Credit is the lifeblood of agriculture, described Chad Jorgensen of the Federal Reserve Bank of Chicago during the Fed’s Midwest Agriculture Conference. That’s why the focus of the event was how the financial sector must evolve to support new and beginning farmers who are taking up the effort to feed a growing world population.
Beginning farmers exhibit even more reliance on off-farm income than established farmers do, said USDA’s Jeffrey Hopkins. “This could be a symptom of access to credit,” continued the ag economist. Of course, the fact that these farmers are also typically younger likely also contributes.
In terms of what industries beginning farmers go into, Hopkins explained that their research shows beef cattle and cash grain farming as a clear top two commodities. Dairy stands out because a higher percentage of all dairy farms are classified as beginning farms (13%), Hopkins stated. That’s compared to 10% of beef operations being run by new farmers. Between 2013 and 2017, there were an average of 5,827 beginning dairies, according to USDA.
Land, technology, and market-based barriers are a few of the top areas cited as inhibitors for new and beginning farmers. In the capital-heavy business of agriculture, credit can often help ease these challenges, but it can also be hard to access.
Some progress has been observed in this area, as agricultural economics professor Bruce Ahrendsen said later in the conference that Farm Service Agency (FSA) direct and guaranteed credit programs appear to be crucial to helping beginning and socially disadvantaged farmers access loans. Socially disadvantaged is typically defined by farm operator race/ethnicity, and some programs also include gender. About 80% of FSA loans are given to beginning and/or socially disadvantaged farmers, he said. This exceeds the goal of 70%.
Despite the value in building business, research also showed that nearly 75% of socially disadvantaged farmers did not use credit in 2017, the University of Arkansas professor said. “Are they still underserved?” he asked.
Ahrendsen noted that in the 2017 agriculture census, 23.9% of primary farm operators were women and 7.8% were identified as a minority. In all demographic groups, the share of beginning farmers grew from 2012 to 2017, he added.
This indicates that there will only be a continually growing need to ensure beginning and socially disadvantaged farmers have access to the tools that will allow them to develop and maintain a successful farm. Tax policies, conservation programs, innovative real estate opportunities, and successful farm transitions were among the possible solutions discussed by the conference’s presenters. They also challenged each other and the entire financial sector to continue looking at how they can better serve the needs of these populations.