MF Global fallout delays U.S. farm seed, land deals
The bankruptcy had an immediate impact on farmers' abilities to hedge their crops at grain exchanges. Many had to liquidate positions or put up additional cash to meet margin calls after their accounts were transferred from MF Global to other brokerages.
Now, the collapse has begun to impact farm decisions that can directly affect output.
In Montana, Marty Klinker, who grows wheat and barley, is missing about $275,000 from his accounts at MF Global. He said the shortfall caused him to delay buying more than $500,000 worth of farm equipment, including a tractor and combine, from manufacturer Case IH.
Klinker didn't know whether he would eventually buy the equipment, which would replace older models on his farm. He said he has to make a decision by the end of the year to take advantage of prices he previously negotiated with the company.
Case is a brand of CNH, a majority-owned subsidiary of Fiat SpA. A Case spokesman did not respond to a request for comment.
"We're right in the middle of year-end equipment decisions," Klinker said.
FARMERS CAUGHT OFF GUARD
MF Global's collapse has not completely halted farm purchases.
Stine Seed, which calls itself the largest independent U.S. seed company, has not seen a slowdown in sales, said Myron Stine, vice president of sales and marketing.
Yet, other agribusiness professionals confirm shockwaves from the bankruptcy have disrupted plans affecting crop production.
Diana Klemme, a broker for Midwest grain elevators and vice president of Grain Service Corp in Atlanta, said one of her clients was holding about $400,000 cash in a MF Global account at the time of its collapse. The client had to delay purchasing some land because the money had been frozen, she said.
Farmers were caught off guard by the disappearance of their money because it was held in segregated accounts considered to be immune from troubles at brokerages. Several farmers said they had felt it was safer to keep cash in the accounts than at local banks.
Farmers worry the cost of doing business could go up permanently due to the increased risk of keeping money in segregated accounts, making it more expensive to produce crops. For Klinker, whose oldest son is entering the family business, that could mean upgrading equipment less frequently than he has in the past.
"It impacts everything," he said.
(Reporting by Tom Polansek)