Banks are lending to farmers at a steady rate, as agricultural businesses expand into organic and specialty markets and seek funding for capital investments.
Financial institutions are aware that agriculture is the No. 1 industry in Pennsylvania, although its health depends on consumer demand.
“What we have seen is growth in the poultry business. There is more demand in hens laying eggs because of diet trends that make eating eggs more popular,” said Thomas J. Jordan IV, market president and president of business banking and SBA lending in the Lancaster office of Univest Corp. “Lending opportunities have shifted. For instance, there is lending going on for construction of bird-house buildings. Farmers want birds to live cage free and the conditions upgraded.”
Kenneth W. Darlington, vice president of agricultural banking at PNC Bank, said farm loans remain stable, specialty products are a large driver in the industry, and banks will lend to farmers who want to diversify. These loans have proven to be well-performing over time, and farm families are some of the bank’s best customers, he added.
Jordan, who has done ag lending for 30 years, said that farmers in eastern Pennsylvania recognize that an important part of business is to diversify their income.
FOLLOW THE TRENDS
Pennsylvania farmers are apt to change their operations to accommodate evolving trends.
If there is an increased demand for tobacco, farmers will plant a couple of acres of tobacco. If organic is all the rage, they venture into the organic market.
Joe Feilmeier, president and CEO of Lafayette Ambassador Bank, an affiliate of Fulton Financial Corp., said that ag lending continues to grow and diversify.
Farmers do business in multiple specialties from livestock and poultry to fruit and vegetables.
“Fulton Bank’s ag portfolio was $500 million about 15 years ago and is now $1 billion,” Feilmeier said.
Feilmeier attributes the bank’s lending growth to its employing people with working knowledge of Pennsylvania farms. Some staff members have their own farms, giving them a unique perspective when they are building a relationship with farm customers.
“Farmers need loans for real estate, heavy-equipment purchases and construction loans,” he said. “For the most part, today’s farmer wants new technology and ways to be less labor-intensive. They are getting into organic and reducing pesticides and chemicals.”
Fulton Bank and Lafayette Ambassador have numerous branches throughout the Lehigh Valley and surrounding counties.
Travis Werley, senior vice president and agricultural relationship manager at Berks County-based Tompkins Vist Bank, said his bank also employs lending officials who have personal experience with farming.
“Farmers and ag business people want to work with people who understand the nuances of their industry and the challenges they face. These include daily pressures they can’t control such as Mother Nature, global political agendas and production levels outside of their immediate marketplace,” Werley said. “In my opinion, the need for specialists in the ag business is like that of no other industry. But when the relationship between a farmer and a banker is done well, it is very rewarding to the bank, the farmer, and the community they serve.”
Agriculture is a very capital-intensive business, since land, equipment and buildings are expensive, Werley said. Production operations require mortgages on land and term loans for buildings, grain storage facilities and equipment.
Farmers may need different financing for livestock purchases. Short-term animals may require a line of credit while a term loan may be better suited for buying an animal that promises multiple years of reproduction.
Werley said it is hard to quantify the growth of ag lending. He believes that the number of farmers is declining overall but the size of farming operations will keep expanding. Costs of land and equipment are on the rise, and operating lines of credit become the norm in farming operations, he added.
“This keeps banks busy supporting the ag industry,” he said.
Jordan at Univest said that there are also plenty of state and government loan programs available to farmers.
“Tariffs are impacting the dollar and affecting exports of farm products, but things will hopefully settle out with that in 2019,” Jordan said. “The strongest farmers will survive and push out those producers who are not doing as well.”