Farm Show speaker: Financial volatility for ag producers likely to continue | TheFencePost.com
YOUR AD HERE »

Farm Show speaker: Financial volatility for ag producers likely to continue

Bill Jackson
Greeley, Colo.

Those involved in agriculture will need to be prepared for more volatility than ever before, especially when it comes to financing, an official with CoBank told a good-sized crowd at an opening session of the 2010 Colorado Farm Show on Tuesday morning in Greeley.

Dennis Blick, a senior vice president and region manager with CoBank in Wichita, Kan., said risk will have to be quantified and managed better, there will be more financial management involved and risk will be shared, noting “risk takers will have to be compensated.”

CoBank, which is headquartered in Denver, is part of the Farm Credit System.

Blick made the predictions following a history of what led to the recession that hit like a brick in the fall of 2008. He said there will be a slow recovery from that recession this year but it may be 2011 before “we may start to dig our way up” out of the doldrums.

“The ag sector balance sheet is still solid,” Blick said, but he said lenders will spend more time on risk management in the coming years and banks “may be highly volatile and difficult to predict.” Mergers will be more common and those banks once involved in agricultural lending may not be in the future.

The livestock feeding and dairy industries “got beat severely” by economic conditions, he said, while there are signs that wheat and corn prices will start to see a rebound. He noted, however, that corn production will be affected by ethanol production and how many of those plants are built or come back online.

Blick said the origins of the economic crisis were many, led by the housing and mortgage business that put a lot of people in homes they couldn’t afford.

“Most people cannot get their arms around how critical things were, and, in fact, they might have been worse than most understood,” he said, noting the government then had to step in to keep what was left of the economy intact.

Presently, he said, the country is seeing a regulatory reaction, and in the case of the banking industry that might be an overreaction.

That, he said, is what will lead to more volatility, but with pressure increasing on the U.S. dollar, agriculture exports should increase this year and into the future, which will help the dairy industry in particular. At the same time, that will also lead to higher input prices for fertilizer, fuels and agricultural chemicals.

Those involved in agriculture will need to be prepared for more volatility than ever before, especially when it comes to financing, an official with CoBank told a good-sized crowd at an opening session of the 2010 Colorado Farm Show on Tuesday morning in Greeley.

Dennis Blick, a senior vice president and region manager with CoBank in Wichita, Kan., said risk will have to be quantified and managed better, there will be more financial management involved and risk will be shared, noting “risk takers will have to be compensated.”

CoBank, which is headquartered in Denver, is part of the Farm Credit System.

Blick made the predictions following a history of what led to the recession that hit like a brick in the fall of 2008. He said there will be a slow recovery from that recession this year but it may be 2011 before “we may start to dig our way up” out of the doldrums.

“The ag sector balance sheet is still solid,” Blick said, but he said lenders will spend more time on risk management in the coming years and banks “may be highly volatile and difficult to predict.” Mergers will be more common and those banks once involved in agricultural lending may not be in the future.

The livestock feeding and dairy industries “got beat severely” by economic conditions, he said, while there are signs that wheat and corn prices will start to see a rebound. He noted, however, that corn production will be affected by ethanol production and how many of those plants are built or come back online.

Blick said the origins of the economic crisis were many, led by the housing and mortgage business that put a lot of people in homes they couldn’t afford.

“Most people cannot get their arms around how critical things were, and, in fact, they might have been worse than most understood,” he said, noting the government then had to step in to keep what was left of the economy intact.

Presently, he said, the country is seeing a regulatory reaction, and in the case of the banking industry that might be an overreaction.

That, he said, is what will lead to more volatility, but with pressure increasing on the U.S. dollar, agriculture exports should increase this year and into the future, which will help the dairy industry in particular. At the same time, that will also lead to higher input prices for fertilizer, fuels and agricultural chemicals.


Start a dialogue, stay on topic and be civil.
If you don't follow the rules, your comment may be deleted.

User Legend: iconModerator iconTrusted User