Business Insights

Choosing an Agricultural Banker

The needs of agricultural businesses are unique. Therefore, it’s important to choose an agricultural banker who understands your business.

Tony Hotchkiss, Director of Agricultural Banking for Regions Bank, provides insight into the issues facing farmers today and how Regions can provide banking expertise to meet those needs.

What are some of the problems facing farmers today?

There is a good bit of uncertainty around international trade due to tariffs. The International Trade War has changed the trade landscape and impacted prices of all commodities. Until the commodity markets level out, there will continue to be much uncertainty in commodity prices.

As commodity prices have fallen, crop related expenses have not come down an equal amount; and has put pressure on every farmer. Additionally, fluctuations in commodity costs have increased the importance of on-farm expense management, understanding the cost to produce grown commodities and having a sound marketing plan. For every farmer, having a strong financial position, good business practices, and a written form of marketing plans for their operations to communicate to key stakeholders is more important than ever. These stakeholders could include, owners, employees, accountants , and financial institutions.

Access to credit may be another challenge farmer’s face in the next few years. Having a strong farm financial statement (low debt levels, good working capital and equity in land & equipment) position farmers well as they enter the next few years. Some financial institutions have tightened credit standards or may be exiting the ag financing segment.

Weather is always a concern as it affects grain yields and commodity prices. In a normal growing year, the United States has more grain than it needs and can sell the surplus on the world market. Therefore, strong International Trade and profitable commodity pricing is critical for a producer to maximize profit’s each year.

Land values have held up the past several years, but pressure is mounting as we continue in the current cycle. This pressure may cause land values in some regions of the country to soften. Equipment is also a large ongoing expense for farmers. Prices for those have also been increasing. If farmers must replace equipment or choose to expand their operation, the impact to the expenses of their operation should be closely managed.

How does a Regions agricultural banker help address these problems?

Regions stands apart as a trusted advisor through our quality of service by engaging in relationship banking. We’re not just providing the farming client with a crop loan; we're also providing our clients with financial advice, wealth and treasury management, and many other financial services. We are dedicated to our clients and provide them with financial solutions tailored to their specific business using the most sophisticated methods.

We have agricultural bankers who are very acclimated to agricultural practices. They understand how to put together a farming budget. They talk to a lot of farmers, so they have a broad view of farming practices in our geography and can relate them to their clients.

Farmers are very appreciative of our expertise because they want somebody who understands their business and the whole spectrum of what agriculture is all about.

What financial options are available for farmers?

Regions provides our agricultural clients with several available financing options, such as working capital lines of credit for crop production, intermediate financing and long term financing for equipment purchase, real estate purchase, farm improvements, and capital investments to name a few options.

What does a farmer need to do secure agricultural financing?

In addition to understanding his crops and his land, a farmer has to have a business plan for today and in the future. Farming is a very challenging business and like any other business, a farmer should maintain both short and long term plans for their operation. Long term plans should consider addressing succession plans for both management and ownership.

Farmers also need to have an understanding of the right balance of equipment for their operation; to maximize efficiency and generate the highest return of their capital investments.

What’s ahead for agriculture in the next two to five years?

The outlook is for agriculture is challenging. The demand for US grown commodities will continue to grow due to increasing world population and increasing global demand for protein. In addition, countries that have an improving standard of living are requiring higher food qualities. However, given the challenges with International Trade, highly volatile commodity prices and increasing expenses, farmers should be focused on their farm business to maximize their returns. Those farmers that embrace change and manage their farm business efficiently will be best positioned for future success.