Several major commodity groups have requested help from USDA Secretary Ed Schafer in addressing a potential credit crunch for retailers and their grower-customers.
Schafer has been asked to help address any potential liquidity crunch in the agribusiness sector should one occur as a result of another rapid increase in commodity prices, according to the Agricultural Retailers Association (ARA).
“It is believed USDA has the authority under the Commodity Credit Corp. to establish a temporary loan guarantee program that would ensure efficient marketing of farm commodities in the event of a liquidity crunch,” ARA states in a press release. “Such a temporary program could provide loan guarantees to qualified financial institutions lending to agricultural businesses; allowing for the continuation of forward contracts and crop input supply financing to producers. Increased borrowings by agribusinesses and farmers has placed significant pressure on company balance sheets, and in some cases, resulted in significant restrictions on the availability of forward contracts for U.S. farmers.”
ARA states that USDA has been informed that high costs for crop inputs will require much greater financing for ag retailers and producers. “Many of these businesses could hit authorized borrowing limits and agricultural lenders could reach the limits of their ability to manage concentrated risks associated with these types of loans,” ARA says.
ARA is closely following this serious financial issue. Contact ARA’s Richard Gupton at email@example.com if your ag retail business is experiencing difficulties obtaining credit.
(Source: Agricultural Retailers Association)