MetLife’s agri loan book is now growing again after the insurer it issued $400 million less in agricultural loans in 2015 than the $3.6 billion it issued in 2014.
The gains are coming from recapitialisation needs in the US and growing markets in Latin America, according to head of agriculture Barry Bogseth.
MetLife also sees lending opportunities in permanent and annual crops in the US, where it is issuing more loans on fixed rates. While the insurer is more cautious about lending to annual crop farmers, where Bogseth says some land values could fall as much as 18 percent, he says they are finding recapitalisation opportunities there and in the permanent crops space.
“With regards to permanent plantings, … a California pistachio or almond grower today is experiencing lower prices as a result of a disimproving US dollar. At the same time increased levels of production are coming online and drought conditions have not fully gone away.”
“We look to underwrite a long-term sustainable view on almond and pistachio prices that essentially mirror prices seen in today’s market. Drought predictions have been reduced as a result of the improved moisture that we have seen over the last weather cycle. We are also seeing some permanent plantings being pulled out … and that will reduce the overall supply ultimately.”
California makes up between 15 and 25 percent of MetLife’s ag lending portfolio.
The firm has also expanded its footprint in Uruguay, Chile and Peru, through increased investment in the permanent crop sector and demand for US dollars from investors and operators.
Head of real estate and agriculture research Melissa Reagen added growth rates starting from 2 percent in the countries where MetLife operates were much more attractive than in many developed markets.
“They are certainly smaller markets, from a GP or a people consumer base. Still, you can certainly get attractive relative value when you’re lending in those countries; attractive, risk adjusted. Think about some of the structural reforms some of those countries have gone through in the last ten years, and not all of them are as risky as they may be perceived to be if you haven’t done your homework,” she said.