It has been a tough year for many farmers and ranchers. The average profit margin for commodity crop growers in the US in 2024 has dropped from over 30 percent in 2022 to less than 16 percent this year. (1) So how does a farmer or rancher make it in 2025? Here are a few alternative ways to finance your ag operation.
Ag Loans from the USDA
Depending on your operation, there are many loans available through the USDA. The Farm Service Agency (FSA) offers loans that can help with operating expenses, purchasing land, and many other needs.
This year some ag operations may fall into the “distressed farm” category and be eligible for additional federal financial assistance. Be sure to check early because these programs tend to be underfunded.
These are loans, not grants, and will need to be repaid. There are grants and subsidies offered by the federal government. If you’re an underserved farmer or rancher, check these out because they don’t have to be paid back. Of course, there’ll be some paperwork involved. Again, apply early.
Restructure Existing Debt
Debt restructuring and consolidation is a common way for ag operators to manage cash flow more effectively. There are both benefits and potential risks with this method of ag finance.
Debt Restructuring Benefits
You can consolidate multiple debts into a single loan. You may be able to negotiate a lower interest rate, and this could lower your monthly cash outlay. It is common to lower your interest rate during restructuring, but it is not a guarantee, so do the math. Consolidation comes with origination fees between 1 and 10 percent of the total loan amount.
Debt Restructuring Potential Risks
Restructuring debt is a temporary fix. When you restructure, you extend the repayment period, and if you’re not careful, you could end up with more debt.
Lenders like to lend to folks who have debt and a good payment record. This is both a negative and a positive. It’s why the average farm debt rose 4.2 percent between 2023 and 2024. The average debt-to-asset ratio in the farm sector is 12.81 percent, according to the USDA.
Alternative Lenders for Agricultural Operators
Funding your ag operation can be achieved without going to a bank or the federal government. But any alternative lenders will want the same proof of efficient operation as a local bank.
Numerous organizations loan to farmers and ranchers. Alternative lenders have identified gaps in the services banks offer and are filling them with convenience and more flexible credit terms. They tend to have quicker turn-around times. They also tend to have higher interest rates and shorter payback periods.
Whereas banks almost always want some collateral (ie: the bank owns the farm), alternative lenders are more flexible. Have your attorney, tax advisor, accountant, and anyone else who is looking out for your best interests advise you.
Bank ag financing is a topic all by itself. And that’s what our next blog will discuss. Be sure and follow so you’ll get the scoop on banks, money, and your ag operation.
Money issues are always complicated. However you decide to fund your ag operation, keep people around you who have your fiscal interests at heart. Read the fine print. We aren’t lawyers or accountants, but we’ve been farmers. We know some of the pitfalls to avoid. You need a trusted advisor to help you navigate the waters. (2)
At ST Biologicals, our team is committed to helping farmers succeed. As we go into what appears a very lean period for profit margins we are here to offer support and advice. We know it’s all about the soil, but we also know we want to keep our farmers and ranchers on the land for many generations. When you succeed, we succeed. When soil speaks, we listen.
