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In this case the loan is to build barns, not buy more land. And the barns are specifically for raising chickens. If the contracts or the poultry processing in t
by mfoy_ 9y ago
In this case the loan is to build barns, not buy more land. And the barns are specifically for raising chickens. If the contracts or the poultry processing in that area fall through then I don't think the underlying assets would be worth their cost-- leaving the farmers high and dry.
- deleted 9y ago[deleted]
- bluGill 9y agoTrue, but the bank won't be giving those loans if they think the contracts will fall through. Even if the contracts fall through, chicken demand is a known quantity. The farmer has opportunity to find someone else to buy his chickens.
- kgwgk 9y agoYes, because banks never give loans to people who is later unable to pay back. And chicken prices can only go up, like house prices.
- austenallred 9y agoWell in this case the assets will be chickens and barns. Certainly there's risk, but the likelihood that either chickens or barns rapidly become worthless is quite small. Unlike the housing crisis, they don't need the prices to continually go up. They just need them to not fall through some floor.