ABN AMRO has noted a rise in the number of loans it is providing to the agricultural sector, with the volume of the loan portfolio growing by a few percentage points in 2013. "We welcomed more than 300 new clients last year," says Pierre Berntsen, Director of Agricultural Companies at ABN AMRO.
When assessing a credit application, the Agriculture teams make two analyses: a business and a financial analysis. The business analysis assesses both the enterprise and the entrepreneur; the financial analysis focuses on profitability, assets and liquidity. "We are selective in our lending," notes Berntsen. "We only lend capital if we have confidence in the business. People often say that the bank doesn’t have enough capital to lend, but this is never the reason for denying a loan application."
Investments and credit requirement vary among agricultural subsectors
ABN AMRO’s total credit portfolio for the agricultural sector is growing – but that doesn’t mean each subsector has the same credit requirement. "The poultry sector, for instance, has invested heavily in recent years in improving animal welfare, because battery cages are now prohibited. And the dairy cattle sector has recently invested a lot in stables in the run-up to 2015 when the dairy production quota will end. This sector is expected to remain ambitious. Another example is greenhouse farming, where profits are under pressure and investments are limited."
No general forecast for the agricultural sector
Berntsen says that given the diversity of subsectors, it’s virtually impossible to predict the future of the agricultural sector. "The dairy cattle and farming sectors are doing well, but some parts of the agricultural sector are having a hard time. At any rate, the agricultural sector has its own dynamics that often have nothing to do with the economic situation, but more with supply and demand – especially supply. In a good potato year, there will be a large supply, with huge consequences for the price."
Rising food prices
Berntsen expects food prices to remain very high in the coming years. “There’s nothing to be done about that. The global population is growing, and every mouth needs to be fed. Raw materials are needed for all that food, and the demand is growing. As a result, prices will remain high,” says the Director of Agricultural Companies at ABN AMRO.