Cost Of Credit Likely Only To Hamper Ag Borrowing

There remains plenty of accessible credit, at least for those in the ag industry with strong balance sheets willing to pay the higher cost of the money that’s available, Ag Equipment Intelligence editors report.

“The answer to the question, ‘Is there money to lend agricultural businesses?’ is unequivocally, ‘Yes.’ But the real question is do farmers and other ag enterprises want to pay the price of borrowing money in the current market?” says Dr. Michael Swanson, vice president and senior economist of Wells Fargo Bank, the largest agricultural lender in the United States.

The Wells Fargo executive says that the leveraging of assets for borrowing purposes has diminished for everyone. Lenders are requiring more equity and working capital based on the amount of business that would-be borrowers are doing than they did before the current economic crisis. The problem for bank financing is the cost of money, he says.

“Whether you’re a great loan risk or not a great loan risk, the cost of money is the cost of money,” Swanson says.

Richard Brock of Brock & Associates doesn’t anticipate problems with farm incomes this year, but believes the residual effects of the current economy will show up in full force in 2009. Overall, he says farm income will be solid for 2008, with the reminder that a lot of producers have crop insurance that covers revenue shortfalls due to falling grain prices.

However, he adds a warning. “I think ‘09 is going to be a train wreck for a…

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