If U.S. farmers can withstand a few bumps in the road as they move through the 2020 cropping season, they could see a smoother ride into 2021.
"We've seen a little pain this year," says Brian Philpot ,CEO and principal owner of AgAmerica Lending, Lakeland, Fla., "but we're not seeing immediate distress in our clients."
Philpot, in a recent Delta Farm Press interview, said client stress may be "not pronounced but a little more than normal. Some clients may be deferring payment for a month or two, that sort of thing."
He says commodity markets continue to drag. "But producers got crops in the ground and are hoping things will come out okay.
"Our client base continues to be strong," Philpot says. "I don't think anyone is exuberant. They are understandably cautious, but overall their balance sheets remain relatively healthy."
Concern factors
He notes areas of concern tied to the coronavirus.
Labor for fruit and vegetable producers is always an issue, he says. "It's more pronounced now. Because of the COVID-19 pandemic, planes are not flying in with H 2-A labor. We are seeing less access to workers."
Reduced fuel use also decreased demand for ethanol, which affects grain prices.
He says wet weather stressed corn farmers during planting season.
Trade also remains a stress point.
"China is still an issue," he says. "The Phase 1 trade agreement target of $80 billion [in Chinese purchases] over two years is aggressive."
The pandemic shutdown of the U.S. and global economies and the strong dollar, Philpot says, "provides more incentive to buy soybeans from Brazil and Argentina."
He adds that presidential election tensions also affect markets.
Recommends caution
He recommends caution. "Now is not the time to go all in on new projects," he says. "We see a little more certainty than three months ago, but the situation is still pretty murky."
Philpot says producers should exercise caution with in-season spending.
"The big thing now is to take care of the balance sheet. Get through the presidential election and see if we get a cure for the virus. Researchers are being aggressive.
"We need to get more clarity on the economy. More risks exist in agriculture than in any business now because of the virus and politics.
"Be cautious," he adds. "It's okay to hit some singles now instead of swinging for extra bases. This is not a great time to do more than just what you have to do. Keep the balance sheet strong."
Optimism for 2021
Then look for improvement next year, he says. "I'm more optimistic for 2021. If we get a vaccine, the economy in the U.S. and globally will improve. However, we may have some demand issues, which might not be as dramatic as people hope."
Philpot says interest rates likely will remain low into next year. "That's good. The cost of capital will remain low. We should have more clarity with the presidency and what trade policy will look like for the next few years. In any presidential election year, we experience uncertainty.
"But 2021 looks a lot better."
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