1980s Prepared Ag for 'The Great Recession'

Ag producers can expect continued mediocre prices, higher collateral requirements and more questions at the bank and limited recovery in 2010.

Published on: Sep 29, 2009

Though the numbers AgFirst Chief Lending Officer Bill Melton had to offer were less than winning, the message he gave to Southern Extension economists meeting in Atlanta Monday was clear: this is not the 80s.

 

"Yeah," Melton said, "it's worse than it was but it's certainly a far cry from the 80s."

 

AgFirst started preparing for a downturn in 2004, speeded up their efforts in March 2007, started seeing numbers fall in March 2008, and were surprised at the "speed and severity" of the drop from June 2008 to June 2009.

 

Speaking at the 2009 Southern Outlook Conference, Melton was candid yet not despairing. Overall, Melton said, AgFirst, with a footprint across the Mid-Atlantic states down through the Southeast and over to Louisiana, is in slightly worse shape than others in the farm credit system, largely because the coastal areas are the hardest hit by the recession in general and the real estate collapse in particular.

 

One of the biggest hits is with what once were considered "bullet-proof investors," those who have a lot of liquidity and buy agricultural land as an investment. "High wealth individuals that don't know where to turn or how to get out of the crisis," Melton said, merely handed over their keys and abandoned the investment. "You've got people who have the ability to pay. They just don't have the willingness to pay."

 

Over the next year, Melton expects the numbers to be fairly flat. "We don't expect to be looking a great deal better, especially in the AgFirst footprint, for the next 12 months," he said.

 

For producers, Melton said, the banks will and the markets will bring more pressure to bear. The issue at the bank will be lenders are slow to write loans, will require more paperwork and more collateral. From the banker's standpoint, he said, "you're experienced a few losses and everyone is second guessing."

 

Melton's commodity forecast is for slightly lower prices in wheat and corn, flat soybean prices, and slightly higher prices for cotton, cattle, hogs, broilers, and milk.

 

"'09-'10 doesn't look all that robust," Melton said. "You're OK. In some of it, you're doing better but it's less than spectacular."