February 15, 2024


Agriculture Industry Hit by High Interest Rates

Jamilex Gotay, editorial associate

The agricultural economy is expected to significantly expand by 2024. However, potential obstacles such as increasing production costs from inflation and high interest rates, fluctuating market prices, climate change and global crises like the Russian-Ukraine conflict may hinder this growth.

According to Statista, gross production value in the agriculture market is projected to amount to $303.70 billion in 2024. “An annual growth rate of 3.07% is expected (CAGR 2024-2028), resulting in gross production value of $342.70 billion in 2028,” the report reads. “The import value in the agriculture market is projected to amount to $84.8 billion in 2024. The export value in the agriculture market is projected to amount to $115.6 billion in 2024. An annual growth rate of 7.33% is expected (CAGR 2024–2028).”

In 2022/23, production increased for all major grains and oilseeds in Russia, according to a USDA report. “Both barley and wheat are primarily winter crops that had been negatively affected by an ice crusting event in 2021/22 but rebounded with ideal weather conditions in 2022/23,” the report reads. “Wheat production has nearly doubled from a decade ago.”

Yes, but: Despite market prices that could reach record highs, the cattle industry is unlikely to expand herd numbers for the next year or two. Due to high feed costs, lingering drought and a limited labor supply, Americans are forecast to consume nearly 3% less beef per person this year than in 2023, according to a Successful Farming article.

Beef industry analyst CattleFax said herd expansion would be slow to appear and cattle slaughter could shrink until 2026. “Over a third of the cow herd was affected by drought in 2023, causing limited heifer retention and more liquidation in some regions,” said Kevin Good, CattleFax vice president of market analysis. “This will limit growth to the cow herd near-term.”

Higher beef prices may soften consumer demand at the grocery store, but shoppers are willing to pay for high-quality meat, said Good. “Though inflation has moderated, consumer debt and interest rates, cheaper alternative proteins and economic uncertainty may limit spending and impact purchasing decisions.”

The drop in cattle prices also poses a challenge for farmers as many are struggling financially. “Farmer incomes aren't as good right now,” said Chad Hart, Ph.D., associate professor of economics at Iowa State University (Ames, IA). “They've slowed down that economic drive and it has led to an increase in the need for ranchers to either obtain credit again through their vendors or through their banks.”

Net farm income, a broad measure of profits, is forecast at $116.1 billion in calendar year 2024, a decrease of $39.8 billion (25.5%) relative to 2023 in nominal (not adjusted for inflation) dollars, according to USDA. “This follows a forecast decrease of $29.7 billion (16.0%) from 2022 to $155.9 billion in 2023,” the report reads.

Agricultural producers have felt the pain of rising production costs due to inflation and higher interest rates due to the Fed’s monetary policy.

  • The federal funds rate, unchanged since last July, sits between 5.25% and 5.5%.
  • At its December meeting, the Fed signaled the potential for an equivalent of three rate cuts of 25 basis points each in 2024.
  • Meanwhile, the CME FedWatch Tool, a gauge of the market, projects six cuts in 2024, each 25 basis points.

Two factors give the Fed reason to keep interest rates higher for longer—a tight labor market and strong wages. The unemployment rate stands at 3.7%, marking 23 consecutive months below 4%. However, the Fed does expect unemployment to be just above 4% through 2026.

In addition to higher unemployment and lower interest rates in 2024, the Fed projected at its December meeting that real GDP growth is expected to slow sharply in 2024. Real GDP will begin to slowly increase through 2026. “In this environment, producers need a working capital management plan, as well as a clear understanding of their operation’s debt commitment and tolerance levels,” reads an article by Farm Credit Services of America.

Many farmers struggle with cash flow as it is, but high interest rates make it more challenging to stabilize. “Many farmers are not as financially savvy or don’t have the financial resources in order to pay that additional $50,000 in interest,” said Kevin Stinner, CCE, CCRA, credit manager at J.R. Simplot Company (Loveland, CO). “There's not a tremendous amount of long-term debt out there, but there is a lot of short-term debt. So, they're paying more for those leases.”

But some experts are optimistic about the overall growth of the economy. “The agricultural economy overall is still in fairly decent shape, especially on the crop side when we had those record exports,” Hart said. “It's just not quite as stellar as it was a year or two ago and we've seen a lot stronger downturns in the past.”

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Credit Scoring in B2B Trade: Explained

Kendall Payton, editorial associate

Credit scores reflect how likely or unlikely a person is to pay any loaned amount of money back. Three digits, typically between the range of 300 to 850, can decide your fate in a multitude of purchases from vehicles to mortgages or student loans, for example. These scores are used by companies to determine the interest rates and credit limits you should receive.

But credit scoring is not limited to the consumer sector only. In the B2B environment, credit managers can also use scores to help gauge how much credit to extend and make credit decisions. Most professionals review a business’ credit score by running a credit report to get their rating. The report shows a clear picture of the business’ ability to pay their invoices based on payment history or public records—and other financial data such as credit limits over multiple years, collections activities and annual sales.

Consumer and business credit scores serve the same purpose, however, there is a difference in how each one uses credit scoring models. B2B relationships are often more complicated than B2C, so B2B credit managers must consider more than a credit score when making decisions.

Internal vs. External Credit Scoring

Most credit professionals review the credit score calculated by an external or third-party agency, such as NACM’s National Trade Credit Report—but others have an internal credit scoring system. Internal credit scoring models were first used by banks and credit card companies because of high volume in low-amount transactions in consumer credit. However, in commercial credit underwriting, the purpose of scoring models is to help build an overall view of a business and become a baseline for making credit decisions. Some businesses may not be big enough or have enough trade lines that can be reported into third-party tools to get an accurate rating in their credit score. In those cases, credit managers can include more credit reference checks and use different sources to get to a credit decision.

Yes, but: Like any other scoring system, there are potential flaws. A business’ credit score is only one piece of the puzzle. Some credit managers do not consider credit scoring at all—but others may rely too heavily on it. Finding the perfect balance in how much a credit score contributes to your decision in extending credit is an important skill to navigate with.

By the numbers: A recent eNews poll revealed that 33% of credit managers say credit scores contribute to nearly 75% of their credit decision. Conversely, 20% of credit managers do not use credit scoring at all.

Nate Yagle, vice president of credit at Premier Companies (Seymour, IN), said he approaches each line of business differently when it comes to credit scoring. For example, “In our heat division, we view that as a very transactional type of account, so we rarely use internal credit scoring systems," Yagle said. "Instead, we use external bureaus for those credit decisions. For the agronomy side of business, we’ll look at bureau scores—but many trade lines are not reported to the bureaus when it comes to agriculture, so it makes it hard to have an accurate score for the farm itself and causes us to rely on additional metrics and resources to make our decision.”

Jessica Holt, director of credit and collections at Soligent Distribution (Dallas, TX), considers customer credit scores as 25% of her entire credit decision. “Several factors are taken into consideration, including credit reports, credit references, personal guarantees and financial statements, and we also consider sales opportunities and relationships,” Holt added. “We always review tax liens and any UCC filings to ensure we are aware of secured vendors and any impact that might bring to our decision instead of credit scores by themselves.”

Credit scoring strategies change depending on risk categories, industry, economy and time of year. “Credit scoring can be based off of trends in terms of placing larger orders toward the end of the year, beginning of the year or consistently, so those patterns are crucial,” said David Escobar, credit manager at Evapco, Inc. (Taneytown, MD). “Our credit decisions are weighted by 25%-50% of the credit score. We use credit scoring for both new and existing customers. With newer customers, we’re going to take a more thorough approach. With existing customers, they’ve already established a pattern so we can already see the payment history.”

Kristin Caswell, CBF, CICP, director of credit at Dakota Supply Group (Plymouth, MN), uses credit scores to make up 75% or more of her credit decisions. She said her department has two different scorecards: one for new customers and the other for existing ones. For new customers, Caswell considers factors like how long a customer has been in business, their response to bank and trade information and whether they signed a personal guarantee with their credit application. For existing customers, Caswell said she adds more weight to their relationship and payment habits, sales in the previous year and any losses with the customer.

“If there’s more than one person setting credit limits, it’s hard to be consistent across each customer,” Caswell said. “So, if a neutral and consistent credit limit setting is important to you, the credit scoring helps guide you down that path. There are situations where the scoring model doesn’t fit our particular customer or there are exceptions that need to be made or different information to be considered—and that’s where you make the exception outside of the scoring. I like credit scoring for the consistency factor.”

NACM’s National Trade Credit Report service provides a Portfolio Risk Analysis (PRA) tool, which is a platform consistently updated with new and refreshed data daily to help credit professionals understand changes within their customer portfolio. “It’s a way for us to upload members’ data files into our system and import that data back in a raw form,” said Gina Calabrese Sylvester, CMP, CGA, executive vice president of NACM Tampa (Tampa, FL). “You can import credit scores into your internal system and come out with an aggregated score to use or look at the number of trade lines that are on a report with some of your competitors.”

As a fully automated tool, you can also choose the frequency of use because it is subscription-based. The PRA tool provides credit managers with a better view of which customers are high-risk.

The bottom line: When in doubt, it is always a good idea to refer to the 5 Cs of credit to evaluate the creditworthiness of any customer. When taking credit scores into consideration, credit managers should know that scores based on up to year-old information are not a full reflection of the current and present developments of a customer’s creditworthiness. Combining credit reports with additional credit assessments is a great way to make a well-rounded credit decision.

If you’re interested in learning more about predictive scoring or the subscription models for the PRA, contact your participating NACM affiliate.

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Dedicated Learners Forge Strong Credit Leadership

Jamilex Gotay, editorial associate

In the realm of credit management, staying sharp goes beyond mere preference—it's an indispensable asset. It makes for increased efficiency and productivity in the workplace, which helps in the ever-evolving nature of the credit industry. Through NACM's six-level Professional Certification Program, credit professionals are not only keeping their mind agile, but they're also growing their credit knowledge to navigate the intricate layers of B2B credit. Here are just a few ways the program has influenced and enforced strong credit leadership:

Harness Knowledge and Skills

Credit professionals are first and foremost risk mitigators. They must make credit decisions based on risk factors and must be knowledgeable about business and credit law to minimize risk. By earning the Credit Business Fellow (CBF) designation, credit professionals display their competence in business and credit law and establish their credibility in the credit profession.

Heather Spencer, CBF, senior district financial manager at The Sherwin-Williams Company (Lenexa, KS) recently earned her CBF designation as part of continuing her credit education. “Although I've been in credit for some time, I gained a sense of accomplishment and a feeling of as if I always knew what I was doing, especially since my college degree is not in finance or accounting at all,” she said.

Adapt to Industry Trends

Credit managers must demonstrate adaptability by adjusting their strategies and consistently staying informed, ensuring financial stability in B2B credit management. Cherie Salvadras, CBF, accounting clerk at Entergy, (New Orleans, LA), who just earned her Credit Business Fellow (CBF) designation, understands that it's important to continue learning so that she can adapt to the ever-changing times and keep up with the younger generation coming into the workforce. “I'm just thankful for the opportunity to be able to do this and in the near future, I hope to continue to move forward to the next step.”

Salvadras said the CBF was her next step in her credit education journey, or adventure, as she likes to call it. Not only is Salvadras proud of her accomplishment, but she's also rediscovered her passion for learning. “I've learned that you're never too old to learn new things,” Salvadras said. “I'm happy to know that I still have the drive and the ambition to keep learning instead of staying stagnant in my daily routine, especially since credit is changing every day.”

Increased Confidence

Confidence plays a key role in the success of a credit professional. You must be confident in your qualifications, experience and expertise to perform to the best of your ability. Misty Menashe, CBA, credit supervisor at LaCrosse Footwear, Inc. (Portland, OR) recently earned her Credit Business Associate (CBA) designation to better introduce herself to her internal teams. “I was promoted to a supervisor role when all our departments were working from home and my interactions with our sales team, customer service team and other managers were limited to emails and Teams meetings,” she said. “The designation in my signature shows that I'm an active learner, engaged in my profession and have expertise in the subject.”

After receiving her CBA, Menashe has more confidence in her role and ability to make sound decisions. “I'm able to take strategic actions according to department policy and procedures when collecting receivables or extending trade credit. I'm also proud of being a positive role model to my teens encouraging them to never stop learning and it was also fun swapping studying techniques.”

💡Study Tips

Make sure that you engage in proper time management. "Carve out a little bit of time each day to study a small portion because trying to obtain all the course information in a day or two before the test will not help you remember it," said Salvadras. “You need to give yourself the time to study to fully learn and understand the concepts.”

By actively engaging with the course material through quizzes and reviews, you can enhance retention and understanding. “Try to answer questions closed book, check your answers and focus on the concepts you struggle with most,” Menashe said. “Repeat until you are averaging 80% or higher per quiz and do not hesitate to replay the Credit Learning Center (CLC) CBA exam review course. I listened to it three times!”

Take learning one step at a time. It’s all about the journey, not racing to the finish line. “Focus on completing each chapter and quiz and don't let the final exam overwhelm you,” Spencer explained. “Also, if I'm doing something else with my hands, I retain the information better than if I just sat and listened to it. So, when I was listening to the lectures, I would build a Lego so that I could listen better.”

For more information about each designation within NACM's Professional Certification Program, visit our website.

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Arbitration of Construction Disputes: Benefits and Drawbacks

Kendall Payton, editorial associate

Arbitration is an alternative dispute-resolution process that uses a neutral third party to make a binding decision. Disputes are inevitable in any business or partnership, but most do not expect future litigation against the other party. However, in the construction industry, the average value of disputes in North America increased by 42% in 2023, according to a report from Arcadis. And 70% of construction projects end up with claims.

Increased caseloads have created a backlog, delaying federal and state court dates and making it much harder for any party pursuing a claim to be heard in court. Awaiting trial could take years—especially in a post-pandemic world. While waiting for long periods of time, the party can lose money on the claim from lost operating funds, loss of use of money, costs from legal fees, and inflation. Construction projects are ending up in litigation at higher rates than ever before.

Alternative dispute resolutions (ADR), or external dispute resolutions have continued to grow in response to the difficulties of taking disputes to court. Arbitration of any construction dispute has become popular among owners, subcontractors or contractors for less costly methods of pursuing their claim or settling a dispute. The American Arbitration Association (AAA) has administered and resolved 54,226 cases this year between Jan. 1 to Feb. 5, which reflects turning away from judicial systems and favor in arbitration. “All parties in favor of arbitration to a construction contract should be aware that arbitration is an available alternative to traditional litigation of claims,” said Christopher Ng, managing partner at Gibbs Giden Locher Turner Senet & Wittbrodt LLP (Los Angeles, CA). “But at the same time, arbitration isn’t always the most ideal solution to all claim situations. A party may desire to litigate rather than arbitrate certain disputes.”

Unlike a court or jury trial, arbitration can consist of documentation only, but if both parties want to speak their arguments, attorneys must be present. So, before you decide to resolve your claim or dispute through arbitration, read to understand both its advantages and disadvantages:


Impartiality. Both parties involved in the dispute can pick an arbitrator together ensuring confidence of unbiased and impartial judgement. Also, many arbitrators in construction claims are typically retired lawyers or judges who have expertise in the field of law that relates to your case. “A lawyer who has spent their career in the construction industry and has a basis of knowledge that is broader than a judge is very beneficial,” said Michael Murray, Esq., associate attorney at Lanak & Hanna, P.C. (Orange, CA). “It’s beneficial for you to the extent of having someone who’s knowledgeable in the area of law that encompasses your case.”

Timeliness. Arbitration cases are likely to be resolved in a shorter amount of time because legal rules of evidence and procedures do not apply to arbitration. This means both parties can save months, if not years on hearings. “If you’re engaged in the building of a large-scale or industrial complex, have to get it done in a certain time frame and you run into a problem, arbitration has the advantage of speed,” said Emory Potter, Esq., partner at Hays & Potter, LLP (Peachtree Corners, GA). “Speed is a main factor in arbitration. Crowded court calendars prevent most construction disputes from being heard until several years after the suit is filed mainly for disputes that require longer trials, like those involved in large, complex projects.”

Efficiency. Time saved is money earned. Arbitration can provide quick and inexpensive means to resolve construction disputes. It eliminates many of the prerequisites to a lawsuit, such as discovery and pleadings, which are costly to all parties in terms of both time and money, explained Ng. “Unlike litigation, arbitration doesn’t require pleadings, legal memoranda, or other costly trappings of a formal lawsuit,” Ng said. “Most of the time, attorneys and expert witnesses charge hourly or daily rates during trials that are way higher than their rates for trial preparations. But arbitration hearings are usually scheduled with the needs of both parties and the arbitrator in mind so that everyone’s daily professional lives can continue while the arbitration hearings are happening.”

Privacy. Trials are usually very public, but arbitration comes to a private resolution. Information in an arbitration dispute can be kept confidential and is beneficial for more well-known or public figures and clients in business disputes. All arguments, statements and evidence are kept private.


Contract technicalities. One of the disadvantages to arbitration is some contractual preconditions. For example, a construction contract may require that the dispute be submitted to the architect before seeking arbitration. “The contractor will most likely be reluctant to do so if it believes that a favorable decision will not be received from the architect, who may be slow to act,” said Ng. “If the contractor proceeds to invoke arbitration, the owner may point to the contractor’s failure to submit the dispute to the architect as a reason why arbitration should not go forward.”

Cost. Most costs are determined by the amount of money sought in an arbitration dispute. High-quality arbitrators can demand loaded fees that wouldn’t necessarily apply in court. Also, contractors must pay the arbitrator’s fee in full. “As the amount of the controversy increases, the amount you pay the company increases, and the more money in the dispute, the more the arbitrator charges you for it versus one filing fee in a court system,” said Potter. “I think it can be more hurtful than helpful to credit professionals in construction because extra fees add up to hundreds of thousands and you don’t know for sure if you’ll collect.”

Unpredictability. One of the biggest drawbacks to arbitration is that arbitrators are not required to follow every word of the law—and arbitration awards are not reviewable by courts for errors of fact versus law. “If the parties by contract choose arbitration, then the grounds for appeal will be extremely limited,” said Ng. “It’s also not required to have participation of all parties needed to fully resolve a particular dispute. Some third parties will not have agreed to arbitration in a contract and, therefore, cannot ordinarily be compelled to participate. Another reason for choosing the court system over arbitration is the desire to defuse the opponent’s equitable arguments, which may be more appealing to a panel of arbitrators than to an experienced trial judge.”

To connect with experts in the construction industry, visit NACM’s Secured Transaction Services (STS) website, or email Chris Ring at This email address is being protected from spambots. You need JavaScript enabled to view it..

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