National Agricultural Law Center and PACA

Bruce Summers of USDA AMS passed on a nice resource to look at when considering the issue of PACA trust rights and relevant court decisions over the years. This link highlights the American Banana case from several years ago that resulted in a produce seller losing rights to statutory trust due to a post-default agreement. Also find this helpful commentary here. More coverage coming on that in The Packer...

Here are some headlines snatched from the Web this morning.

Obama's first day After 10 inaugural balls the day before, Obama active on war in Iraq, bailout

Possible FDA head: more staff needed to inspect food From Newsday

Dr. Steven Nissen, chairman of cardiovascular medicine at the Cleveland Clinic - and reported to be on President Barack Obama's short list to become FDA chief - said food inspection is swamped by the FDA's other responsibilities: the approval of medications and medical devices.

"Here's one of the problems: Foods have two major inspection agencies, the U.S. Department of Agriculture and the FDA. I think all of it needs to be under one roof," Nissen said yesterday.

Immigrant activists call for end to raids

European pesticide battle rumbles on Grower groups want negative impact measured before new rules are implemented next year

State auditors question avocado commission's payouts Coverage from The Packer

World running out of water Pacific Institute and Water Footprint Network produces scary numbers and has ag in its sights:

A significant part of the problem is the huge, and often deeply inefficient, use of water by industry and agriculture. UN calculations suggest that more than one third of the world's population is suffering from water shortages: by 2020 water use is expected to increase by 40 per cent from current levels, and by 2025, according to another UN estimate, two out of three people could be living under conditions of “water stress”.

Florida growers work to save crops from freeze

Rio Queen citrus founder dies Coverage from The Packer

CDC warns of program cuts The now familiar theme: how will state budget cuts affect services to consumers and industry?

Supply, weather factors lift lettuce prices Coverage from The Packer

Colder winter actually proof of global warming Could it be any other way?

Greek farmers maintain highway blockades

Potato shippers avoid national oversupply Coverage from The Packer

South Korea's economy shrinks Fourth quarter results show GDP contracted 5.6%, more than double what was predicted

Foreclosures spread from sub prime to prime

Changes to credit limits influence consumer behavior
A report on website Internet Retailer suggests that falling credit limits could impact the average person's spending behavior.
While many people reported they planned to voluntarily cut back on purchases over the holiday season, others may have found their hands tied due to credit concerns.

Deeper housing woes this year, say economists

Hotels trim amenities Fewer cookies and hand lotion

Five feet high and rising

Now that the bailout package has passed, it is not exactly reassuring to see the Dow Jones continue its dive, now uncomfortably below 10,000. Perhaps John McCain will have buyer's remorse for having voted for the bill, since there appears to be little to no benefit to market psychology from the bailout. How this all impacts the farm community is getting a little more play. Here are a few headlines snatched from the Web about agricultural lending.



Ag lending thrives amid financial turmoil From The Modesto Bee:

"The fundamental economics of agriculture overall are positive," said Roger Sturdevant, an executive vice president with Bank of the West and manager of its farm lending division, based in Fresno.


Farmers, ranchers could feel credit crunch From the AP's Betsy Blainely

While there's no immediate problem because agricultural lending institutions remain strong, there's fear that the recent financial meltdown will make bankers far more cautious, said Carl Anderson, an agricultural economist at Texas A&M University.

"I would say that everybody's pretty cautiously concerned," said Don Langston, a longtime cotton producer in Texas, the nation's leading producer of the fluffy fiber and the nation's No. 2 agricultural state.

Farmers still able to get bank loans From The Des Moines Register:


Farm Credit Services' bonds are the principal source of funding for the agency. As government sponsored entities, they are tax-exempt and thus can be sold at a more attractive rate.

Kinnison noted that unlike Fannie Mae and Freddie Mac, Farm Credit Services doesn't package its farm loans and resell them in securities markets. Instead, it processes and services its own loans, which can have durations of up to 25 or 30 years. That practice put Fannie Mae and Freddie Mac, plus several major private investment houses, in financial trouble as the nation's housing market has sunk.

"We keep and administer our own loan portfolios, and our bad-debt ratio is 0.29 percent of our total portfolio," Kinnison said. "We like to think of ourselves as a poster boy for how an agency like ourselves should act."

Tight credit could nip farm sector From Reuters:

My understanding is the financial lenders in rural America are very strong," Buis said. "We hope it doesn't spread."

Interest rates on price-support loans by the Agriculture Department fell by one-quarter percentage point for loans made in October. The loans, which use crops as collateral, can be a short-term financing tool for growers.

Ag land values - cause for concern?

I was searching the Web today and came across a story published back in March of this year, where one state bank regulator raised worries about a bubble in farm real estate prices.

A state banking regulator raised a warning flag about soaring agricultural land values on Tuesday, telling a congressional hearing that the U.S. farm land bubble could burst and unleash a fresh set of economic problems. "If there has been too much leveraged or loaned against the inflated value of farm land, the bubble will burst, and we will once again experience an economic crisis similar to that of the 1980s," Iowa Superintendent of Banking Thomas Gronstal told the Senate Banking Committee.

His remarks came before the release of USDA data on farm real estate values for 2008. which showed an overall U.S. gain of 9% this year and some corn belt states showing close to a 20% gain compared with last year. The USDA data showed California's land values were up 8.8%, with Florida's mostly unchanged and Texas up 14%. Illinois farm land was valued at a whopping $5,000 per acre in the 2008 survey, with California at $6,500 and Florida at $7,600 per acre.

The average value of farm real estate in 2008 was estimated by the USDA at $2,350 per acre, up from $1,340 in 1998.

This afternoon I visited with Tom Hill, chief financial officer of the Austin-based Farm Credit Bank of Texas. Hill assured me that agricultural lenders - at least in Texas - don't face the same worries as Fannie Mae or Freddie Mac - even though the Farm Credit Banks (there are five in U.S. farm country) are government sponsored enterprises like the aforementioned Fannie and Freddie.

I asked if the credit crisis on Wall Street will affect farm country credit.

"My observation is that there be some tightening up, but nothing as dramatic as urban consumers are experiencing, because of where we started with underwriting criteria," eh said.

Hill said the Farm Credit didn't write the kind of "no doc" and sub prime loans that have seized the credit markets and threatened the existence of various banks.


"We never left our basic underwriting criteria," he said. "While we may tighten up a little bit on advance rates - make them a little more conservative, make the terms a litter bit shorter, reinforce underwriting covenants and conditions, underwriting covenants and conditions, the impact to a good producers won't be adverse compared with the rhetoric you are seeing in the papers about home buyers," he said.

Generally, he said Hill the Farm Credit Bank was in a "much tighter range" in terms of what it advances on real estates loans. Most loans would give land buyers 70% to 75% of the land's value.
"We've never advanced 100% and it was rare that we advanced over 80%; we drifted a little bit, and current conditions will truly make us drift down a little bit," he said. " But we won't be in such an adverse swing that a good producers that has been in the market will ever sense we have changed."

Hill said land values in Texas haven't taken a hit yet, and said any declines would be linked to the run ups in real estate values that has occurred up until now. Increases in the value of Texas agricultural land have been moderate - at about 8% to 10% annually - compared with some of the states. He noted that the most drastic increase in land values have occurred in primary Midwest corn ground.

"It's no different that what happened in the housing market; if you have a run up in house values from $250,000 to $500,000 and you are lending on 90% of that, your exposure to a downturn is huge," he said.

Hill said the value of corn acreage may be vulnerable to changes in the government policy toward ethanol, which has been hotly debated this year because of high food and fuel prices.

Hopefully, I'll have more of a chance to visit with ag lenders in Florida and California in coming days (weeks?) to get a stronger sense on how lending to produce growers may be stung by the Wall Street credit crunch.