Annually, De Lage Landen’s Monitor 100 survey results reveal agriculture as its leading equipment asset class by volume. Tom Meredith, president of DLL’s Global Food and Ag Business Unit, discusses the genesis of the unit, its global reach and relationship with parent Rabobank.
The ambition of Rabobank, according to Tom Meredith, president of De Lage Landen’s Global Food and Ag Business Unit, is to be the world’s leading food and agriculture financial institution. Following in the footsteps of its parent, the food and agriculture sectors are a significant focus at De Lage Landen. In fact, annual Monitor 100 survey data regularly shows this market as the company’s leading equipment asset class by volume.
According to Meredith, DLL specifically got into the Ag business in the U.S. in the mid-1990s when it purchased a majority share of Agricredit Acceptance from AGCO Corporation. Since then, DLL and AGCO formed another joint venture to serve AGCO’s captive finance needs, which is separate from the Food and Ag business unit which Meredith leads and provides finance solutions to other vendors and dealers in the Food and Ag equipment industry.
He explains, “The business started in Des Moines, Iowa and has been here for a number of years. We have several employees that have 20, 30 years of experience, so they truly are Ag equipment experts. That’s one of our differentiators. We have people who are focused and dedicated to the industry, and we have expanded to the point of offering the full product suite to manufacturers, dealers and farmers throughout the United States and throughout the world.”
When Meredith assumed his role at DLL in 2010, he had nearly 30 years of experience in equipment finance, including construction and agriculture. His background includes a stint at GE Capital, through its acquisition of Citi Capital.
“I started my career in the equipment finance business with a captive finance company financing forklifts, construction equipment and some Ag equipment, and I’ve worked in the equipment finance business ever since. I’ve held positions in all functions within the business at all levels of a captive, of an independent and of a bank-owned finance company. Those experiences have given me a broad base of knowledge, which gives me a solid foundation for my role at DLL, along with the fact that the culture and guiding principles of DLL match very closely to mine,” said Meredith.
DLL’s collaborative relationship with Rabobank gives Meredith’s business unit advantage in the global space. Because Rabobank has an extensive research arm in the Ag industry, DLL can access that information, which becomes particularly helpful when exploring new markets or new countries, not only from an Ag industry perspective, but from an economic and governmental perspective as well. This research is also available to DLL’s partners, giving them an extensive supply of information to help them manage their businesses. Other benefits DLL garners from its relationship with Rabobank include the ability to offer a broader range of financing products and developing opportunities outside of traditional Ag equipment such as food processing and packaging equipment.
“For instance, we have a sister company in the U.S. that provides input financing, working capital loans and real estate loans to farmers and Ag businesses. We’ve collaborated with them for certain customers where we provide the equipment leasing and they provide other financing, and together we are able to offer a full range of products to that single customer. On a more international basis, Rabobank deals with large, multi-national customers in the food and Ag business and that has provided opportunities for us. We share those customers back and forth, and we work together to make sure we can provide them with any type of financing they need,” Meredith explains.
The global footprint of DLL’s Food and Agriculture business unit includes activity in 14 primary countries, with plans to expand into China, Turkey and India. Earlier this year, DLL partnered with CNH to provide customers in the Russian Federation with competitive retail finance programs, offered under the CNH Capital name. CNH and DLL first established their relationship in Poland in 2007 and then established a standard vendor program agreement in Russia in 2010.
“The Russia operation and the relationship we have with CNH is an example of our tailor-made programs suited for the manufacturer’s needs. We work to develop a program and a relationship that matches the manufacturer’s goals and aspirations. It’s not a cookie cutter approach — it’s looking at what’s necessary based on the specific needs of our partners and executing upon that. We offer standard financing programs governed by traditional program agreements, as well as more structured private label programs and joint ventures. We first determine what it is that the partner is looking for and structure around that,” Meredith points out.
Other examples of such relationships include a finance program in the UK, through which DLL is the exclusive financial provider for the equipment sold by agricultural equipment manufacturer Same Deutz-Fahr Group, operating under the label SDF Financial Services. In addition, DLL has formed a joint venture with Mahindra & Mahindra Financial, a provider of financial services in the rural and semi-urban markets of India, providing exclusive wholesale inventory financing to U.S.-based Mahindra tractor dealers and retail financing to end-user customers for Mahindra tractors, implements and used products. Mahindra Finance USA is Mahindra Finance’s first foray outside of India.
In conducting business on a global scale, Meredith notes, “Unlike the U.S., where business is essentially the same from state to state, once you go international you must deal with the nuances of the local laws, the business environment and government participation as far as the subsidies they offer. The hallmark of our business is that we have local execution at the country level. Just like in the U.S., we have people in every one of the countries where we have operations who know all of those nuances, and they execute and deliver upon the programs and products that we have developed for the vendors.”
Opportunities and Challenges
With the increasing demand for food from an ever-growing world population, it would seem that long-term opportunities in the space are abundant. According to Rabobank’s website, experts expect that global food production will have to be doubled by around 2050. But the reality isn’t that simple. “There is a finite amount of arable land in the world, so finding opportunities is more complicated than the need for food. Significant considerations include production capabilities, political influences, erratic weather and the need to improve production efficiency with the limited land and water that we face around the world,” Meredith says. “Manufacturers have to continue to evolve their technology to make equipment more efficient. These factors make our challenges more interesting because we continually have to look at what is going on in the market and how we can serve these changing needs as we move forward.”
Meredith sees additional growth for his unit thanks to new requirements for renewable sources of energy, which has created opportunities in Ag-related biofuels. Moreover, with Rabobank’s assistance, his group is looking into financing nontraditional types of food-related equipment such as food processing equipment, bottling equipment and even wine barrels.
“There is tremendous opportunity in the Food and Ag business, and we are looking at several different new and exciting ways to serve the industry. While the Ag side will always be our mainstay and primary focus, we do see the need to diversify and look at other options as well. We can continue to grow this business beyond the Ag sector,” Meredith adds.
Regarding challenges in the space, Meredith cites the global economy and increasing competition. He notes, “Because this is a reasonably attractive sector, it has led to more of our competitors to have an interest in it, and that has created margin compression. As a result, we are continually looking for ways to increase our internal efficiencies, automate our processes, provide new eCommerce tools for our partners, manage our costs and evaluate our market strategies. We always try to foresee what changes are coming down the pike and determine how to react to them and stay ahead of the curve.”
With that in mind, Meredith is confident that DLL’s unique industry specialization in the food and Ag space gives his group a competitive edge. “We manage global relationships through the business unit, and we have the local country execution to provide global equipment manufacturers with a real value proposition when it comes to offering financing options to their dealers and end-user customers around the world. With us, when they want to expand globally, they have the ability to deal with one person or a small group of people on an ongoing basis to provide and coordinate solutions anywhere in the world where we have a presence.”
Lisa M. Goetz is editor of the Monitor.
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