A distressed agricultural loan is usually a business in a bad year.

The instinct is to liquidate.

When a file turns, the machinery is already pointed one way. Realize the security, close the position, move on. It is orderly, it is defensible, and it is frequently the most expensive decision in the file.

A forced sale prices an operation at what it fetches on a bad day, in front of buyers who know it is a bad day. The equipment goes for salvage. The herd goes into whatever market is standing there. The land goes to whoever showed up. What comes back rarely resembles what the business was worth to someone who could have run it.

The gap isn’t policy. It’s the read.

Most credit teams already have the instruments. What they rarely have — and this is not a criticism, it is simply how people get trained — is someone who has carried an operating line through a bad year.

A covenant breach tells you something has gone wrong. It does not tell you whether the operation underneath can carry itself again. That read is not on a spreadsheet. It comes from having stood in the yard.

And the signals arrive long before the covenant does. What is happening in a herd, a rotation, or a feedlot shows up on the ground months before it reaches a risk report — to someone who knows what he is looking at.

What can this business actually carry?

That is the question, and in a distressed file it is very nearly the only one. Not what the assets appraise at. Not what the model returns. What the operation, run properly, through a normal year, can service.

I have run the businesses that end up in these files. Grain and forage. A cow-calf herd. A feedlot I built past two thousand head. Hogs. A grain elevator, bought, run and sold. I took a farm from 480 acres past 10,000 — and I sat on the other side of the desk first, five years inside a financial institution, from loans officer to branch manager.

And I have been the borrower in the bad year. The BSE years, when the market closed and the loan didn’t.

Two piles. Move quickly, and kindly, on both.

Some of these businesses can carry themselves again on a restructured obligation. Some cannot. The work is separating them honestly — and then acting, in both directions, without letting a file drift while the answer gets worse.

Where there is a path: restructure it, on terms the operation can actually meet. Where there is not: an orderly outcome that finds the buyer who values the operation correctly, rather than the buyer who simply happened to be there on the day of the sale.

And a producer treated well through the worst year of their life is a customer for the next generation. That is not sentiment. On an agricultural book it is the longest-dated asset on the file.

Both sides of the desk.

I trained as a banker and became the operator. That is the whole of my credibility here, and it is not a common combination.

• The lender’s side — five years inside a financial institution, from loans officer to branch manager. I know what the file looks like from where you are sitting.
• The operator’s side — forty years on the land: 480 acres to more than 10,000, a feedlot past 2,000 head, grain, cattle, hogs — and the cycles that closed markets without closing loans.
• The read before the report — what a yard, a herd or a rotation is telling you, months before it reaches a covenant.
• An honest answer, quickly — including when the answer is that the operation is finished. A fast no is a kindness.

Advisory and structuring — I’m not a licensed insolvency practice.