Based upon the scuttlebutt in the market-to-date, 2011 is shaping up to be a banner year for agriculture. This follows up on a 2010 season which also was very strong in terms of crop input usage and overall sales revenue.
So where are the deals? I remember back during the banner years that were 2006 and 2007, many ag companies decided the time was right to sell or merge their businesses with those of some former competitors. It seemed perfectly natural – market conditions were good and company values were as high as they were likely to be for some time. It seems like the 2010 and 2011 seasons will parallel this situation.
But so far in 2011, there haven’t been many company deals made. As I get ready to send out our magazine’s annual CropLife 100 survey, the only member of the list that I’m aware has been acquired was Miles Farm Supply by Crop Production Services – and this deal happened at the close of 2010.
The deals could be coming, however. A financial analyst at one of the meetings I attended over the winter pointed out that with interest rates near zero and companies sitting on piles of cash as a hedge against a double-dip recession (which doesn’t appear likely to occur at the moment), company deals should be in the offing.
And the evidence suggests things could pick up this fall. As I write this column, I’ve just received word that the boards of U.S. AgBank and CoBank, two of the five banks that make up the Farm Credit System, have drawn up plans to merge come October.
“Our two boards remain unanimous in their support for the merger, which will bring together two financially sound, profitable cooperative banks to create an even stronger, more durable institution,” said Everett Dobrinski, chairman of the CoBank board. “We believe the merger is the right long-term decision for the farmers, ranchers, cooperatives and other borrowers we serve across rural America.”
If the industry’s money lenders are combining forces, can other players be far behind? We all should find out the answer to this question in a few months . . .