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An Optimistic Look Ahead for Food and Agriculture Leasing

Date: Jan 16, 2014 @ 07:00 AM
Filed Under: Food & Agriculture

Equipment Finance Advisor recently spent time with Tom Meredith, President of the Global Food and Ag Business Unit at De Lage Landen. In spite of some reports that investment in agricultural equipment will pull back in the coming months, Meredith looks to other critical factors and offers an optimistic outlook for this sector.

Equipment Finance Advisor: Please provide an overview as to where the food and agriculture leasing business fits within De Lage Landen (DLL) and its parent company, Rabobank.

Tom Meredith: De Lage Landen has a long tradition in agriculture equipment finance — as the company was founded to meet a growing demand for more sophisticated financial services in this sector nearly 45 years ago. In North America, DLL operates under the Agricredit brand. This division has its roots in the former Massey Fergusson Credit Corporation.

DLL’s parent company, Rabobank, is one of the largest F&A banks in the world which further strengthens our commitment to this area of the business. DLL is also fortunate to receive exceptional support through this relationship. For example, Rabobank provides access to leading research produced by a team of 85 analysts across the globe in a group called Food and Ag Research (FAR). The research covers specific industry trends (Farm Inputs, Animal Protein, Grains and Oilseed, Dairy, Beverages, Cotton and Sugar, Value Add Processing) and country profiles. This information deepens our understanding of the marketplace through data that can then be shared with our customers.
Equipment Finance Advisor: What type of results are you experiencing at DLL?

Photo of Tom Meredith - Food & Ag Global Business Unit President - De Lage Landen

Meredith: While the agriculture segment of the leasing industry recently saw declines in quarter-to-quarter and year-over-year performance, DLL has obtained double digit growth in this segment during the past year. This success is the result of a combination of key differentiating characteristics and our unique brand personality.

Equipment Finance Advisor: Can you say more about those key differentiating characteristics and Agricredit’s brand personality?

Meredith: First, DLL’s partnership philosophy is an important driver. We offer innovative solutions to meet the specific needs of our customers. In some instances we offer financing using our own brand, but we also co-brand and use private label options. With private label agreements, dealers enhance their brands by adding financial services to the scope of their offerings and having stronger oversight of their customer base. Several of our partners realize great value from the ability to upgrade or trade existing equipment on a regular basis through this arrangement.

DLL also has partnerships with vendors where the financial results and investments are shared via joint venture agreements. We work in close collaboration with equipment manufacturers to optimize their distribution networks. Together, we discuss the needs and strength of the dealer network, the credit limit guidelines, the possibility to relocate specific units, and create  financing plans that will be offered to the vendor’s dealers and end users. The key aim of all these activities is to help the vendors realize incremental sales.

Second, our industry specialization among select target markets ensures that our solutions truly address the needs of our customers. DLL has 250 members in North America solely dedicated to the company’s F&A business — currently offering solutions in three main markets (Hobby farming, Production farming and Golf & Turf). The segmentation within each market is of critical importance too. The needs of a dairy farm investing in milking robots are not the same as the grain farmer who is upgrading their combine harvester.

Additionally, the dealers and customers serviced in each segment can be quite diverse. For example, DLL conducts business with several independent family owned dealers at the same time as it supports some of the world’s largest dealer organizations. On the end user side, DLL supports transactions in the $10,000 range all the way to several million dollars. DLL has consistently offered a lot of flexibility and is currently exploring some innovative arrangements where equipment ownership will be replaced by a full service solution offered by the equipment manufacturer, the equipment dealer, and by DLL.

The third differentiator is DLL’s comprehensive product offerings. We have grown the inventory finance portion of our business substantially in the past few years as this is an important tool for equipment manufacturers. DLL provides extensive inventory finance credit lines to allow the dealers to benefit from early payment discounts made available by the manufactures. With our industry expertise we understand the dealer’s requirements and are able to support them with a variety of offers such as the new equipment financing, trade in equipment financing, and of course our tie to our retail finance offers. We also work with our vendor partners to create new equipment financing to allow for improved cash flow and equipment inventory management with their dealer networks.

DLL works with equipment dealers to create flexible options for end users. Currently, dealers can obtain credit approvals in a few minutes and DLL continues to invest in new processes and decision strategies to further simplify the amount of information needed. For end users who may be interested in further flexibility regarding equipment usage, we provide competitive lease offers along with our traditional effective loan products.

Equipment Finance Advisor: If you could point to one attribute, that sets DLL apart—what would it be?

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