The world's population is growing, and everyone needs to eat.
That is part of the reasoning behind Wells Fargo's (WFC) expansion of its agribusiness in Washington and Oregon. The San Francisco company recently named Terese Rowe as head of its agribusiness group in Oregon and is likely to add to its staff and announce larger deals in the future.
With the world's population expected to hit 9 billion by 2050, U.S. businesses can capitalize on the growing global demand for food – provided the agrarian areas of the Pacific Northwest carry a heavy load, Rowe says. The region is capable because it has strong irrigation systems, good rainfall and the climate and soil to sustain a wide variety of crops, she says.
Managing an agribusiness portfolio means juggling various factors, some beyond the control of either the lender or the borrower, something that Rowe has learned during her more than 15 years in lending.
Rowe previously led corporate credit at Rabobank Chile, part of the Rabobank Group, where she managed the credit risk for an agribusiness portfolio that included fruit, salmon farming, wine, poultry and forest products.
Things like the weather, access to water, type of crop to be grown and the overall global economy can all come into play.
"Agricultural is a very complex sector and in order to serve farmers properly, a deep understanding is needed and unique solutions for each individual are critical," Rowe says. "It's like putting together the puzzle. All of the pieces are there. You just need to put them together in the right way."
For example, the Midwest this year suffered from a severe drought, causing lower crop yields. There were even some "farmers whose crops turned into popcorn in the field," Rowe notes.
But this doesn't necessarily spell doom for every farmer. Lower crop production is often offset by higher prices from the limited supply.
Rowe and her team also have to consider what crops other countries are producing and consuming. Previously experts had predicted that China would dominate the world's food production, Rowe says. She notes that although it is a big producer of things like garlic, tomatoes and apple juice concentrate, its increased production is being consumed domestically.
Now the South American market is developing and one to keep an eye on, Rowe says.
"Overall the growing world population and purchasing power in the developing world has been good for agriculture," Rowe says. "As people have greater purchasing power, fresh fruit is one of the first things they always buy."