On June 13, Husch Blackwell’s Food & Agribusiness industry team presented a seminar in Denver, CO spotlighting industry finance and investment trends and regulatory developments. More than 50 professionals attended the seminar, representing ag processing, food distribution, ag production and industry-focused lenders and investors. The morning started off with Jim Ash, Husch Blackwell’s Food & Agribusiness industry team leader, moderating a panel focused on industry trends. The panelists included –

The panel discussion kicked off by discussing the current consumer trends and whether or not the current trends are considered sustainable. The panel agreed the importance of food safety is top of mind with consumers and food company executives alike. Healthy alternatives, convenience and transparency in labeling were also noted as important to consumers. Consumer demand for new products with unique flavorings is resulting in small, nimble companies being rewarded. An example of this is the growth in the craft beer industry.

The panel turned their attention to consolidation within the industry. The panelists agreed the mega-deals would likely continue over the next 18-24 months, but smaller deals at the other end of the spectrum would also continue, highlighting the importance of companies being nimble and responsive to the market. For smaller companies within the industry, 75% of the deals were for strategic reasons compared to an average across all industries of 50%. Technology advances and the need for innovation were also mentioned as driving consolidation. European companies are looking to North America for investment because of perceived opportunity.

Commodity pricing and the impact on the industry was discussed next. Over the long-term the prices for commodities are expected to rise, however in the short-term there will be continued downward pressure until there is a significant correction, which will likely be driven by a weather event. Pricing is driven by supply and demand and in the short-term there is an excess supply; however, long-term commodity demand will be driven by rising world-wide socio-economic status increasing demand for protein, which is a more inefficiently produced food source. The current excess supply is the result of technology advances resulting in improved yields and the absence of a significant weather event over the past several years.
Continue Reading Denver Food & Agribusiness Seminar: Regulatory & Investment Trends

Agricultural producers face liability risks generally experienced by most businesses – workers compensation, for example, and risks that can easily be covered by standard property and casualty insurance policies. However, agricultural growers and producers are also confronted with particular risks of losses and liabilities endemic to agriculture that go to the very heart of their businesses as farming operations.  As those involved in agribusiness realize, standard property and casualty policies may not be available to provide coverage for the unique risks and potential losses an agricultural producer faces – losses attributable to:

  • environmental matters;
  • animal diseases;
  • crop diseases;
  • pesticides and fertilizers; and
  • livestock and crop contamination, resulting in food borne illnesses for which there is liability and product recalls;

to name a few. Even if the commercial insurance is technically available, it is not available on practical terms because the premiums are so costly and the deductibles are so high the producers and growers cannot afford to pay them and still generate sufficient net income from their farming operations.  Further, if and to the extent carriers are willing to write insurance policies for these unique agricultural risks, they are of little value because the policy exclusions leave uncovered many of the very risks of which the producer is most concerned and for which it needs the policy.

Many large agribusiness companies have addressed their risk management issues through the formation and operation of single parent captive insurance subsidiaries as referenced in a previous post.  However, producers and growers have not embraced captive insurance despite the fact that it may represent a risk management tool tailor-made for the unique risks faced by crop growers as well as for the risks faced by livestock producers.  Most give as their reason for not pursuing captive insurance their belief that implementing and operating a captive insurance company is too costly, too complicated and draws their attention away from their primary focus – growing and selling crops or livestock or operating their related businesses.
Continue Reading Captive Insurance Can Help Agribusinesses Come Rain or Shine (or Other Events Adversely Impacting Industry Participants)

In June, the Department of Agricultural Economics at Kansas State University (“K-State”) released the results of its semi-annual survey of agricultural lenders. K-State began conducting the survey in 2013 to provide farmers insight into agricultural credit conditions from lenders’ perspective. The survey focuses on five main areas: farm loan interest rates, spread over cost of

On November 21, 2014, the United States Court of Appeals for the Seventh Circuit issued a very tough opinion for lenders.  In this case, a borrower signed a $1,100,000.00 Promissory Note dated December 15 and an Agricultural Security Agreement dated December 13. The Security Agreement said that it granted the bank a security interest in

The National Conference of Commissioners on Uniform State Laws (“NCCUSL”) promulgated significant revisions to Article 9 of the Uniform Commercial Code (“UCC”) in 2010 (the “2010 Amendments”).  Most of the states adopted those revisions in 2013 with an effective date of July 1, 2013.  The one-year anniversary of the 2010 Amendments is fast upon us and all lenders, including ag lenders may need to take action.

TRANSITION RULES FOR 2010 AMENDMENTS TO UCC ARTICLE 9

The 2010 Amendments provide transition rules in the new Article 9 Part 8 of the 2010 Amendments, which are intended to allow orderly transition into the 2010 Amendments. If a financing statement was sufficient under the UCC prior to the 2010 Amendments, a secured party will only need to take action to remain perfected in certain cases, which are described below.

1. The General Rule is That The Secured Party Remains Perfected. Section 9-805(b) provides the general rule that the 2010 Amendments do not render ineffective a filed financing statement that perfected a security interest under Article 9 prior to the 2010 Amendments.

a) The Individual Debtor in Alternative A States. If a secured party filed a UCC-1 in an individual’s name prior to the effective date of the 2010 Amendments, the secured party continues to have a perfected security interest against the individual in jurisdictions adopting Alternative A following the 2010 Amendments even if the name on the driver’s license differs from the individual’s name as filed. Such effectiveness would continue until the time the financing statement would have ceased being effective under pre-2010 Amendment Article 9.

b) The Individual Debtor in Alternative B States. If a secured party filed a UCC-1 in an individual’s name prior to the effective date of the 2010 Amendments, the secured party continues to have a perfected security interest against the individual in jurisdictions adopting Alternative B following the 2010 Amendments since use of the “individual name of the debtor” is sufficient under Alternative B as well as under pre-2010 Amendment Article 9. Any name that was sufficient before the effective date will also comply with the new individual name rules in Alternative B states.

c) Corporations, Limited Liability Companies, Partnerships. There are no special rules in the 2010 Amendments that have any effect on the continued effectiveness of financing statements properly filed against debtors that are corporations, limited liability companies, general partnerships or limited partnerships. If a secured party filed a UCC-1 in an entity’s name prior to the effective date of the 2010 Amendments, the secured party continues to have a perfected security interest against the entity B following the 2010 Amendments However, see the section below on Continuation Statements.
Continue Reading 2013 Amendments to UCC Article 9 – Lenders May Need To Take Action