Not too big to fail, but maybe too big to finance

Washington Ag Today September 21, 2009 We have heard a lot about “too big to fail” in relation to the financial crisis in the United States over the past year. Jay Penick, President and CEO of Northwest Farm Credit Services told a Spokane Ag Bureau breakfast Friday that we could hear a somewhat different terminology about some financially troubled segments of agriculture.

Penick: “What we might start hearing in agriculture is too big to finance, or to finance at a competitive rate.”

Penick pointed specifically to large dairy operations.

Penick: “I tell you what, if you are financing a dairy and you look at that dairy it scares you to death. Because there is no way to get out and no way to stay in.”

Penick does believe the efficiency of large operations will carry them through and they will be attractive long term, but right now, of any dairy carrying debt he doesn’t believe that if it were liquidated, it would be solvent.

As for the wheat industry and too big to finance, Penick says that’s a different ball game. Wheat plays over a longer horizon of marketing. Also;

Penick: “It always has a solid asset base, land. So those industries are going to be easier to finance in the future and are probably going to be more attractive to lenders than a lot of the specialized facilities we see in the fruit industry, the dairy industry, whatever it may be.”

Penick believes all ag commodities will be going through a down turn, not necessarily because the financial crisis and its impacts, but because of natural cycles.

I’m Bob Hoff and that’s Washington Ag Today on the Northwest Ag Information Network.

?