Outlook brightens for farmers, less so for ag lenders

Powell Becker

Editor’s note: This is the first in a three-part series on the current state of the farming industry and ag banking.


As they near the end of 2021, many community ag bankers say their farm clients are feeling optimistic. Commodity prices — from corn to dairy — look favorable. Many farmers have ample liquidity thanks to a variety of government programs offered in the past two years to stem damage from natural disasters and the pandemic. The Paycheck Protection Program, the Coronavirus Food Assistance Program and the Wildfires and Hurricanes Indemnity Program have all helped farmers weather the challenges of the past year and a half. 

Low interest rates are driving the price of farmland in some areas, but expansion is an obstacle in others. Land for homes and vacation getaways in Montana, for instance, has grown increasingly desirable (and costly) to those not engaged in the business of agriculture. 

Some of the sunnier projections for the coming year are partially offset by higher costs for feed, fertilizer and fuel. Farmers are hedging by locking in fertilizer prices early, and doing so with help from banks.

“We feel like our farm incomes are going to be higher based on the commodity prices. The hard part is obviously all our operating expenses are definitely going higher as well,” said Powell Becker of Stockman Bank, Stanford, Mont. “So, it’s quite the relationship that we have there.”

Some banks reported a decline in ag loan volume over the past eight to 10 months. Limits on growth and farm consolidation are two other issues affecting farmers. Weather remains, of course, the factor that tempers even the sunniest outlook. 

What does the future hold? Some expect continued innovation. And while some farmers are making strides in carbon sequestration and carbon credits, this remains an area of study. 

Dave Coggins

“I get the sense that especially our more progressive farmers are paying close attention to the climate change conversations and looking for ways they can contribute and participate,” said Dave Coggins of Investors Community Bank in  Manitowoc, Wis.

Farmers often keep an eye on technology to address their diverse range of needs, and these days, foremost among them is labor. 

We asked six Midwestern ag bankers from across the region to reflect on the past year, and share their insights into what the next year might look like for them and their ag customers. Here’s what they said:


What trends are you noticing in 2021?

Ed Sullivan

Ed Sullivan, CEO, State Bank of Bussey, Iowa: “We’re seeing good prices in south-central Iowa. We’re going to have a corn crop. I don’t know if we’ll have record yields, but we have a lot of optimism. Fertilizer costs have really gone up a lot here in the last few months. I think next year, if those don’t adjust, profitability will get squeezed quite a bit. But there’s just a lot of optimism. I’ve been in this for 40 years, so I’ve seen it swing a lot. I got into it in 1982 with high interest rates of 18 to 21 percent. We’re seeing low rates, which drives up the price of farmland.”


Dave Coggins, executive vice president-chief banking officer, Investors Community Bank, Manitowoc, Wis.: “Our bank’s ag portfolio is heavily weighted toward dairy so our perspective is impacted by all things dairy. Our observations are as follows:

  • Dairy prices on the futures for the next 12 months are at or above most producers’ breakevens.
  • Costs, primarily feed and fuel costs, have risen significantly over the past 12 to 18 months.
  • Dairy plants are not as interested in growing their patron base or their volumes, thus putting a sort of cap on dairy expansion here in Wisconsin.
  • Labor supply issues are having an impact to some degree.”


Jacob Jenniges

Jacob Jenniges, branch president, Integrity Bank Plus, Walnut Grove, Minn.: “Our ag borrowers, for the most part, have shown a strong surge of liquidity due to the funds from the CFAP, WHIP and PPP programs, along with a dramatic increase in commodity markets, specifically corn and soybeans. We are noticing trends in tax planning that include the installation of tile and updating of equipment — brought on [by] very aggressive point-of-sale financing by the equipment dealers. Unfortunately, this has been the main source of financing for the purchase of equipment.  

“I have also heard from many of my producers that they are expecting input costs for 2022 to increase by 25 to 30 percent compared to 2021. This has some producers looking to purchase 2022 inputs like fertilizer and seed right now. After calculating the interest cost to carry those inputs for an extra six months, assuming the inputs increase by that amount, the producers are financially ahead of the game by paying the six months of interest instead of the increase in input cost. 

“We have also experienced a decline in ag loan volume over the past eight to 10 months. The 2020 harvest saw a large percentage of the crop in our area sold out of the field. The amount of grain inventory loans decreased by 30 to 40 percent compared to 2019 and 2020.”


Joseph Carlson

Joseph Carlson, president and CEO, Community State Bank, Royal Center, Ind.: “Technology adoption continues with my customers. Planters continue to get upgrades allowing for variable-rate seeding, seed placement, chemical and starter fertilizer application and placement enhancements. We continue to reduce fertilizer and chemical application rates while maintaining and increasing yields. The bank’s customers are moving to 20-inch rows and are finding ways to adapt technology in the narrow row spacing with camera computer-guided sprayer technology that allows for high-speed fungicide, insecticide and nutrient application.  

“The latest trend is the usage of microbials at planting, made possible by the latest planter technology. Microbials are providing increased organic nitrogen fixation, growth regulation and larger plant root systems for increased nutrient utilization and uptake.”


Powell Becker, branch president, Stockman Bank, Stanford, Mont.: “In central Montana, we’re starting to get a lot more discussion about the cattle market after the few Black Swan events in the last couple of years. Specifically, it appears that our government’s getting more involved in looking at the monopoly that our four main big packers have. And as a result of Covid-19, it looks like we’re getting a lot more interest — not so much here locally but nationally, of smaller, packer driven-types of businesses that are offering beef, pork (the proteins) to consumers directly outside of the large, national packer-type venues. That’s exciting to see. It just hopefully brings more competition to the marketplace and that’s what everybody hopes for.”


Scott Zimbelman

Scott Zimbelman, vice chair, Homestead Bank, Cozad, Neb.: “Most, if not all, ag trends are positive. Farm and rangeland prices are holding steady with favorable commodity prices.”