Faegre Drinker’s 2021 Food & Agribusiness National Conference assembled speakers from global, market-leading companies to discuss major issues and trends of note from across market segments and product categories. In the latest in a series of alerts recapping the event, we’ll take a look at key takeaways from panel discussions on topics related to the agribusiness industry. Read our previous alert for insights from panel discussions on food manufacturing, processing and distribution.
For lenders and borrowers, the pandemic has placed risk management practices under a microscope.
The pandemic has affected global markets, balance sheets and financing in unprecedented and unexpected ways. In a session entitled, “Lessons Learned About Finance & Restructuring From COVID-19,” a panel of industry leaders discussed how food and agribusiness companies adapted to the challenges and volatility of COVID-19, the ways in which both financial institutions and government lending helped the industry navigate significant changes, and what lenders and borrowers should take away from the challenges and industry resilience displayed throughout the pandemic.
In particular, panelists identified the following trends:
- Despite volatility, borrowers have had access to capital. Panelists credited financial institutions for helping food and agribusiness companies manage the liquidity constraints during the pandemic, particularly in its early phases. They noted that lenders were patient – but consistent in their expectation that borrowers would work through challenges and plan for the future. Panelists also pointed to the government programs – including the Paycheck Protection Program, Economic Injury Disaster Loans, Payroll Tax Deferral Program, USDA Food Purchase Programs, and Employee Retention Credits – as key parts of an economy-wide collaboration that provided companies the flexibility needed to meet the challenges of COVID-19.
- Going forward, risk management is key. COVID-19 is not over, and risk management plans must account for the challenges of the ongoing pandemic, including labor shortages, evolving work environments, inflation, commodity prices and supply chain concerns. Panelists stressed the need for risk management plans to be dynamic and consider a broader range of risk than previously contemplated to account for challenges to business continuity plans. In the long term, this kind of planning will make businesses more flexible in responding to adversity. In the near term, a robust risk management plan will make companies more attractive in the eyes of lenders. Expect banks to continue to scrutinize risk management plans of any prospective borrower.
Now is the time for agribusiness companies to get acquainted with environmental justice priorities.
The Biden administration and the Environmental Protection Agency (EPA) have pledged to set policy and enforcement priorities through the lens of environmental justice. According to the EPA, environmental justice is “the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income, with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies.” In a discussion entitled “Environmental Justice and Agriculture: Understanding Regulatory and Enforcement Priorities,” a panel of industry and regulatory leaders examined environmental justice issues and how they expect them to impact the agricultural sector in the years ahead.
While many environmental justice initiatives are still in their infancy, companies should take time to understand this new regulatory and enforcement regime, determine the degree to which they will be impacted and make use of government resources to plan next steps. Specific action items include:
- Determine if you are in an “overburdened community.” As laid out in an April 30, 2021 EPA memo, the agency will focus on enforcing violations of major environmental statutes in “communities overburdened by pollution.” Companies operating in those communities should prepare for heightened inspections and enforcement and greater permitting scrutiny.
- Use EJ Screen. Developed by the EPA, EJ Screen is the leading tool to identify potential EJ areas of concern. This publicly available mapping and screening tool provides environmental and demographic reports for communities based on nationally consistent data. Companies can use EJ Screen to determine if they may be operating in a community with EJ concerns – and proactively prepare for discussions with regulatory agencies or permitting authorities.
- Keep an eye out for more guidance. Regulated communities can expect that EJ practices will become more defined and potentially more rigorous as more guidance is released. Specifically, the panel expects EJ efforts to focus on mitigation projects and effective and meaningful community outreach by regulated entities.
The role of scientific standards in agricultural civil litigation is diminishing – increasing risk for companies.
New technology is changing the face of food production, from how it is grown, produced, packaged and sold, providing both opportunities and challenges. In a discussion entitled “Legal Trends and Issues in Agricultural Product Litigation and Regulation,” a panel of litigation leaders pointed to recent verdicts that illustrate challenging trends in ag products litigation.
The panelists noted the following litigation trends for agricultural products companies to be mindful of:
- Erosion of the causation requirement. Causation is a foundational element to all mass tort claims. Panelists noted adverse decisions in which there were significant questions about whether causation principles were properly applied and addressed. The shift away from this well-established legal theory could expose agriculture companies to significant legal risks.
- Tension between transparency and IP protection. In agriculture products litigation, we have observed a rise in plaintiffs’ lawyers asserting that companies, in trying to protect their IP, impeded or prevented scientific inquiry into a new or existing product. This places companies in a challenging place as they struggle to meet demands for transparency and the need to protect the value of their innovations. While this is a complex issue, panelists noted that there may be value in clarifying all of the steps the EPA and other agencies take when assessing the risk of a new product so that judges and juries understand the considerable scrutiny new ag chemicals face before entering the marketplace.
As advisers to many of the world’s leading food and agribusiness companies since 1912, Faegre Drinker’s food and agribusiness industry team has the scientific, economic and regulatory knowledge to address the full range of clients’ domestic and international business needs. Our experience working with core associations on industry issues means we have our finger on the pulse of key topics impacting your business. Whether your products are based on the farm, the table or somewhere in between, our team is designed to help you navigate the challenges of today’s marketplace.