How to Get Farm Borrowers Thinking About Risk

If your bank is not yet teaching farmers how to better manage risk, here's how to get started:

Master the concepts yourself. Make sure you understand how risk management tools work before you start suggesting them for your customers. Get in touch with your local cooperative extension, a futures and options broker, or crop insurance agent and ask to have the popular products explained to you.

Turn the bank into a school. Ask those same local experts whether they would give a seminar on their products to your farmer borrowers. Brokers and insurance agents usually jump at the chance, hoping they may pick up new customers at the event.

Be prepared for sticker shock. Some marketing plans, especially futures contracts, can be expensive up front, but rewarding over time. Bankers should be prepared to provide some farmers with marketing lines of credit - separate from a standard operating line of credit - to finance risk management tools.