Western Grower & Shipper 2018 11Nov-Dec

Ag Economy Faces Uncertainty

By Tim Linden U ncertainty in several areas including world trade, tariffs and labor do pose some issues for the agricultural sector that does impact its attractiveness to lenders, according to a couple of financial experts interviewed by Western Grower & Shipper recently. “There is a lot going on that is impactful to agriculture,” said Dean Cardoza, executive vice president of Bank of America, listing both tariffs and the global trade situation as concerns. Mark Littlefield, who wears the same title for Farm Credit West, added the uncertainty about the availability of labor is another negative factor for the ag sector. In fact, he said agriculture in general appears to be in an “off cycle” for the next 18 months. “We’ve got to see a little more certainty moving forward. It might be into 2020 before we have a better understanding of the trade wars.” Uncertainty is not a friend to the financial community as lenders of money favor stability over volatility. Though with that

said, both men noted that ag borrowers with a good financial story to tell will be able to find funds to finance their operations. Even though the Federal Reserve has been consistently raising interest rates for the past two years and three more hikes are expected in 2019, interest rates are still historically low. “Money is still cheap,” said Cardoza. “Historically anything under 10 percent is good. We have been spoiled for a long time with low interest rates.” Even with projected rate hikes going forward, he said the interest rate will still only be in the 4-5 percent range, which is still very good. Littlefield made the same point, noting in mid- September that even after the latest rate hike, 10-year money was still just over 3 percent. Consequently, he said it is currently an excellent time to invest capital in your operation if you have a good business reason to do so. When evaluating loan applications, the modern banker in the ag sector is very knowledgeable about the factors that play a role.

20   Western Grower & Shipper | www.wga.com   NOVEMBER | DECEMBER 2018

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