AGF looking to sign deal with insurers
Farm & General
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“Farming went through its own recession for a
number of reasons between 1998 and 2004, but is historically an
extremely resilient marketplace,” he says, sharing the results of
recent discussions with farming clients. “A weak pound has given us
great meat export prices, people still need to eat, and the weather
this season is promising a good return.”
To back this up he predicts that AGF, a group
comprising 15 agricultural equipment finance brokers covering the
length and breadth of the UK, is on target to process similar or
improved levels of business to the £100 million (€111 million) it
reported for its first full year of business in 2008.
Common ground
The group was formed, with all members
included as partners and shareholders, in response to a change in
the agricultural finance market in early 2007. Virtually all
funders in the sector, barring SG Equipment Finance and the
captives of AGCO, Case New Holland, John Deere and Claas had
withdrawn from direct finance sales, says McCarthy, leaving several
manufacturers and dealers looking for finance providers that
understood the sector.
AGF was quick to pool the resources of its
members and fill the breach – but had the banks been right to
leave?
McCarthy answers by quoting a well known
statistic in his marketplace: that only around 7 percent of the
agricultural industry’s net worth is borrowed money.
This, he explains, greatly reduced the impact
of the credit crunch and subsequent bank paralysis on the industry
compared to more credit-driven sectors such as construction or
haulage. Agriculture, he stresses, is a remarkably low risk
area.
At the same time, he says, the credit appetite
of the farm sector is constant, being mainly based on machinery
which is highly specialised and in need of regular replacement –
and thus well suited to finance and leasing.
In addition, he comments, there are ways in
which the global recession has actually aided business. The
slowdown in CEE and Asian markets has seen less demand for
equipment in those regions, leading to a greater availability for
British dealers and importers.
“The banks, however, hit by losses in other
assets such as construction, property, and commercials, have tended
to look at everyone in the same light and tightened things up
across the board,” says McCarthy. “We have repeatedly said: ‘Look
at this as a separate industry and a separate finance market, with
a lower risk customer profile’, but to no avail.”
A bright future?
Looking forward to the rest of 2009,
McCarthy notes that some new equipment prices have risen by as much
as 20 percent recently – a good sign for residual values, if second
hand values manage to keep pace, he says.
As with the rest of the industry, it seems
vendor partnerships are in favour in agriculture, too – in the wake
of agreements with baler maker Big Bale a year ago and Combine
Harvester dealership Kevin Kirby in January, the group is on the
verge of finalising a sales aid venture with a leading milk
equipment manufacturer.
AGF is also looking to expand the range of
services it can arrange for farmers, by further strengthening a
partnership with agricultural insurance specialist Farm &
General.
Fred Crawley
