Financing farm products for export requires special considerations by lenders.
It can also be stressful.
"It's a little nerve-racking," said D.J. Wright, vice president of $35 million-asset Farmers and Merchants State Bank, Stanley, Wis., which finances producers of ginseng, a root prized by the Chinese as a medicine.
"You're dealing with an international crop and international buyers," said Mr. Wright. "It's a completely different market than what people are used to."
While ginseng is relatively well known to be an export product, many other farm products may end up overseas without the lender being aware until the borrower is socked with, for instance, a currency fluctuation loss.
Gordon Tanner, a lawyer at the agriculture specialty firm Stoel Rives LLP, Seattle, said more bankers should know whether all or part of a crop will end up overseas when they evaluate farm credits.
U.S. agricultural exports totaled $54.1 billion in fiscal 1995, according to the Federal Reserve Bank of Chicago.
Regarding any product destined for a foreign land, lenders should consider currency fluctuations and their possible impact, Mr. Tanner said, citing the disruptive 1994 Mexican peso devaluation.
Lenders should consider potential fluctuations in loan analyses and perhaps take additional collateral, he said.
Another issue is collections. The Uniform Commercial Code won't cut it for, say, creditors trying to collect from Colombian debtors. A client of Mr. Tanner who sold apples there recently had to hire someone local to collect on a debt.
Larry Hiller, assistant vice president at the Marathon, Wis., branch of $190 million-asset Peoples State Bank, is considering foreign payment problems for the first time with ginseng, a crop he's financed since 1991.
"I did have one customer have a check (from a foreign buyer) that bounced," he said. The collection took 30 days and extended the loan's terms and due date.
"What would you do if you had a customer pay you $50,000 off of your loans and the check bounced and your product's in Hong Kong?" Mr. Hiller asked. "As a lender, I prefer to have some real estate with it," for additional collateral.
In the world of mink, 95% of the U.S. product goes overseas, said Jerry Janz, vice president of $115 million-asset First American Bank, Detroit Lakes, Minn., which finances two large mink producers.
"The single biggest factor that we try to keep abreast of is world production," Mr. Janz said. Overproduction reduced mink prices in the early 1990s, he said. In addition, other nations subsidize mink production, while this country does not.
