Nicknamed “America’s Finest City,” San Diego proved to be a beautiful and welcoming destination for the National Grain and Feed Association’s 115th Annual Convention. More than 700 attendees descended upon Hotel del Coronado in mid-March for networking opportunities, educational open forums and committee meetings.
The keynote address was presented by Greg Page, chairman and CEO of Cargill Inc. Page’s presentation, “Finding The New Center of Gravity With Policy,” explored unprecedented market volatility and its causes. Increased global consumption, rising fuel costs, inclement weather, and government and export restrictions are among its many drivers.
The Q&A portion after the presentation turned toward Cargill’s public perception. Page urged the industry to avoid allowing consumers the opportunity to jump to conclusions about agriculture. Recently the company invited Oprah into one of its meat plants to clear up misconceptions and help educate about the animal agriculture.
“In a world where nothing can be hidden, it’s better to have nothing to hide,” Page says. “Take a step of faith to invite the community into your business.”
The current state of ag lending
“Financing and Capital Availability” featured a panel of financial stakeholders and explored the increased demands of grain costs, increased volume and liquidity. With 61 bankers at the conference, this session proved a timely open forum for all attendees. Doug Stark, president and CEO of Farm Credit Services of America, feels the current state of agriculture is a perfect storm, but in a good way. The combination of low interest rates, federal policy, liquidity and high trade with a weak dollar creates an environment that is about as good as it gets for producers; however, he notes that volatility and capital requirement changes could shift this and leave producers without a safety net. Lenders can’t rely on the “good old boy report,” but a firm understanding of the marketing position will allow them to fund fast and move forward.
“The most frequently asked question: How much will you lend?” describes Bob Egerton, Eastern regional president of CoBank. “The answer: There isn’t one. Every situation is unique.”
Egerton suggested the industry move to an asset-based lending approach. He made the correlation between grain and lending, seeing that both industries deal in undifferentiated commodities, risk management and uncertainty.
“When looking for a financial partner, look for expertise, responsibility and capacity,” Egerton said.
Picking up on this point, senior vice president of U.S. Bank Elizabeth Hund’s presentation focused on the questions grain handlers and feed manufacturers should ask their bankers. Do they have the capacity to support your business?
“Would you invest all your money in one stock? No. Then why would you only work with one bank?” Hund says. “As we’ve learned, there is no such thing as too big to fail. Understand the financial strength and capacity of the banks you’re working with.”
She suggests working with multiple banks in a way that forces them to offer competitive rates. To do this, borrowers must be proactive not reactive when seeking to borrow money. “If you don’t, you’re putting all the power in the bank’s hands, and you won’t be able to negotiate.”
Issues affecting ag
“Agriculture is a linchpin for the economy and global stability,” said Hal Reed, NGFA chairman and president of The Andersons Inc. He noted that agriculture represents 11% of U.S. employment. Given the role ag plays, the challenges it faces are broad. From regulation to rail rates, the Annual Convention’s speakers addressed many topics. Here are a few highlights:
Dennis Avery, senior fellow at the Hudson Institute, made the case for agriculture in his session, “Climate Change: Impacts on Crop Production and Sustainability.” He explained how biotechnology and industrial agriculture are not contributing factors to global warming, but actually help defend against it.