Credit still flowing for agribusiness

Agribusiness is one sector of the economy that should not have a hard time getting credit in 2009 to buy equipment, raise cattle for market or get another crop to harvest.

Terry Anders, president and CEO of Mountain Plains Farm Credit Services in Greeley, said the nation’s Farm Credit System continues to be a reliable source of credit for the nation’s agribusiness community.

“Our nation is facing unprecedented turmoil in the financial sector at a time when demand for credit in agriculture will undoubtedly increase due to dramatically escalating input costs,” Anders said. “Despite the turmoil, we continue to provide a steady supply of credit to the farmers, ranchers and rural residents we serve.”

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In mid-December, the Greeley-based cooperative lender reported a $6 million dividend paid back to its member-owners. Since the beginning of the program in 2004, more than $42 million has been returned to members, according to Mike Flesher, Mountain Plains Farm Credit Services vice president and corporate secretary.

Flesher said the rock-solid, federally chartered FCS has not been hit by the Wall Street uproar and should remain relatively insulated from its repercussions.

“We are still able to provide capital to the several areas we serve,” he said. “If a person comes to us looking for a loan, we are not unable to make that loan.”

That, of course, is dependent on the borrower having a good credit rating, Flesher noted.

“Looking at the foreseeable future, we don’t see anything to prevent us from (making loans),” he said. “We’re still able to make loans.”

Flesher said the only real challenge facing Mountain Plains is finding investors willing to buy long-term FCS bonds. “The funding side of it is our challenge,” he said. “Investors are so spooked in the market there’s no one interested in a 20-year bond. Everyone’s just thinking short-term.”

Those 20-year-and-longer loans may still be available but borrowers will have to pay more. “There’s going to be more of a premium on longer-term loans,” he said. “It’s not more difficult, but it’s more expensive with regard to longer-term securities.”

Mixed bag elsewhere

Elsewhere in agribusiness in 2009, there’s a somewhat mixed grocery bag of variables to ponder.

Thanks to strong foreign market demand, vegetable and dairy farmers can likely expect a reasonably good year as long as the weather cooperates. The first crop of genetically modified sugar beets resulted in a record crop for Northern Colorado growers in 2008, and that will likely mean more acres planted in sugar beets in 2009.

Corn growers have been benefitting from a strong demand for cattle feed and corn-based ethanol in recent years, but low gasoline prices that arrived in the last quarter of 2008 have cut into ethanol’s use and profitability for producers. Sharp cutbacks in production ordered by oil-producing nations in December were expected to push gas prices back up and renew ethanol’s attraction.

Specialty crops that require lots of hand labor were dealt a setback in 2008 by a shortage of migrant laborers, who left the state due to tougher immigration law enforcement and a generally declining U.S. economy. That’s likely to continue in 2009, ag observers say.

Dairies boom

The region’s dairy industry got a huge boost in mid-2008 when Denver-based Leprino Foods announced it would build a mozzarella cheese factory in Greeley. Les Hardesty, local dairy owner and immediate past president of the National Dairy Board, said the opening of the plant in 2011 should stimulate local dairy producers to increase their herds and operations in anticipation of the opening.

“Just being able to process our milk locally and the environmental impact of not shipping it to other states is huge,” Hardesty said.

Cattle producers are awaiting the outcome of an anti-trust lawsuit filed in October by the U.S. Department of Justice against Brazil-based JBS S.A., which is trying to purchase National Beef Packing Co. and become the biggest beef processor in the U.S. and the world.

The DOJ is claiming that JBS’s proposed merger with National could result in lower prices paid to cattle producers and higher prices paid by beef consumers. Industry observers have lined up on both sides of the issue, while Terry Fankhauser, vice president of the Colorado Cattlemen’s Association, said he just hopes there are enough packing plants left near producers when the dust settles on the case.

Flesher said the overall picture for agriculture in 2009 is bright. “The good news is that in the ag industry, people still have to eat and the demand will be there for these products,” he said. “We anticipate 2009 will still be a good year for the agriculture economy.”