Leave Me A Loan
It seems as if the shadow of 2008 continues to loom large over the U.S. economy. Just as the general economic climate seemed to be improving, the debt ceiling debate and country credit rating downgrade have seemingly sucked all the financial stability out of the stock market and are threatening to derail any real growth through the rest of 2011.
As for the world of agriculture, things don’t look near as bleak. Crop prices are up, and with flooding in parts of the Midwest and drought in parts of the South expected to keep harvests low, these are anticipated to remain high for the foreseeable future. Likewise, ag equipment and crop input sales remain steady based upon the early data from our CropLife 100 report and the buzz at this summer’s trade shows.
However, it’s doubtful the current health of the ag economy will remain completely unaffected by the nation’s overall economic slowdown. If I had to guess, I would keep an eye on the banking industry and its willingness (or lack thereof) to extend loans to grower-customers, ag retailers and smaller ag-related companies.
We all remember that this sector of the industry virtually ground to a halt during the economic crisis of 2008. Even with low debt and decent crop prices, banks were reluctant to loan funds to anyone in the ag market (and anyone else, for that matter). As economic fortunes again dry up on Wall Street, you could easily see this kind of scenario playing out once more during the fall. And this situation is made even more precarious by the recent merger of ag banks U.S. AgBank and CoBank, reducing the number of loan institutions in the Farm Credit System from five to four.
Hopefully, I’m wrong about this and the problems of the general economy won’t spill over into the vibrant world of agriculture. But it probably wouldn’t hurt companies that do business in the marketplace to have some Plan Bs and Cs in the works just in case their bankers decide to hole up in their financial bunkers as they did back in 2008.