How the Ag Economy is Affecting Financial Institutions in 2024

Tips to mitigate risk amidst industry turbulence

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2023 has been a tough year for the agricultural industry. Droughts, rising input costs, price volatility, and many other factors have put a strain on the industry this year.

As an agricultural lender, you may be wondering what this means for you and how you should handle the turbulence. You’re not alone in your questions. Many financial institutions are concerned about their ag customers’ ability to meet commitments over the next twelve months.

To help navigate the uncertainties, here are simple measures you can take to prepare your institution for the potential increase in credit risk in 2024:

  • Place risky loans on your watch list. Establish a system to monitor the list appropriately.
  • Verify that collateral is adequate, and appraisals are up to date.
  • Assess your risk. How reliant is the bank on crops if the drought worsens or prices continue to drop?
  • Establish an adequate reserve. Are the Q factors in your ACL analysis relevant and reasonable?
  • Review your concentrations in the ag market. This includes loans collateralized by both crops and real estate.
  • Stay on top of industry changes. Subscribe to ag resources like High Plains Journal and monitor Purdue University’s confidence dashboard.

Resources to stay on top of ag industry changes

High Plains Journal – HPJ is a publisher of ag news, information, and analysis for farmers, ranchers, and agribusiness professionals, helping make informed decisions in the ever-changing world of agriculture.

Purdue University confidence dashboard – Purdue offers a monthly update, presenting a nationwide gauge of the U.S. agricultural economy’s health.

Farm Journal AgDay TV – Every weekday, Farm Journal presents a 20-minute segment detailing the latest prices, market data and commodity markets impacting farmers, producers, and consumers.

 

If you have any questions about serving your ag clients and preparing your institution amidst industry challenges, please connect with Pinion’s Financial Institutions team. As the nation’s leading food and ag consulting firm, we are deeply connected to the industry on both sides of the topic.

 

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