Greg Reno is a farming banker and a banking farmer.
He is regional vice president for American AgCredit, a member of the Farm Credit System, a system of banking co-ops that lend to farmers and ranchers. American AgCredit covers about the middle third of Kansas and part of Oklahoma, about two thirds of Colorado, all of Nevada and a good part of California. It is based in Santa Rosa, Calif.
The bank, located at 7940 W. Kellogg as well as in numerous other locations throughout the area, lends to farmers and ranchers for real estate and equipment purchases, and general operations. It also does equipment leasing and provides crop insurance.
He is also a crop and livestock farmer in Kingman County. Reno, 48, is married to Kelli, and they have three children.
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What is American AgCredit?
We are a borrower-owned financial services cooperative that focuses on agriculture, so the people we loan money to are farmer and ranchers, agribusiness, people involved in the production of food and fiber across the country. We work for their benefit and, as a cooperative, if we make a profit at the end of the year, we return a portion of that profit to those members in the form of a patronage dividend.
How can you compare with regular banks?
Their margins come from the difference between what they pay for a CD and what they charge for a loan. We, on the other hand, borrow from Wall Street and operate on that margin. Interestingly, those margins are about the same. So it becomes how efficient can we do it, with our scale, versus a smaller community bank that doesn’t have the advantage of that scale.
Hence the pressure on you to consolidate with similar lenders?
No. 1 is margin pressure, and No. 2 is the scale of the operator’s business. You think about the cost of equipment and the cost of real estate. What you could do as a small bank 20 years ago is now totally out of the realm of possibility. We now have customers who borrow multiple millions of dollars for their operating needs and we have small banks that just can’t do that. As farmers get larger, their banks naturally have to get larger as well.
What is your relationship to CoBank, successor to Wichita-based US AgBank?
CoBank is a member of the Farm Credit System. They are our wholesale funder. They are the intermediary between us and Wall Street … They cover many states. I previously worked at US AgBank, which then merged with CoBank to get much bigger, so I was downtown in the Farm Credit Building for 23 years.
Why do we need special agriculture banks?
There was a need identified by Congress back in 1916 because banks were unwilling to make long-term loans to farmers to purchase real estate. So Congress said this is so vitally important for our economy we are going to create a special entity that does nothing but this for farmers and ranchers. You will be farmer owned, farmer directed, federally regulated.
Wouldn’t the regular banking sector be happy to have that business -- now?
That’s the real point. We know that agriculture cycles; it always has and it always will. Our job is to be here not only in the good times, but also in the tough times. ... Our focus is to be conservative and to focus on the long run. We’ve had relationships with our customers for generations. It’s not just a transaction, it’s a relationship that spans generations.
So where are farmers in the cycle?
It depends on which side of the equation you are on. On the grain side of the equation, our customers have enjoyed 10 years of unprecedented profitability. Grain prices have been phenomenal, yields have been good. That has come at the expense of the livestock sector. Those folks are now having their day, very well deserved. We have seen a reduction of the cow herd, and an increasing demand for cattle, so now those people are enjoying very good profitability.
Some worry about a crash in farm asset values caused by falling crop prices like in the 1980s. What do you see?
A lot of people use the bubble term. I really don’t see that. Exports are strong. Population continues to grow. People continue to like to eat, and our farmers are very efficient at producing food. I think that means, for the long term, a very good picture. We’ll always have our ups and downs, always will.
So, you think they’ll stay strong enough to repay their loans?
Our asset quality is very strong because of the 10 years of profitability we’ve just come through on the grain side and the extreme profitability we are now seeing on the livestock side. Farmers have built a tremendous amount of liquidity because of the good earnings and external things, such as the oil and gas play that we saw coming up from Oklahoma about three years ago.
What would look for to see distress?
What we look for is to see who’s viable for the long run. That’s more of an art than a science. What is their management capability, their liquidity and their asset base. ... Looking at liquidity, it’s the first thing any good banker will look for. What’s changed with liquidity, where did it go and why.
Have farmers become more capable managers?
Very much so. The size and scope of their operation has grown substantially in order to be more efficient as asset values have grown. The load of cattle going down the road is worth thousands of dollars more than it was a few years ago. The level of risk so much higher. We see farmers using professional crop consultants, professional advisers and CPAs, all of the things that any good business would use.
How has that farm profitability changed farming since you were coming up?
I was up at a career fair at Kansas State last year, talking to Bryan Schurle, my old ag economics professor, and we were talking about how difficult it was to attract people into (agribusiness) careers. I said “What’s going on?” He said, “Remember when I asked your class to raise their hands on who was going to return to the farm?” I said “Yeah, I heard crickets.” Back in the ’80s nobody was going back to the farm. Now, in that same class he teaches at K-State, 98 percent of the young people say they want to go back to the farm because it’s so profitable and such a great occupation ... Why wouldn’t you want to go home and be with your family and be in production agriculture, it’s a great career.