Current Progressive Cattle digital edition

Alternative land loans meet the financing needs of cattle operations across the U.S.

Brian Philpot for Progressive Cattle Published on 15 January 2020

There are many factors that go into running a profitable farming operation. In an industry that faces several influencing factors such as new technology, government regulations, climate change, commodity pricing and tariffs, the potential impact on your operation’s bottom line is high.

Over the past decade, the United States has lost an average of 1% of U.S. farms annually, and when analyzing the rate of bankruptcies per 10,000 farms, the American Farm Bureau Association reported that it’s the highest it has seen since 2011, marking four consecutive years of rising bankruptcy rates as a proportion of the farm population. Moreover, farm debt this year has increased approximately 40% to a record $416 billion, according to the USDA.

Shifts in U.S. farm size and acreage

According to the census, the U.S. laid claim to 2,042,220 farm operations covering a total of 900,217,567 acres. When it comes to size and acreage of America’s farms, the 2017 census simultaneously showed both growth and decline. In terms of actual number of farms and acres, the number of farms decreased 3.2% and the number of acres decreased 1.6%.

Although the number of farms and acreage decreased, average farm size actually increased, from 434 to 441 acres between 2012 and 2017.

As stated by James MacDonald, chief of the structure, technology, and productivity branch at the USDA’s Economic Research Service, “Land is moving out of mid-sized farm classes and into the largest class.” This consolidation is evident, indicating a trend toward more large farms.

Despite the gradual shift toward larger or commercial operations, U.S. agriculture remains dominated by family farms. Nearly 96% of operations are family-owned.

Alternative farm loan solutions

Financing the family farm and ranch has become more difficult as farm income continues to decrease year-over-year, making it challenging for farmers and cattle ranchers to have cash on hand to operate their farm and repay their agricultural loans. As a result, traditional lenders and banks are tightening their credit qualifications – leaving operators holding rejected applications instead of much-needed operating capital. Despite these challenges, the resilience of farmers and cattle ranchers, as well as advances in alternative lending solutions are creating financing opportunities for operations of all sizes.

Alternative land loans can meet farmers’ and cattle ranchers’ needs by offering creative ways to refinance their operations to open up significant cash flow, recover from a bad year or provide cash-out options for operating expenses, all while continuing to run their operations for generations to come. With an alternative loan, an operator’s land, and even the operation’s outstanding invoices, can be used as the primary collateral. If you are in need of alternative ag financing, here is a quick checklist to determine if you may qualify for a loan:

  • Good land equity
  • Good farming history and longevity
  • Good prior on-time payment history
  • Good diverse crop mix and willingness to amend 
  • Good projected cash-flow potential

When traditional financing can’t meet the needs of your operation, consider learning more about alternative lending solutions offered by non-bank lenders that could offer you a lifeline where traditional banks cannot.  end mark

Brian Philpot is the CEO of AgAmerica Lending.