Senior Vice President, Farm Lending, Fulton Bank, Lancaster, Pennsylvania
Roger Rohrer has been an Agricultural Relationship Manager and Business Development Officer at Fulton Bank for 6 years and has a career in farm lending in South Central and Southeastern PA that spans 37 years. He farms part-time on his family’s Century Farm in Lancaster County, Pennsylvania. He has been awarded the Outstanding Cooperator Award by the Lancaster County Conservation District and is the recipient of numerous other awards.
While preparing to speak to the Society, I realized we have something in common. The Society was founded in 1785 and I was born and raised in a house that was built in 1785. A lot has happened in agriculture over the years but the Society’s mission of helping its members and the general public develop well-informed opinions with respect to agriculture is as important today as it was when the organization was formed.
I am from Strasburg Township, Lancaster County and my sons are the fifth generation to farm our land. We have a 200,000-bird capacity broiler growing operation that produces broilers for Tyson Foods, New Holland. Eighty percent of that production goes to the United States Department of Agriculture School Lunch Program. We also grow six acres of Pennsylvania Type 41 cigar tobacco as well as wheat, corn, soybeans and hay. We also have a retail mulch and mushroom soil enterprise on the farm.
I am an evening and Saturday farmer. The biggest enterprise on the farm is the broilers. We grow five flocks a year for Tysons. All our land is preserved for agricultural use in perpetuity. Our farm won one of four national awards for environmental stewardship.
My career in agricultural lending began in 1974. That year, the price of milk per hundredweight was $14. In 2009, the price per hundredweight was less than $13. In many ways this has been the story of agriculture. In order to make money, farmers have had to become much more productive and efficient in order to turn a profit whether we’re talking about milk or other agricultural products.
Southeastern Pennsylvania is a great region to be in the agricultural industry. It is close to markets and has a good agriculture infrastructure. Production on farms in the region is very high and it is a reflection of the management skills and the integrity of the producers. Of course, capital requirements for modern farming are high. That and the stability of farming in the area have made the credit business good for lenders who understand the industry. Loan delinquency rates are low and success rates high.
Drought and increasing world demand have focused attention on the global balance sheet for commodities. How much will the world crop of corn, soybeans and wheat be down this year? Nobody knows at this point. What is known is that there have been wicked swings in markets that increase the management strains and capital demands for today’s farmers. China’s economy and increased demand for protein grown in the U.S. will be major factors in how markets play out for farmers this year and in coming years. North America and South America produce around three quarters of all grain commodity exports in the world. Without them, Europe, Asia and Africa would be in real trouble when it comes to food.
High grain prices will inevitably raise the price of meat and milk. The question is at what price levels will consumers not buy them? This type of rationing through price coupled with high feed prices at the farm gate has many wondering how well the livestock industry will withstand these pressures.
Agricultural lending has been a bright spot in the banking industry. The 2011 Farm Bank Performance Report showed that 2,185 farm banks recorded strong asset quality and improved earnings in 2011. They did this by using traditional banking practices, focusing on the fundamentals of credit, solid underwriting standards and knowledge of the customer’s business. The U.S. banking industry is the nation’s most important supplier of credit to agriculture, providing more than 50 percent ($130 billion) of all farm loans. Small loans made up a majority of bank farm and ranch lending with nearly $67 billion in small and micro-small farm and ranch loans on the books at the end of 2011.
In 2011, farm banks increased employment by 1.65 percent, adding more than 1,400 jobs, and employed 86,984 rural Americans. Farm banks increased farm loans by 5.6 percent, or $3.8 billion, in 2011 and held $72.3 billion in farm loans at year end. Over 95 percent of farm banks were profitable in 2011, with 65 percent reporting an increase in earnings. Ninety-nine percent of farm banks were well-capitalized in 2011, the highest capital rating given by bank regulators.
Agricultural banking challenges include regulations such as the Dodd-Frank law that increases the cost and complexity of doing business and educating our customers on good business and financial management. Large swings in commodity prices and the cost of farm inputs represent an increasing challenge because it is becoming ever more difficult for farm producers to create accurate budgets.
It is important in farm lending to adhere to strong lending requirements. High on that list are a positive relationship between the strength of the farmer’s balance sheet and his exposure to negative effects from the markets for what he produces. He or she should also have a strong competitiveness score relative to the rest of the industry. And they should be using risk management tools such as crop insurance, revenue insurance, marketing tools such as commodity hedges and forward pricing.
Agricultural producers — at least those still in business — have learned to embrace change. They will continue to see substantial change such as environmental regulation, animal welfare laws and restrictions placed on them by their non-farming neighbors. I am optimistic that they will adapt and that agriculture has a bright future.
In an effort to provide wide-ranging views and perspectives regarding the practice of and issues surrounding agriculture, the Philadelphia Society for Promoting Agriculture (PSPA) seeks speakers representing a variety of perspectives. The statements and opinions they present are strictly their own and do not necessarily represent the views of PSPA.