, accounting for a substantial portion of the credit sector in agriculture.
• Interest rates are currently slightly elevated but are expected to stay at the long-term average of around 8%. The Federal Reserve aims to avoid the boom-bust cycles of the past and maintain a steady economy.
• Farmers should strategically plan their equipment purchases, focusing on essential pieces that will contribute to the profitability and efficiency of their operations.
• Farmers should shop around for lending options to spread the risk and obtain the best terms and conditions for their loans.
• Understanding the farmer's goals and objectives is crucial in determining their likelihood to purchase equipment.
• The current farm financial conditions may impact equipment sales, but farmers with strong balance sheets may still be willing to invest.

This episode's guest

Brady Brewer is an Associate professor in the Department of Agricultural Economics at Kansas State University. Brady’s teaching responsibilities include the undergraduate agribusiness management course as well as a graduate course on micro-economics and strategy. His research agenda includes the broader topics of agribusiness and profitability, agricultural finance, and production/supply-chain issues. His extension program includes education on credit and lending to both farmers and bankers, as well as working with agribusinesses on a variety of financial management topics.

Brady grew up on a family farm in Oklahoma that raised wheat, soybeans, alfalfa, and cattle. He received a B.S. in Agricultural Economics and Accounting from Oklahoma State University and later earned both his M.S. and Ph.D. from Kansas State University in Agricultural Economics. Before joining the faculty at Kansas State University, he was a faculty member at Purdue University as well as the University of Georgia.

Chapters

• Introduction and Background  00:58
• The Role of Non-Traditional Lenders in Agriculture  04:08
• Understanding the Impact of Interest Rates on Farmers  09:07
• Factors Influencing Interest Rates and Future Outlook  12:57
• Strategic Equipment Purchases for Farmers  19:57
• The Importance of Shopping Around for Lending Options  27:01
• Farm Characteristics and Lending Risk in Agriculture  29:55
• Categorizing Farmers: Relationship, Performance, and Cost  33:24
• The Impact of Farm Financial Conditions on Equipment Sales  43:08
• Tailoring Equipment Offerings to Match Farmer's Needs  54:39

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