How is Your Co-op’s Health?

January 7, 2009 06:00 PM
 

Charles Johnson, Top Producer National Editor
 
For farmers and co-ops alike, it's a new and fast-changing economic world, says Bob Engel, president and CEO of Denver-based CoBank, which lends money to farmers in some regions as well as to co-ops.

"There's more stress on farmers, co-op managers and bankers than ever. But the health of agriculture is good,” he says, with the caveat that the livestock complex has been "hit hard.”

"Farm co-ops will face their own unique funding challenges over the coming months. Cooperatives will continue to have consolidation from the standpoint of both the financial side and in human capital,” Engel says.

Lower crop prices are easing the situation, because co-ops now need less working capital. But their problems are far from over.

"The tougher challenge for farm supply co-ops is they've contracted fertilizer. Now that the fertilizer market has gone down, at what price do they sell?” Engel asks.

"Farmers now are much better positioned coming into this; most are not highly leveraged. The lesson is not to buy land like some people buy spec homes. It's to grow crops, not for speculation,” Engel says. "We'll probably get some depreciation of land, but it'll be 10% or 15%, not 50%. I'd be more worried about loans to gentleman farmers.”
 

 
You can e-mail Charles Johnson at cjohnson@farmjournal.com.
 
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