Pullbvack in Ag Lending

Navigating the Changing Landscape of Ag Lending

When navigating the changing landscape of ag lending, it’s important to stay informed about the latest trends and developments impacting the industry. Farmers and ranchers rely on financial institutions for capital infusion, and understanding the shifts occurring within the lending sector is critical for operational efficiency.

What factors contribute to the recent pullback in ag lending?

Recently, there has been a noticeable pullback in agricultural lending from major institutions and commercial banks, both large and small. This pullback is primarily deposit-driven, with many ag lenders experiencing a decline in deposits, leading them to a more cautious approach to lending.

Additionally, the fear of potential losses in 2024, attributed to certain commodity values falling below production break-evens, has further contributed to this trend. As financial institutions grapple with dwindling deposits and looming uncertainties in the market, they are adopting a more conservative stance, which directly impacts lending practices and diminishes accessibility to agricultural financing.

Past mergers in the banking sector have also resulted in some lenders becoming significantly larger in scale. Consequently, when economic outlooks fail to project positivity for their client base, these large-scale lenders tend to pull back on new business opportunities. “Some institutional lenders and commercial banks are beginning to exhibit signs of that we call ‘fair-weather’ ag lending, where lenders are more selective and conservative in their lending practices during uncertain times.” commented Luke Schultz, Conterra Great Plains relationship manager.

Why is it important for farmers to partner with a consistent lender?

In light of these challenges, it’s crucial for farmers and ranchers to partner with a lender that offers stability, reliability, and expertise in the agricultural sector. Choosing a lender that has a consistent presence in the market, even during turbulent times, is paramount. Farmers and ranchers should look for an ag lender with the capacity to provide large lending limits and a staff that possesses in-depth knowledge of the agricultural industry.

I advise my clients to work with a lender that doesn’t come and go in the market. Agricultural lenders should also have large lending limits and a team that is extremely knowledgeable in the sector,” continued Schultz.

Why are large lending limits important?

The ability to lend larger amounts deepens financial flexibility that enables growth opportunities and long-term viability. They provide a broader range of farmers and ranchers access to necessary capital for operational growth and improvement. Paired with an experienced lending team, this allows for valuable insight, strategic advice, and customized financing options designed to address the complexities of agricultural production.

Conterra understands the specific challenges facing farmers and ranchers today. Our team is committed to providing reliable and tailored financial solutions that meet the specific needs of our agricultural clients,” Schultz stated. “With a comprehensive understanding of the ag industry and a steadfast dedication to our clients’ success, we stand ready to navigate these uncertain times together.”

By staying informed about current trends, being proactive in financial strategies, and partnering with the right lender, producers can overcome the challenges ahead and continue to thrive. Proactive financial strategies, such as optimizing operational efficiencies and exploring alternative revenue streams, can mitigate risks and capitalize on emerging opportunities.

What proactive strategies can producers implement to thrive in the current environment?

  1. Diversification: Producers can explore alternative revenue streams or diversify operations to spread risks and mitigate the impact of market fluctuations.
  2. Cost Management: Operations should review expenses closely and identify areas where costs can be reduced or optimized without sacrificing productivity or quality.
  3. Risk Management: Develop risk management strategies to hedge against price volatility, weather-related risks, or other uncertainties that could impact revenue.
  4. Strategic Investments: Invest in emerging technologies, equipment upgrades, or infrastructure improvements that can enhance operational efficiency and productivity over the long term.
  5. Financial Planning: Develop a comprehensive financial plan that includes budgeting, cash flow management, and long-term financial goals to guide decision-making and secure financial stability.
  6. Collaborative Partnerships: Build strong relationships with ag lenders, advisors, and other industry experts to access resources, insights, and support that can help navigate challenges and capitalize on opportunities.
  7. Flexibility and Adaptability: Without exception, operations should remain flexible and adaptable in response to changing market conditions, consumer preferences, and regulatory requirements to seize opportunities and mitigate risks effectively.

Moreover, selecting a lender with a proven track record of stability and expertise in ag financing is important for securing the necessary resources to support growth and sustainability. Remember, throughout the cycles of agriculture, reliability and expertise are key.

Conterra Ag Capital is a private lender, focused exclusively on agriculture. With more than 20 years of ag lending experience, Luke Schultz works directly with farmers, ranchers, and lending partners throughout the Great Plains Region. Conterra lending experts are strategically positioned nationwide, providing flexible farm and ranch loans, crop operating loans, development and alternative lending to America’s farmers, ranchers and agribusiness. 

Disclaimer: Please note that the information provided in this article is for educational and informational purposes only, and should not be construed as financial or investment advice. While we have made every effort to ensure the accuracy and reliability of the information presented, Conterra Ag Capital and its affiliates make no representation or warranty as to the completeness, correctness, timeliness, suitability, or validity of any information contained in this article. You should always consult a qualified financial advisor, tax professional, or other qualified professional for advice on your specific financial situation.

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