Get Credit From More Sources

Right now, we have a lot of grieving farmers. Some are disappointed that they missed the market highs last spring and summer. Some wish they had taken advantage of land opportunities when prices were more reasonable. Others are finding out that the credit source they’ve relied on for years has dried up. And many haven’t moved much grain this winter.

All doom and gloom? Not at all. Although tight credit is affecting the way business is done at every level of agriculture, securing credit is still possible, but you’ll need to turn over every stone and contact potential new lenders. Even if you’re in pretty good shape, don’t wait around. Start getting your credit lined up for this season. The credit game is getting tighter every day.

We know the amount of capital available through banks for input loans is going to be reduced. Your best bet is to transition into several sources of credit. Try lenders you’ve bypassed in other years. Set up reviews. Talk with the lender not once but several times. Don’t get stressed out about it. Securing credit is part of farming every year. It’s just that this year you’ll need to apply due diligence and start earlier than ever before.

This is a good year to expect the unexpected. Your favourite banker may have changed lending requirements. But where there’s challenge, there’s opportunity. Grain markets have been slow this winter; a lot grain hasn’t been called forward. Your lender may view your stored grain as an asset to lend money against. If that’s your situation, find out about it and use it to your advantage.

Agriculture is getting hit with tight credit, which means the business of agriculture is slowing down. Credit problems have slowed up the shipping business. A lot of companies can’t get the credit they need to buy product from Canada nor can they find buyers with credit so they can sell it. The only export grain that’s on track is canola; everything else is lagging. Every level of agriculture is living with uncertainty, and this is going to be with us for some time to come. We’re probably 12 to 24 months away from a lot higher grain prices, but you’ll need to stay optimistic.

SEIZE THE OPPORTUNITY

“You’re richer than you think” is a bank slogan that’s not bad advice for these uncertain times. An optimistic view of the future of agriculture — and your operation — will help you take advantage of opportunities. Commodity prices are still well above 2007 levels. Maybe it’s time for you to look into the availability of rented land. Ask yourself how dropping input prices can fatten up the bottom line. Take a look at your crop rotations. How will your rotations this year impact the 2010 crop? Maybe you’ll decide to seed more peas this year, if you can get a decent price, so you can cut down your nitrogen bill next season.

If fertilizer decisions are making you crazy, buy now. Prices are starting to move up. A penny saved could cost you big-time. There’s not enough capacity in the system to deliver all the fertilizer in the spring. Remember, we’ve seen a 60 per cent price drop. It’s cheaper than it was at this time last year, so get your credit lined up and your buying done.

This season, scenario pre-planning is especially important. Make plans for a wet, normal and dry season. Plan for a shortfall in credit and for ample credit. Count on market volatility. Do this before we’re too far into the season, so you can think clearly without emotion. Paying close attention to your ROI and not the day-to-day moves in the market will help you keep an eye on what’s happening in your own backyard.

If your investment portfolio has taken a hit, you may be more reluctant than ever to assume risk, but you really don’t have a choice. As producers, we have to play the game with the hands we’re dealt, but we have options: decrease the size of your operation, find more assets, rent more land, revamp your cropping decisions with 2010 in mind. This is the time to do more long-term planning and think opportunity, not limitations. PMG is talking with producers who are expanding. They’re saying: “I’m getting ready for the next run-up. If I sit around and mope, I could miss some great opportunities.”

And finally, don’t become discouraged by the media. As one of our clients told us, “I really don’t know how to describe myself, but I think I’m a whole lot smarter than many car company CEOs, because I’m still here.”

Gary Pike is president of PMG. PMG provides management, marketing, business planning advice and coaching to members who represent 2.5 million acres in Western Canada. To find out more about PMG and how to become a member, visit www.agcoach.caor call us toll free at 1-877-410-7595.

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