ICBA's committee on ag and rural affairs met recently, and I had the opportunity to gather information from ag bankers all across the US. 

The dairy and row crop situations continue to present the top challenges to ag bankers. Dairy industry consolidation, processor capacity, and weakening organic markets were the most prevalent issues of dairy state banks. And where does dairy fit into the next Farm Bill? Is there money for a revamped dairy title? Everyone recognized the almost complete failure of the dairy MPP program and ICBA has been advocating for a stronger dairy title.

Row crop farming also presents ag bankers with challenges. Most bankers agreed there would be some customers who would be unable to repay their operating in full. Being proactive and ahead of the curve seemed to be what the regulators desired. 

ICBA's ag bankers shared regulator observations and concerns from recent exams. There seemed to be a large focus on identifying ag concentration among "ag banks" – those where ag loans comprised 300% or more of capital. These "ag banks" seem to have a large focus by regulators. ICBA leadership was going to ask regulators why ag banks can't show diversification among enterprise types, instead of lumping all agriculture together. Regulators also appear to be focused on asking these institutions how they can diversify their risks and manage them.

Recent exams have also brought positive comments to those banks that utilize the FSA guaranteed loan programs extensively and have documentation about customer contacts. Of course, utilization of FSA guaranteed loans depends upon adequate funding of those programs.

Gruetzmacher is vice president at Royal Bank and a member of the 2017-2018 WBA Agricultural Bankers Section Board.