Farm bankers need to keep up with ag tech

WINDSOR — The technology, processes and workforce are vastly different for farms and ranches on the high plains than they were just a few decades ago — and so, by necessity, are the considerations lenders must make in financing them.

Only the mission remains the same: to feed America and the world.

“A lot of what happens on a farm is run by satellite now,” said Jay Goddard, a fifth-generation farmer who serves as executive vice president and high plains regional president for Windsor-based Points West Community Bank. “A lot of the tractors, the combines, the sprayers drive themselves by satellite and GPS. The owner or manager can watch from their house or while on another tractor. The irrigation pivots are now run by cell phones; if they shut down in the evening, you automatically get a phone call.

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“Some farmers now are a lot like stock traders in New York,” he said. “They can make bids on their phones or market their crops while they’re out in the field. They make decisions on the go.”

Goddard, who said he runs some cattle on the side “just to keep my sanity,” remembers life on his family’s farm on the arid outback of northeastern Colorado.

“When I was a kid, eight hours of corn planting wore you out,” he said. Now, with the self-driving machinery, he added, “they can even plant at night. They can cover more acres at a faster pace with bigger equipment.”

Farmers or ranchers who might be many miles from a sizable town also had to know how to service their equipment as well. “Most of them are still pretty savvy on that side, but just like a car, a lot of it is electronic now,” Goddard said. “They can call a mechanic who can dial in” to see the ailing machine’s telemetry and diagnose the issue.

“We used to have to get into a combine to replace a belt,” he said. “Now I open the side and just stare.”

About half of Points West’s lending involves agribusiness, Goddard said, and the bank’s job is to keep up with all the advances in technology — and make sure they make financial sense.

“On our side, we have to be knowledgeable and flexible and make sure that we know what technology is going in and whether it’s feasible for them to spend money on it,” Goddard said.

“Will it cut costs on things like wasted seed and hired help? Is it going to increase yield? Will the increased yield pay for this technology?

“The simple answer is, yes, it does.”

For three of Goddard’s customers, irrigated corn circles produced an outstanding 300 bushels per acre, thanks to the technology that allowed precision planting, guided efficient spacing of seed, and directed application of fertilizer and other chemicals at the right time and place.

The human side of farming looks different as well, Goddard said.

“Most of my customers have four-year college degrees, and some have master’s degrees,” he said. They’re well educated, and they take classes and seminars on precision farming in the offseason.”

Goddard’s father and brother have bachelor’s degrees from Colorado State University, and his father also holds a master’s from the University of Northern Colorado. “We’re not like those farmers with bib overalls and pitchforks anymore,” he said.

“When I was a kid in the late ‘80s and early ‘90s, my dad had two families running the farm with three or four hired men. Now he does 5,000 to 6,000 acres with himself and one hired person.”

Points West’s holding company, First Nebraska Bancs Inc., “has been owned and operated by the same family since 1906 with a strong ag background and has done a whole lot of lending in the ag industry,” said Tim Ulrich, its Greeley market president.

The bank’s charter was moved from Sidney, Nebraska, to Windsor in 2020. In 2019 it opened three new branches — in Loveland, Fort Collins and downtown Greeley, for a total of 20 locations in Colorado, Nebraska and Wyoming. Besides its Windsor headquarters, it also has a branch in Wellington.

At the end of November, Points West reported assets of $823 million.

“We benefit from locations in rural communities as well as the urban corridor,” Ulrich said. “We help customers in all those types of markets — agriculture, real estate, operating capital and construction as well as consumer lending. Our business is more predominantly commercial on the Front Range, which balances out our more ag-related portfolios across our territories.”

In October, Points West was recognized along with several other banks, credit unions and Community Development Investment Funds by Gov. Jared Polis and the Colorado Office of Economic Development and International Trade for work throughout 2020 to process Paycheck Protection Program loans for Colorado businesses.

“A lot of ag producers that had employees applied for the PPP loans,” Goddard said, “but it was mainly businesses that support agriculture.”

At a BizWest CEO Roundtable session in September, Points West president Mark Brase noted that “we’ve effectively kicked our customers out of the bank for the last year and a half, but now it’s back to community banking.”

The ag industry runs in “cycles of seven,” Goddard said. “It’s been really tough for the past seven or eight years going back to 2013. There were a lot of farm sales and retirements. Some folks just couldn’t hang in there. But we’re having a really good year in 2021. Production yields are up, and prices are at five- to seven-year highs. Farmers are going to start taking some profit.”

For lenders to agribusiness, he said, “it’s a lot more competitive. Most ag banks are really flush with cash and hungry for good ag loans to put on the books, just like we are.”

And looking ahead is always top of mind, he said.

“Is the financing still going to work if we go five, seven years from now and go back to some lower commodity prices again? 

“We more or less want to see that the supply chain continues to stay open,” Goddard said. “With the cattle industry, a lot of big packing plants shut down because of the pandemic, and that backed things up for over a year, let alone being able to ship commodities overseas.”

What hasn’t changed, he said, is farming’s sporadic revenue stream.

“It takes a lot to do a loan,” he said. “Million-dollar lines of credit are very common, just for a common farm, because they have to put all the inputs into the ground. They have to put everything up front. They have to buy the seed. They have to put the fertilizer in. They have to water the crop. They have to pay for the fuel through the entire summer. And then you get that income at the end of the year after you’ve put all the expenses into it. So the operating lines are big just to get to the end of the year before they get paid back to zero after the commodity is harvested and sold.   

“It is a fascinating world,” Goddard said. “We didn’t think so when we were kids. But everyone should come out and watch a farmer and rancher operate in today’s world. They’d be amazed. It’s pretty exciting, and a great way of living.

“We’re supplying the country with food. It’s not a five-day job. It’s seven days, and they work hard.”