CHS, a leading farm cooperative in the US, has warned crop growers regarding the approaching hurdle in the US agricultural economy. According to Carl Casale, chief executive officer of CHS, net income across the US farms are dropping at a faster rate than money receipts, indicating high expenses associated with agricultural equipment and land.
The US Department of Agriculture expects the total farm income across the US to experience a drop of $54.8 billion in 2016, a third successive fall, owing to the increase in supply. Prices for commodities like corn, soybeans and wheat have recovered in the recent month, but still the US futures are trading close to their "multi-year lows".
The US farm cooperative is intending to reduce its expenses for the next couple of years in order to save its workforce. CHS is looking forward to rescue the agricultural economy without damaging its workforce, as reported by Bloomberg.
Meanwhile, the US cooperative had extended its contract with Australia's leading grain exporter CBH in an effort to widen its business platform into Australia. Recently, the Australia-based grain victor revealed its intention to corporatize CBH, which prompted CHS to make an offer. The American cooperative joins CBH suitors list that includes Port Botany, Industry Funds Management, Queensland Investment Corporation and Port Kembla.
The operating strategy handled by CHS in delivering profit to its member while at the same time remain listed on the American Stock exchange is considered as a footprint for CBH. In February, CHS announced that its members will receive a share in the US$519 million cash distribution in 2016. During the previous four years, the US cooperative has dispersed a cash of US$2.18 billion among its 50,000 members, as reported by The West Australian.
David Bielenberg, chairman of CHS, said that the facility of its members to directly partake in the cash reward contributed to its business success. He added that the cash distribution will motivate farmers to invest more in the soil.
DENVER BUSINESS JOURNAL quoted a report from American Bankers Association (ABA), which said that bank loans for agriculture has increased by 7.9% in 2015 and that banks maintain a cash of $100.3 billion as agricultural loans. The report said that farm banks have gained huge capital from the robust agriculture sector over the past several years.
Bank loans for small and micro farms amounted to $75 billion at the end of 2015. Brittany Kleinpaste, ABA's director of research and economic policy, said that banks will continue to support crop growers amid the poor farm income outlook. He added that farm banks are committed to rescue their farm customers from any turbulence in the market.
CHS expects more hurdles for crop growers across the US as surplus yield depressed prices of agricultural commodities. However, farm banks remain stern in backing up these farm owners.
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