Young and aspiring farmers are increasingly seeking financial partners and advisers outside the federal government.
U.S. agriculture faces a precarious future. This year, farm incomes are expected to hit their lowest point since 2006. The country has experienced a multiyear slump in commodity prices, a slump that’s reminding many of the 1980 farm crisis.
Meanwhile, the industry is aging drastically: over the past 30 years, the average age of U.S. farmers has grown from 50.5 to 58.3 years, and over 30 percent of American farmers are 65 or older. Many of these aging farmers are on the brink of retirement, but do not have a successor to take over their farm. Family farming, with its multi-generational model, is on the decline as younger generations reject the profession.
Drawing young people back to the farm, therefore, has become an increasingly important goal for the U.S. Department of Agriculture. They’ve started several programs for beginning farmers and ranchers over the past several years, aiming to provide them with greater training, loan opportunities, and federal support.
But is it enough? As the cost of farmland continues to skyrocket throughout the U.S.—due in large part to urban sprawl and suburbanization—many aspiring farmers must grapple with the enormous economic burden of starting a farm. Beyond land costs lie many other financial hurdles: procuring or building a house and storage facilities, buying expensive farming equipment and implements, buying and caring for animals, and/or purchasing seed (which is growing more expensive as a small subset of companies monopolize the field).
Through the U.S. Department of Agriculture, the Farm Service Agency has a variety of loans available to young and beginning farmers: farm ownership loans, meant to provide farmers with access to land and capital, operating loans to assist with equipment procurement, and a microloan program for smaller, start-up farms.
“The USDA microloan program is great money if you can get it, but it has all sorts of restrictions,” social investor and Maine Harvest Credit Project Director Scott Budde notes. “For one, they will never refinance a loan.” In addition, he adds, “The timeline for a USDA mortgage is six months. It’s very rare to have a land transaction that will wait six months.”
What’s more, as Politico reported in its Morning Agriculture email recently, “Many local farmers aren't taking advantage of USDA programs because there are so few department staffers in the state … some serve areas covering more than 600 miles.” Much of the paperwork farmers must fill out is not available online, and they must meet with a field staffer before they can fill out forms. Although the department’s microloan paperwork is less burdensome than most, a lot of the paperwork required puts a tremendous time burden on young farmers.
Kate Greenburg works as the Western Program Director for the National Young Farmers Coalition, and has experience working on vegetable farms, wineries, and ranches. To her, the outdated and burdensome paperwork process associated with federal funding is in desperate need of updating.
“We surveyed 3,500 farmers under 40 across the U.S., and found that the top answer for accessing federal programs was that applications and paperwork are too burdensome,” she notes. “Filling them out requires losing time on the farm. That challenge is not unique to young and beginning farmers, but for those who don’t have a family working with them, it’s particularly burdensome.”
Dorothy Suput—Founder of The Carrot Project, a financing project for young farmers—notes that excessive paperwork is a challenge associated with most small businesses and startups. “The central problem is that farmers have to learn and exercise an incredible body of skills and knowledge to do well: mechanics, agronomy, husbandry, marketing, soil scientist, entomologist, bookkeeper, [as well as] knowledge of the many local, state, and federal laws that impact their farm and labor practices,” she says. “And many are doing it alone.”
Beyond paperwork issues, Greenburg also sees a problem with federal programs’ scale and diversity. “FSA programs are typically geared toward large-scale operations, which usually isn’t the scale young, beginning farmers are able to afford,” she says. “So a lot of our focus is on making those programs scale-appropriate.”
Budde, who has worked in social investing and finance for several years, is not waiting for the federal government to fix these problems. Instead, he’s working to start a credit union specifically for farmers in Maine, one which would offer farmers a local, personalized, and savvy alternative to federal aid.
“Traditionally, let’s say 50 years ago, small-scale agriculture lending was done by community banks,” Budde explains. “That whole segment of the financial system has been slowly wiped out in most communities. … The agriculture [most banks] understand is large-scale, industrial agriculture. And some of the systems set up—like the farm credit system—will occasionally do smaller farms, but they are really geared toward 5,000 to 10,000-acre farms.”
Suput has seen farmers struggle with the same challenges. As financial institutions have consolidated over the past few decades, they’ve lost agricultural knowledge, she says, and have lost many of the loan officers who knew and understood the world of farming. “They’re doing less mainstream lending and more square-peg lending, creating a less flexible model,” she says.
Community-supported agriculture (CSA) serves as an interesting example of this tension: in CSA programs, farm customers become “shareholders” of the farm, pledging funds to cover the farmer’s anticipated crop and operation costs. They then receive a portion of the farmer’s produce throughout the growing season. CSA programs provide a great financial benefit to small farms by reducing risk and bringing in money upfront, but Budde notes, “your average bank just doesn’t know what to do with that as a business factor, in terms of analyzing loans. [Having pre-paid customers] isn’t something they find easy to understand, or recognize as reducing the risk of lending to that borrower.”
“If you want to borrow money as a small business in America, you’ll do very well if you’re operating in a pretty standardized sector: like an autobody shop, print shop, or franchise lender,” Budde says. “Banks know how that works. They have a template they can pull up, and they know the margins. But they simply don’t have that understanding in this small-farm and food producer world.”
As small-scale, diverse, and sustainable agriculture becomes more prevalent and popular throughout the country, Budde sees a deep need for loan officers, banks, and credit unions to step up and fill the void in supportive funding.
“Small-field sustainable ag is not a priority to Sonny Perdue,” he says. “All those [farm loan] programs are subject to the government being open, and subject to funding availability. … When we go out and ask people what they need, financing gaps are pretty high on their list.”
Starting a credit union involves some unique challenges, however. Credit unions are tax-exempt financial cooperatives, and part of the same 501(c)(3) segment of the tax code as nonprofits.
“They don’t have shareholders, which means you start them with grants,” Budde explains. The Maine Harvest Credit Project has raised 75 percent of its necessary funds, but must finish raising the capital before Budde and his teammates can finish the charter application—an application which is itself is 100 pages long, and requires “hundreds and hundreds of pages of business plans, along with every conceivable description of what you’re going to do.”
Nonetheless, Budde believes the credit union will be an important asset to Maine’s farmers once it is up and running. “We’ll be specialized around this sector, and will understand it better than other people,” he says.
There are other important ways in which localized nonprofits and philanthropists can help young farmers succeed: The Carrot Project, which serves farmers in the Northeastern United States, features four different loan programs, each of which works in conjunction with a different local lending institution. “We provide some form of guarantee to the lender, so that they can make loans they couldn’t otherwise make,” Suput explains. The Carrot Project also focuses on training farmers to be good businesspeople: helping them develop a long-term business plan, craft financial statements, use Quickbooks, establish cash-flow budgeting, and package loans, among other things.
“We’ve been working with one young farmer for the last six or seven years,” Suput says. “We put together his cash flow and his first loan. He was debt-averse, but knew a loan could help him in the right situation in the right way. So he did a small loan, continued to take financial management classes, and now feels like he has the tools and wherewithal to care for his business and make these big decisions. He’s confident in his ability to figure out large loans, and confident that his business to be able to handle it. We’ve seen story repeated many different ways, where people are learning to manage their business. That’s what inspires me.”
Suput has worked in the sustainable agriculture field for many years as a staff person and volunteer. “I saw a wonderful focus on production practices and organic farming, but what seemed to be missing was a focus on the long-term economic viability of these business models, and the support needed for them to do well over time,” Suput says. “That included access to capital. Farms I was working with who were running good, solid operations were unable to access good capital.” In response, she created that Carrot Project—focusing first on regional loan programs, and then adding one-on-one technical assistance programs.
“The shortfalls in [federal] programs lie around things the loan officer doesn’t have the capacity to do,” she says, namely, “the mentoring and training of new farmers, making sure their businesses are doing well.”
There’s a deep need within the agricultural sector for business assistance and training—a need, Suput says, that directly ties to the collapse of multi-generational farming. Today’s up and coming farmers don’t have a father or grandfather to teach them the ropes. They “may not have a strong network or support system, or their network may also be young and early-stage. Expertise in knowing how to run a farm business can be really important in the early stage. These young farmers are going elsewhere to find that support—and it’s hard to find.”
The Carrot Project and Maine Harvest Credit Project are not alone in seeking to fill some of these needs. Suput points to Kitchen Table Advisers and the California Farm Advisory, both of which work to fuel the economic stability of small-scale sustainable agricultural producers in California, as two successful examples. Both Greenburg and Budde pointed to the vital work land links are doing to preserve farmland and make it more financially affordable for aspiring farmers. Greenburg has also seen Slow Money groups step up and provide vital funding to small-scale farmers around the U.S. But more is needed.
“Ideally, we’d see more public and private actors provide unified support for farmers and ranchers,” she says. “There’s a huge opportunity to increase philanthropic engagement in the young farmer movement, and to use that money to preserve the ag base in this country. It could fill holes in all sorts of places.”
She notes that one hurdle many aspiring farmers face when applying for a federal loan is in making their upfront cash contribution. “A zero-percent loan at those moments, when cash isn’t flowing, could allow a farmer access to those cost-share programs,” she suggests. “The farmer could then have a really great partnership with a funder who understands what that farmer is doing. For philanthropists to look at those needs and to plug in is really critical.”
U.S. agriculture may be confronting some large economic and cultural hurdles—but there’s still promise for the future. Many young people want to keep farming alive. They just need a little help getting started.