DES MOINES, Iowa – You might expect bankers to be hiding from hog producers, desperate to stay away from the industry that has caused many lenders to lose a lot of money.And you might expect hog producers to be hiding from lenders, fearful that they might pull the rug out from under their struggling operations.But the return of profitability in the industry helped bring lenders and farmers together amicably at the World Pork Expo, and both sides of this longtime financial marriage vowed to stay together.”Farmers are going to want to expand again eventually, but they’re going to be careful about how much money they borrow to do it,” said Neil Dierks, chief executive officer of the National Pork Producers Council.”They’ve learned a lot about debt in the last few years – as all of America has. They want to make sure they can manage it when things turn down.”Mark Greenwood of Ag Star Financial Services told hog producers that lenders want to begin lending new money to hog producers, but they too will be cautious after many lost money to failing farms.”We’re still looking for business with producers who have good financials, have good financial records,” said Greenwood.”We have been far from perfect in managing our portfolio, but we feel very good about the portfolio of the people we do business with. They’re very good at what they do.”Since late 2009, prices have been trending higher, returning many farmers to profitability.At the expo, a number of agricultural lenders set up booths in the trade show and many producers were talking about expanding production again.But few at the show believed there was much chance of rapid expansion. Severe losses to many farms have knocked some out of business and most are going to lower the amount of debt they feel comfortable carrying.Greenwood said elite producers have been solidly profitable this calendar year – some averaging $18 of profit per pig – but many others are just marginally profitable. Those differences will mean a lot when producers and lenders try to make future lending agreements.”It’s going to be harder for producers in general to get access to capital if you don’t have timely financial reporting and a good risk management program,” said Greenwood.Risk management will be demanded by lenders, especially for producers who are making low profits now, Greenwood said.He said the outlook for his part of the lending industry isn’t bullish, but he thinks it will be a good business, even if it is less active.”I’ve told our company, I think our average yearly balance is going to go down,” said Greenwood.
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