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Financing the fields: Ag lender reflects on U.S. vs. Europe

By   /   Wednesday, November 26th, 2008  /   Comments Off on Financing the fields: Ag lender reflects on U.S. vs. Europe

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During the past year, Jetze Kempenaar, Rabobank’s regional manager for agriculture in the Tri-Counties, has seen the financial world turned upside down.

But the world of farming is still pretty well grounded, said Kempenaar, who works for one of two AAA-rated banks in the world.

“People have to keep eating their strawberries and broccoli,” said Kempenaar, a Netherlands native and 19-year veteran of the ups and downs of agribusiness. “Rabobank has worked with farmers for 110 years.”

Kempenaar joined Netherlands-based Rabobank in the late 1980s and arrived in Carpinteria a little more than a year ago. He’s one of a handful of “imports” working for Rabobank in California; the Dutch financial giant gained a big footprint in the Tri-Counties with its acquisition of Mid-State Bank & Trust in 2007.

Despite the financial markets’ unprecedented turmoil, Rabobank has used the strength of its balance sheet to continue providing loans, treasury service, deposits and other services. The agribusiness market has remained consistent, compared to residential and retail lending, although Kempenaar said “the price for money has gone up.”

Along with the with the Tri-Counties’ world-class produce and citrus operations, Kempenaar said one underappreciated part of agriculture is the cut flower industry, where a statewide workforce of 7,000 produced a crop worth an estimated $96 million in revenue in 2007.

“Many of the bulbs come from Europe for tulips and lilies,” he said, adding that while the number of flower growers has declined, revenue growth among the surviors has been strong.

Beyond tulips and daisies, part of the region’s agricultural strength comes from its diversity, which Kempenaar said is something to marvel about. Rabobank recently hired a relationship manager just to work with the wineries in Paso Robles, where some 200 wine-related businesses operate.

Despite persistent drought, wildfires and encroaching urban development of farmland, Kempenaar said he believes agriculture will play a significant role in the economy of the Tri-Counties. “You have good cycles and you have bad cycles, but farmers are in it for the long term.”

Question: Can you give a couple of examples of how the flower business in the U.S. is similar to, or different from, Europe?

Answer: One similarity is that flower growers are very dedicated business owners. Both in Europe and the U.S., we’re talking about a progressive industry with modern techniques and sustainable production methods. In Europe (mainly the Netherlands) there’s more automation because of higher labor costs. The biggest difference is the marketing. In the U.S. growers sell all of their product directly to wholesalers, supermarkets, etc.

This means the growers over here have their own sales force and grow a wider variety of flowers to be able to supply their customers with a full range of flowers or bouquets. In the Netherlands a big portion goes to the auction. A lot of growers only grow a few varieties.

Q: What do you think about the growing competition between the U.S. and Mexico in the avocado business?

A: The avocado used to be an exotic fruit that was primarily eaten by the Hispanic population. Today, however, avocados have become part of the mainstream U.S. diet.

The fact that the Hispanic population will grow significantly in the next few decades will only increase U.S. avocado consumption.

With growing consumption levels, imports have played an increasing role in fulfilling domestic demand; because Mexico’s avocado-growing season ends as the U.S. season starts, demand for the fruit is created year round. That means the U.S. views Mexico as a trading partner in avocados rather than competition.

Q: Do you think that a new round of trade talks will help global agriculture?

A: I think it is going to be some time before we see anything happen regarding Doha (the latest round of global trade talks) and we may see an increased focus on bilateral trade agreements as a result. This is obviously positive for those that have them but could be difficult for those that don’t.

Q: What big trends to you see for global agriculture in the next few years?

A: I see a softening of demand as a result of the economic crisis – long-term demand fundamentals are there, but how long is it going to be before we see increased consumer confidence? Low stock levels mean that when demand does pick up there is going to be upward pressure on commodity prices.

Also, there is the increased volatility of commodity prices and the recent appreciation of the U.S. dollar.

Q: What’s your favorite new fun thing to do since moving to the U.S., and what do you miss most about not being in Europe?

A: I started to barbecue a lot. The weather is always good enough to barbecue! I also started coaching my son’s soccer team in Carpinteria, and that’s a lot of fun too. Of course we miss our family and friends.

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