In the U.S., the aging of our agriculture producers signals that a mass transition to the next generation of farmers, ranchers and growers is on the horizon.
A quick review of some of the core statistics of the USDA Census of Agriculture shows that it’s clear the approaching generational shift will be impactful on the landscape of agriculture.
- The U.S. has 1.9 million family-owned farms, accounting for 96% of all farms.
- The average age of farmers was just under 58 years.
As these trends indicate, farm succession planning and executing these plans will be a significant focus for your ag clients in the coming years. As these assets transfer to the next generation, the need for capital solutions will be greater than ever. Syndicated loans can be a part of your overall strategy to make these transitions successful.
Farm succession planning: A critical junction for agriculture
This younger generation of farmers will no doubt come well prepared, as they have been working alongside and in partnership with their parents or grandparents for years or even decades to ready themselves for taking over. When you consider the often cited statistic that fewer than one in three family farms (or family businesses) successfully transition to the next generation, we’re approaching a critical juncture for not only agriculture but for rural America.
Will these young farmers have the resources they need to take the baton of their family-owned operation and run with it? They’ll need a few allies in their corner to help them access the financial tools to leverage growth and maintain an adequate cash flow. As a lender and financial organization, catering to young farmers can be part of your growth strategy. A partnership with a secondary lender like Agri-Access can make your program achievable.
As the next generation takes on the ag operation, whether it’s a dairy, corn and beans, an orchard or a ranch, they’ll need capital to operate and carry out their vision for the next phase. Here’s a brief list of some of the capital needs and challenges young producers face.
Adding commodities: Taking over an existing operation is an opportune time to better meet the market by introducing a new product line or commodity. As a lender, having access to the market analysis that helps you evaluate the viability and the risk of this will be critical to their success.
Adding or expanding facilities: One of the cascading effects of introducing new commodities and product lines is the need for new equipment. Even if the new producer isn’t expanding their product line, there’s often a need to replace or expand facilities to enable them to better meet the market needs. Whatever is driving the need for facilities, these young farmers require lending solutions.
New equipment: As machinery ages out of production, there is a plethora of intelligent solutions that can transform the productivity of the operation. With precision ag tools that make it possible to do everything from analyzing soil health to identifying the right dose of fertilizer to considering automated milking “bots” that reduce the need for human labor, accessing capital for these advanced technologies can be a game-changer for long-term viability of these operations.
Real estate: Settling the farm estate can be another hurdle when it comes to transitioning to the next generation. This is especially true when there are non-farming siblings to buy out or who decide to enter an ongoing rental agreement. A well-executed succession plan can go a long way in helping the next generation keep the farm operational. But with elevated farm land values, balancing family obligations with the needs of the operation can create serious hurdles for the producer, particularly if they were hoping to add acreage to grow.
Keys to a successful transition: Catering to the operation’s cash flow needs
Taking over a farming operation isn’t as simple and straightforward as it was in our father or grandfather’s generation. These new farmers often require additional capital to settle with family members, and acquire the equipment and facilities needed to achieve their business plan. But even the most thoughtfully executed farm succession plan can’t address all the funding gaps they’ll face when it’s time to take the reins.
Financing solutions that support new farmers by allowing them to leverage growth will be crucial to the success of the rising generation of ag producers that are driven to build on the family legacy.
Partnering with Agri-Access can provide multiple solutions to help you bolster your offerings to the next generation of ag producers.
Participation loans: Gain the ability to offer real estate loans that are structured to help new farmers maintain liquidity with our participation lending solutions. You can offer larger loans at longer terms that accommodate cash flow while reducing your risk.
Streamlined appraisals: Save valuable time with our services and programs that expedite the appraisal process.
Leasing: When it comes to making farm improvements before the transition, whether it’s adding a facility or grain bins, leasing provides a seamless solution for anyone’s succession plan.
Now is an opportune time to establish resources and lending solutions for producers who are taking over their family operation.
To learn more about how Agri-Access can help you do more to serve and support this growing contingent of producers, connect with us.