Will You Survive 2009?
13 January 2009 Some of you won’t be doing business next year. That’s the sad reality of the current worldwide fiasco that the mainstream media salaciously refers to as the global credit crisis. Without steady streams of credit for operating expenses, many growers and distributors won’t be able to afford crop protection on par with last year.
Some of you are starting to get worried. According to a Farm Chemicals International online poll, 20% of respondents reported that their business will not survive without more liquidity from credit markets. That means one out of every five of your colleagues, competitors, customers or supply chain businesses could disappear.
Additionally, 30% of respondents said they are being forced to rethink their business operations; 16% said they can find the money they need, and 38% said they are conducting business as usual.
What does this mean? For one, fewer of you will be reading this column next year. Some have already fallen. And in an unfortunate tribute to the multinational banking industry, the agrochemical sector will continue to consolidate at a fairly brisk pace as smaller companies fail to generate enough cashflow to cover operating costs in the absence of credit.
How To Survive
For those of you who have cash reserves, think acquisition. As smaller companies buckle under the weight of excess inventory and less demand in the first half of the year, larger ones can find deals on assets that can make them stronger when demand picks up in late 2009 and 2010.
Second, don’t let your supply chain fail. Now is the time to renegotiate contracts and, if necessary, prop up your most crucial suppliers so you can rely on them when growers have more confidence in crop prices.
Finally, extend longer lines of credit to your best clients, whether they are manufacturers, growers or distributors. You’ll need them when the money starts to flow again, and longer lines of credit will imbue your clients with confidence about their respective businesses and the industry as a whole. That confidence is contagious, and right now, it’s even harder to find than a line of credit.
How are the capital markets affecting your clients and your business? Send your stories to Editor David Frabotta at [email protected].
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