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Can banks have an impact on alleviating the egg shortage?

June 25, 2015
Read Time: 0 min

If you’re craving an omelet the next time you sit down at your favorite restaurant, you may need to reconsider your order. If eggs are even on the menu at your local haunt, your dish may carry a higher price tag than the last time you dined out. The egg shortage, brought about by a bird flu virus that wiped out nearly 50 million chickens (and turkeys) on commercial farms earlier this year, has left all parties – from the farmer to restaurateur and the consumer – impacted. A recent report from said that while prices began falling last week, officials say it could take up to two years for the providing farms to return to normal production.

While the rising prices and shortage are certainly of concern to restaurants and many consumers, it’s the full-time farmer that is likely to see the biggest hit. The U.S. produces about 75 billion eggs each year, which is about 10 percent of the world’s supply. Farmers that rely solely, or even partially, on their egg-laying hens for income are sure to have their bottom lines severely impacted. With this hit in mind, some farmers may be looking to diversify their practices to safeguard against similar issues going forward. During leaner years is often when the demand for ag loans increases, as it’s common for those full-time farmers to tap into their community bank to cover operating costs or invest is other lines of the agricultural business.

According to data from Sageworks Bank Information, community banks (those with total assets less than $5 billion) lent more than $49 billion to farms across the country in the most recent quarter reported. In Q1 2015, the Midwest accounted for the largest pocket of lending, with 71 percent of the total farm loans for the quarter ($35 billion).

The biggest name in ag lending is unlikely to be a surprise – John Deere Financial FSB. Headquartered in Madison, Wisconsin, the non-traditional bank held more than $1.6 billion in farm loans in Q1, accounting for about 80 percent of its total assets. The runner-up lender, Amarillo National Bank, also made a sizable impact for farmers. The north Texas bank, which specializes in commercial lending, lent nearly $600 million. Farmers & Merchants Bank of Central California leads ag lending in the West, with more than $250 million. The bank’s 23 branches serve Sacramento and south of the capital city, where almonds and grapes are two key cash crops. In the Northeast, The Bank of Castile lent the most to farms in Q1. The community bank specializes in commercial lending in upstate New York, where milk accounts for one-half of the state’s total agricultural receipts yearly.

For community banks that don’t currently hold farm loans, or those with limited experience in the industry, this may be the ideal time to diversify their portfolio by expanding their commercial lending. Although there are some specific challenges to assessing farm loans and borrowers, automation can assist banks breaking into this area with an easy and efficient process for analyzing prospective applicants.

Sageworks recently released Credit Analysis for Ag Lending. The new automation module expands the existing credit analysis solution to now analyze agricultural loans and build projected farm cash flows. For additional information, download a product overview.

About the Author


Raleigh, N.C.-based Sageworks, a leading provider of lending, credit risk, and portfolio risk software that enables banks and credit unions to efficiently grow and improve the borrower experience, was founded in 1998. Using its platform, Sageworks analyzed over 11.5 million loans, aggregated the corresponding loan data, and created the largest

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