Retailers: Dealing With A Credit Crunch
Industry insiders continue to express concern that banks and lending institutions will be extremely reluctant to do business with agriculture.
December 4, 2009
As the nation’s financial system ground to a halt in 2008, most banks and lending institutions were still willing to extend credit to the ag market due to record commodity prices and increased yields. But according to Dave Sparks, regional manager for the commercial agribusiness group for CoBank, that was so last year.
“We are in a huge transition stage right now,” said Sparks, speaking at the annual Mid America CropLife Association meeting. “Nothing is the same as it was one year ago.”
Jeff Eggleston, general manager for Hintzsche Fertilizer, agrees. “We have not made any adjustments in the things we’ve done due to the financial crisis in the U.S.,” Eggleston says. “I guess my concern is how does this lack of available credit affect our customers on gaining operating lines of credit and us extending credit to them.”
Most industry insiders have this same concern, that banks and lending institutions will be extremely reluctant to do business with agriculture. “The average margin for retailers is so dependent on a number of factors that aren’t constant from year to year,” says Dan Kennedy, general manager for Ritter Crop Services. “There are going to be a lot of banks that won’t want to the risk of the uncertainty of growers spending and commodity prices staying high.”
Still, there is a note of hope. According to Ken Feaster, vice president for First National Bank of Omaha, ag credit will be hard to get in 2010, but not impossible. “Companies will need three things to get the credit,” says Feaster. “Liquidity, capital/equity, and a credible business plan.” He adds that seekers of ag credit should expect “100 more questions” from their lending institutions than in the past.