Though farm lending is a profitable niche, many of the banks engaged in it underperform because they lack the ability to diversify their loan portfolios, according to a recent study.

"That's sort of a long-term dilemma for them," said Glenn Pederson, a professor of applied economics at the University of Minnesota, who co- authored the study of Minnesota banks' performance. "It's not an easy situation for them because their market has been limited."

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