• You will need to login or register before you can post a message. If you already have an Agriville account login by clicking the login icon on the top right corner of the page. If you are a new user you will need to Register.

Announcement

Collapse
No announcement yet.

I like this guy! Always has a good article!

Collapse
X
Collapse
 
  • Filter
  • Time
  • Show
Clear All
new posts

    I like this guy! Always has a good article!

    There is trouble on the horizon. Most won’t see it
    until it too late like that shitty Titanic boat captain.
    The farm sector is about to be a financial mess.
    No the sky isn’t falling, it’s already fell. Most
    people in ag have heard stories about the 1980′s.
    It was a financial meltdown of epic proportions.

    Let me refresh your memory as I understand it. I
    was 3, so I don’t have first hand experience with
    what went on then, and most guys that do are
    dead or in a nursing home. Since they are
    enjoying their NutterButter at snack time and
    nobody is ever going to talk/visit with them about
    this matter, I’m all you’ve got for the time being.
    (if that made you feel guilty about not seeing an
    old loved one, good, go see them jerk) Basically
    banks lent capital based on collateral and when
    the underlying asset (land) went in the toilet,
    everyone was screwed. Their balance sheets
    were a wreck and they then had to sell into a non-
    liquid falling market that was in the process of
    deleveraging. Long and short of it, it wiped out a
    whole bunch of people and left a very bad taste in
    everyone’s mouth.

    That bad taste hasn’t went away. Ag banks still to
    this day don’t put much emphasis on land
    collateral. Yes it’s there and that is nice and all,
    but this time it won’t matter. The reason we will
    revisit the 1980′s style crash is because of debt
    serviceability. <— (big word) Everyone still looks
    to land values and wonders if they fall how will it
    affect the overall health of the ag sector. This is
    irrelevant because of the point about banks and
    their view of land assets.

    Most of the country went through the massive
    deleveraging event spawned by the housing
    crisis. I don’t like calling it that, it really should
    have been called the “greedy gluttonous I want it
    all” crisis, but people recognize it as a “housing”
    problem. Same thing is about to take place in ag
    for the same basic tenants. High commodity
    prices brought about a huge influx of $$$ to
    people that were accustomed to narrow
    production margins. In effect, most guys won the
    lottery for the last couple of years… and they
    spent like they did. Tons of new equipment,
    vehicles, services, etc… were bought and now all
    that debt leveraged up on guys balance sheets
    must be serviced with less revenue for the
    foreseeable future. Low commodity prices due to
    overproduction spurred on by high prices… sound
    familiar? Just like the suburban house buyer,
    they wanted it all, and got it, now it must be paid
    for. (no MBS type vehicle in ag sector I think, but
    maybe worth checking into) Some justified the
    purchase citing tax savings, problem is they just
    traded paying the tax man for paying the ag
    manufacturing sector. And, most likely, in order to
    pay off that debt, they will have to liquidate
    assets, & that will bring the tax liability back to bite
    them in the ass…

    Question the validity of my argument? Go check
    out the combine glut sitting on ag equipment
    dealers lots. Demand has dried up as all the fun
    money has been spent and the conservative
    crowd isn’t biting the same bait. The buy up and
    lever up crowd has stocked all the yards with late
    model used equipment that isn’t selling in the
    secondary market… sound familiar? Equipment
    industry insiders know this, but aren’t about to
    mention it because the sales of new stuff and
    gaining market share is their core business. Only
    way to keep the party alive is to have enough
    cash-flow to keep going, and that revenue stream
    will dry up as commodities fall below the cost of
    production in a function to buy back demand that
    was lost due to high prices.

    What’s truly sad is this history repeating itself
    didn’t have to happen. I don’t blame the
    equipment manufactures, but I will say it’s easier
    to get a massive equipment loan than it was to get
    a mortgage in 2006 IMO. Guys who get screwed
    this go around have done it to themselves. We will
    see how it shakes out. A lack of rain was a factor
    that helped bring about the last price surge (2012)
    in commodities…Most generally, every farmer
    wants rain, but my fear is that all too soon, some
    will be huddled with their lenders praying for it to
    not rain. <— (That’s how you make a big-ass
    cliché dramatic close to some thoughts people…
    #face)
  • Reply to this Thread
  • Return to Topic List
Working...