The inflation thread detoured into the demise of a rising star. I don't know them or the whole story, so don't want to pass too much judgement. Could have had the best business plan and were the hardest workers, stymied by mother nature throwing too many consecutive disasters at them, as ajl suggested.
But, if this type of massive expansion proves to be financially unsustainable as it apparently was in this case, doesn't that indicate that every other producer who is forced to compete with them (while they lasted) with higher rents, higher land prices, etc., is at a big disadvantage by paying the artificially higher prices while the responsible farmers are also actually paying their bills and growing in a more sustainable pace? Doubtful that those costs will go down when the big player goes down. Hard to compete with someone who doesn't pay their bill at the end of the day, intentionally or otherwise.
If it was all built by unsustainable debt, how does anyone else play the game without doing the same, and why would the result be any different in the long run if they hve to do it the same way? Supporting and encouraging what (may?) be over leverage by a few big operators just makes us all less competitive in the world market place by raising our land costs for no increase in yield or productivity.
Mostly I'm trying to understand why the banks and ag lenders would want or allow themselves to get this deep into one operation? And keep getting deeper even after trouble may have started. From a risk perspective, wouldn't the lender be far less exposed by loaning this same amount to 10 smaller operations to have more sustainable expansions? Do they really have a master plan to support consolidation, or are the ambitious over achievers just the only ones applying, so they get the funds? While the cautious just get left behind without even asking if they would be approved?
Meanwhile we all get to pay for the defaults. The unpaid bills don't disappear, the input suppliers, banks creditors etc. will have to pass those costs on to everyone else, and price even more risk into their prices to protect against more of these events.
I'm just trying to figure out if this type of operation really has any net benefit to the industry in general? Or is this the outlier, and everyone else who tries it is massively successful and far more efficient than the rest of us, and that is why the lenders are lining up to support them? Then they force us to be more efficient or get out of the way?
But, if this type of massive expansion proves to be financially unsustainable as it apparently was in this case, doesn't that indicate that every other producer who is forced to compete with them (while they lasted) with higher rents, higher land prices, etc., is at a big disadvantage by paying the artificially higher prices while the responsible farmers are also actually paying their bills and growing in a more sustainable pace? Doubtful that those costs will go down when the big player goes down. Hard to compete with someone who doesn't pay their bill at the end of the day, intentionally or otherwise.
If it was all built by unsustainable debt, how does anyone else play the game without doing the same, and why would the result be any different in the long run if they hve to do it the same way? Supporting and encouraging what (may?) be over leverage by a few big operators just makes us all less competitive in the world market place by raising our land costs for no increase in yield or productivity.
Mostly I'm trying to understand why the banks and ag lenders would want or allow themselves to get this deep into one operation? And keep getting deeper even after trouble may have started. From a risk perspective, wouldn't the lender be far less exposed by loaning this same amount to 10 smaller operations to have more sustainable expansions? Do they really have a master plan to support consolidation, or are the ambitious over achievers just the only ones applying, so they get the funds? While the cautious just get left behind without even asking if they would be approved?
Meanwhile we all get to pay for the defaults. The unpaid bills don't disappear, the input suppliers, banks creditors etc. will have to pass those costs on to everyone else, and price even more risk into their prices to protect against more of these events.
I'm just trying to figure out if this type of operation really has any net benefit to the industry in general? Or is this the outlier, and everyone else who tries it is massively successful and far more efficient than the rest of us, and that is why the lenders are lining up to support them? Then they force us to be more efficient or get out of the way?
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