Farmers face unique financial challenges, such as fluctuating income, seasonal expenses, volatile costs, and significant investments in equipment and infrastructure. Access to appropriate financing options helps manage these challenges and supports sustainable farm operations. Two primary financing options available to farmers are agriculture lines of credit and agricultural loans. Both come with their own set of advantages and disadvantages, but what are the differences between these two financing options, and which is the best one for you? 

Agriculture Lines of Credit

What is an Agriculture (Operating) Line of Credit?

An agriculture line of credit is a revolving credit option that allows farmers to borrow, repay, and re-borrow funds up to a specified limit. It offers flexibility for managing short-term expenses and working capital needs.

Key Features of Ag Lines of Credit

• Revolving Credit: Allows funds to be borrowed, repaid, and reused multiple times within the credit limit.
• Flexibility in Borrowing and Repayment: Borrowers can access funds as needed and repay them when it suits their cash flow.
• Short-Term Use: Typically used for short-term operational expenses like seed, feed, fertilizer, and more.

Advantages of Lines of Credit

• Financial Flexibility: Provides financial flexibility for seasonal or fluctuating expenses, allowing farmers to access funds when needed.
• Interest on Usage: Interest is charged only on the amount of credit used, not the entire credit limit, helping to manage borrowing costs.
• Cash Flow Management: Helps bridge gaps in income and manage cash flow during low-income periods. 

Disadvantages of Lines of Credit

• Higher Interest Rates: May have higher interest rates compared to traditional loans, increasing the cost of borrowing.
• Periodic Renewal and Re-qualification: Requires periodic renewal and re-qualification, which can be time-consuming and stressful.
• Lower Borrowing Limits: Often have lower borrowing limits compared to agricultural loans, potentially restricting available funds. 

Agriculture Loans

What is an Agriculture Loan?

An agriculture loan is a lump sum of money borrowed and repaid over a fixed term. These loans are generally used for long-term investments and significant purchases.

Key Features of Ag Loans

• Lump Sum Financing: Provides a single lump sum that is repaid over a specified period.
• Fixed or Variable Interest Rates: Loans can have either fixed or variable interest rates, offering predictable repayment schedules or potentially lower initial rates.
• Used for Long-Term Investments: Suitable for substantial investments like purchasing farms, land, equipment, or infrastructure improvements.

Advantages of Ag Loans

• Lower Interest Rates: Often have lower interest rates compared to lines of credit, reducing the overall cost of borrowing.
• Predictable Payments: Fixed repayment schedules provide predictable monthly costs, letting you plan your finances without any surprises  
• Facilitates Large Investments: Allows for larger, long-term investments in farm operations and equipment, supporting growth and development. 

 Disadvantages of Ag Loans

• Less Flexibility: Fixed repayment schedules offer less flexibility compared to the revolving nature of lines of credit.
• Collateral Requirements: May require collateral or a down payment, increasing the initial financial burden.
• Prepayment Penalties: Some loans may impose penalties for early repayment, limiting financial flexibility. 

Choosing Between Ag Lines of Credit and Loans

Factors To Consider

• Purpose of Financing: Determine whether the need is for short-term operational expenses or long-term investments.
• Amount Needed: Evaluate the borrowing limits of each option and how they align with your financial requirements.
• Interest Rates: Compare the interest rates offered by each option and their impact on overall costs.
• Flexibility and Cash Flow: Assess your need for flexible repayment terms and how each option affects your cash flow. 

Discuss Your Options with an Agricultural Lender

Consult with an agricultural lender who can provide personalized advice and help you understand the best financing options for your farm's specific needs. They can assist in tailoring a financial strategy that incorporates both lines of credit and loans or help you choose the financial option best for you.

Consider Both Financing Options

You don’t have to restrict yourself to just one type of financing. In many cases, using both agricultural lines of credit and loans in combination can provide the best of both worlds. Lines of credit can cover short-term, flexible needs, while loans can support larger, long-term investments. This combined approach can enhance financial stability and support sustainable farm growth.

Ag Lines of Credit vs Ag Loans

Agriculture lines of credit offer flexibility for short-term needs with revolving credit, whereas agricultural loans provide a lump sum for long-term investments with fixed repayment schedules. Understanding these differences and working closely with an agricultural lender can help you select the best financing solution to ensure your farm's success.  

Have questions about the perfect loan for your business? Contact us today to see how we can help you. 

Choosing the right agricultural lender can significantly impact the success of your farming operations. Agricultural (Ag) lenders play a crucial role in providing the financial support necessary for purchasing equipment, expanding operations, and navigating the unique financial challenges of farming. This blog will guide you through the essential factors to consider when selecting an agricultural lender, ensuring you make an informed decision that supports your farm's goals and growth. 

The Role of Agricultural Lenders in Farm Success

Agricultural lenders are more than just financial institutions; they are partners in your farming business. They provide the capital needed to invest in new technologies, land, and infrastructure, which can improve productivity and profitability. A good agricultural lender understands the cyclical nature of farming, including the seasonality and specific financial challenges that come with it. They serve as a confidant and someone you can bounce ideas off of. By choosing the right lender, you can secure the necessary loans and products that align with your farm's cash flow and growth plans.

How to Vet Your Ag Lender

When evaluating potential agricultural lenders, it's essential to thoroughly vet them to ensure they can meet your farm's needs. Here are some key aspects to consider: 

Industry Experience and Knowledge

One of the most critical factors in selecting an agricultural lender is their experience and understanding of the agricultural industry. An ag lender with extensive industry knowledge will:

• Understand agricultural cycles and seasonality, providing financing options that align with these patterns.
• Be familiar with the specific needs and challenges of your farm type, whether you run a dairy farm, grow crops, or manage a vineyard.
• Offer valuable agricultural industry insights and advice that can help you make informed business decisions. 

Flexibility and Customization

Every farm is unique, and your financing solutions should reflect that. Look for an ag lender who is willing to:

• Tailor financing solutions to meet your farm's specific requirements.
• Offer a variety of loan types and repayment options to suit your financial situation.
• Discuss and adjust terms as needed to ensure the loan remains manageable throughout its duration.

Competitive Rates and Fees

The cost of borrowing is a crucial consideration. Finding the best interest rate and fees means you’ll not only be getting a loan that will have a positive impact on your finances, but one that you’ll be able to pay back. Ensure your ag lender offers:

• Competitive interest rates on loans to keep your financing costs low.
• Transparency in fees and charges so you know exactly what you're paying for.
• Good value for the cost of borrowing, ensuring you receive the support and services you need at a fair price.
• A key question to ask your lender is whether or not there are prepayment penalties. 

Strong Financial Stability and Reputation

Choosing an ag lender with a solid financial foundation and a positive reputation in the agricultural community is vital for long-term success. Look for:

• A proven track record of financial strength and stability, indicating the lender's ability to support you in the long term.
• Positive testimonials and references from other farm owners who have successfully worked with the lender.
• A good reputation within the agricultural community, which can be a reliable indicator of the lender's reliability and trustworthiness. 

Responsive Customer Service

Good customer service can make a significant difference in your lending experience and help resolve any problems you might encounter. Ensure your ag lender provides:

• Easy access and responsiveness to inquiries, ensuring you get the answers you need promptly.
• A dedicated point of contact for your account, so you always know who to turn to for assistance.
• Prompt turnaround times for loan applications and decisions, helping you secure funding when you need it most.

Additional Resources and Support

Beyond financial support, a great ag lender offers additional resources that can help you manage your farm more effectively. These may include:

• Educational resources and workshops on farm financial management, helping you improve your business knowledge.
• Referrals to other agricultural professionals, such as accountants and insurance agents, to provide comprehensive support.
• Assistance with government programs and grants, ensuring you take advantage of all available financial opportunities.

Long-Term Partnership Potential

Finally, consider the potential for a long-term partnership with your ag lender. A lender committed to building a long-term relationship will:

• Show a willingness to grow with your farm over time, providing support as your needs evolve. A track record of building long lasting relationships with clients is a good indication of long-term partnership potential.
• Offer opportunities for future collaboration and support, ensuring you have a reliable financial partner as your farm expands.
• Demonstrate a commitment to your success beyond just the bare minimum, helping you navigate challenges and seize opportunities.  

Choosing The Right Agricultural Lender

Choosing the right ag lender is not just about securing a loan, it's about finding a partner who will support your farm's journey. Take the time to vet potential lenders, consider their industry experience, flexibility, rates, reputation, customer service, additional resources, and long-term partnership potential.  

Have questions? Contact us today to see how we can help you. 

Farm Credit recently awarded $100,000 in prizes to ten beginning farmers through their Farmers on the Rise program. Each recipient received $10,000 to help their operations grow and honor their outstanding achievements in agriculture. The following agriculturalists received this year’s honor:

• Jonathan and Laura Brittingham of Millsboro, Delaware
• Ashlee Butkiewicz of Factoryville, Pennsylvania 
• John-Robert and Gracie Helsley of Edinburg, Virginia 
• Chris and Emily Molnar of Pipersville, Pennsylvania 
• Andrew and Theresa Mussaw of Elkton, Maryland 
• Cindy Smith and Beth Williams of Knoxville, Maryland 
• Rhonda Smith of Portage, Pennsylvania
• Katie Stevens of Frederick, Maryland
• Mackenzie and Eli Strawser of Herndon, Pennsylvania 
• Jesse and Lisa Vivian of Brockway, Pennsylvania 

“With more than 100 applications from producers located across our 100-county footprint this year, it is certainly encouraging to see so many hard-working individuals paving their way in agriculture” says Tom Truitt, CEO of Horizon Farm Credit. “The journeys we see through the Farmers on the Rise program excite us about the future of agriculture and inspire all of us at Farm Credit to continue serving those who work tirelessly each day to pursue their dreams. We are honored to support beginning farmers, like those selected for this award, and we cannot wait to see the continued impact they make toward building a strong and vibrant agriculture industry.” 

Steve Connelly, the Deputy Secretary of the Maryland Department of Agriculture, was present to recognize and congratulate award recipients, noting that Maryland and other states’ departments of agriculture are proud of the achievements of beginning farmers.  

The Farmers on the Rise program was established in 2021 to honor beginning farmers with three to ten years of experience from diverse agricultural communities. Recipients are selected based on their efforts in agriculture, financial character, leadership and community involvement, and environmental stewardship. To learn more about the program, click here.

In today's fast-paced world, efficiency and productivity are more important than ever. For farmers and farm-related businesses, the concept of process improvement might seem more relevant to big corporations than to your daily operations. However, implementing process improvement strategies can bring significant benefits to your personal and professional life.

What is Process Improvement?

Process improvement involves examining and refining your current practices to eliminate waste, reduce costs, and enhance productivity. It's about working smarter, not harder. By focusing on what your customer values and eliminating as much that they don’t value as possible, you can achieve better results with less effort.

Benefits of Process Improvement for Farmers and Farm-Related Businesses

1. Increased Productivity: Streamlining operations can help you complete tasks more quickly and efficiently, leading to higher yields and better resource management.
2. Cost Savings: Identifying and eliminating waste in your processes can reduce expenses, allowing you to invest more in other areas of your business.
3. Improved Quality: Consistent processes lead to more consistent results, which can improve the quality of your products and services.
4. Better Resource Management: Efficient processes help you make the most of your time, labor, and materials, leading to a more sustainable operation.

Practical Steps for Implementing Process Improvement Strategies

1. Identify Customer Value: Start by identifying what you offer that your customer values most – the things they pay for. 
2. Analyze Current Practices: Look at how you currently deliver value to the customer. Are there any bottlenecks or areas where time and resources are being wasted?
3. Eliminate Waste: Anything that unnecessarily extends the time it takes between you paying for materials and a customer paying you to buy a product is a waste. Example of waste include defects that cause rework, producing more than a customer wants and then having to sit on the extra inventory, and excess transportation of materials and final products.

Even if you're not running a business full time, process improvement can still have a significant impact on your daily life. By applying these principles to your household chores, personal projects, or hobbies, you can save time and reduce stress. For example, streamlining your morning routine can help you start your day more efficiently, leaving you more time for the things you enjoy.

Process Improvement at Farm Credit

At Farm Credit, we are committed to providing the best possible experience for our members. One of the ways we achieve this is through continuous process improvement. By refining our operations and focusing on efficiency, we can offer better services and products to our members. 

Earlier this year, we established a dedicated team to help us implement process improvement strategies across the organization. In addition to investing in new technologies, training our employees, and gathering customer feedback, our process improvement approach involves analyzing and optimizing our methods to eliminate waste where we can, reduce costs, and enhance productivity. This allows us to deliver higher quality service and an enhanced customer experience while maintaining competitive rates.  

Process improvement is not just for big businesses. By adopting these strategies, farmers and farm-related businesses can enjoy increased productivity, cost savings, and improved quality in their operations. Start small, be consistent, and watch as these improvements make a big difference in your life and work.

As fall planting season rolls on, farmers face risks from unpredictable weather patterns and potential crop damage, especially from hail fire. For many, Crop Hail Insurance provides valuable peace of mind, offering financial protection against specific perils that can affect crops in the field. Here’s a closer look at Crop Hail Insurance and why it’s an essential consideration during the fall season.

What is Crop Hail Insurance?

Crop Hail Insurance is a unique policy that differs from multi-peril crop insurance. It provides specialized coverage for damage directly related to hailstorms and certain other risks, from the time your crop starts emerging until it reaches its first storage destination. Unlike broader crop insurance policies, Crop Hail Insurance can be added at almost any point during the growing season, making it a flexible choice for farmers.

Coverage Provided by a Crop Hail Policy

A Crop Hail policy is designed to address specific risks that can impact crop value and yield. Here’s what it typically covers:

• Hail Damage: The core of the policy is protection against hail, which can devastate fields and ruin crops in a matter of minutes.
• Fire Damage: Coverage includes not only natural fires but also those that result from equipment malfunctions that may damage crops either in the field or during harvesting.
• Transit Coverage: This extension covers crop transport to the first place of storage, up to 50 miles. Protection includes incidents like windstorms, collisions, overturns, and structural collapses (bridges, docks, and culverts).
• Fire Department Costs: If fire response is necessary, the policy can cover up to $250 in related expenses, alleviating some of the costs for emergency services.

Key Points to Keep in Mind

• Effective Date: It’s important to note that Crop Hail Insurance has a 48-hour waiting period from the time the policy is signed until it goes into effect. This waiting period is standard, so plan accordingly to ensure coverage before anticipated weather risks.
• Acreage Flexibility: Farmers have flexibility with Crop Hail Insurance; it’s not required to insure every acre of a particular crop within a county. This allows you to select the coverage that best aligns with your risk assessment and budget.
• Annual Policy Renewal: Unlike multi-peril crop insurance policies, which are continuous, Crop Hail Insurance requires renewal each year. Your agent will need to rewrite the policy annually, so be sure to check in to ensure you’re covered for the new season.

Why Consider Crop Hail Insurance This Fall?

As weather becomes increasingly unpredictable, having a safety net like Crop Hail Insurance can be a strategic choice. Protecting against unexpected hail damage and other risks can help you secure a return on your investment and mitigate the impact of unforeseen losses.

Whether you're looking to add coverage mid-season or prepare for next year, Crop Hail Insurance offers tailored protection that helps keep your farm and finances secure during harvest season.  

Farm Credit’s crop insurance agents are knowledgeable and prepared to help discuss coverage options to ensure your crops have the protection they need. Contact us today at 888.339.3334 or learn more here. 

Horizon Farm Credit sees growth in 2024 third quarter, announcing strong financial results. Net accruing loan volume for the first nine months of 2024 was $7.0 billion, an increase of 7.0% compared to the same 2023 period. Net interest income for the third quarter of 2024 was $49.8 million, a 17.6% increase from the same period in 2023. Net income for the quarter was $30.1 million, a 3.2% increase compared to the third quarter of 2023. The favorable impact of the 2024 third quarter results is principally related to increased loan volume.

Nonaccrual loans increased $1.2 million in the third quarter of 2024 to $29.2 million, compared to $28.0 million at December 31, 2023, and decreased $1.5 million compared to $30.7 million at September 30, 2023. The Association’s nonaccrual loans as a percentage of total loans decreased to 0.41% at the end of the third quarter of 2024 compared to 0.42% at the end of 2023 and compared to 0.48% at the end of the third quarter of 2023.

“The success we’ve seen in 2024, and especially the third quarter, is a direct result our of member-borrowers’ resilience,” said Tom Truitt, Horizon Farm Credit’s Chief Executive Officer. “Our mission is to support rural America with consistent and reliable credit that allows borrowers achieve their dreams. Horizon Farm Credit’s strong financial position reflects the accomplishments of our members, and we’re proud to support them in their journeys.” 

Members’ equity as of September 30, 2024, totaled $1.3 billion — up 8.1% from December 31, 2023. Total Regulatory Capital Ratio was 15.68% as compared with the 10.5% minimum mandated by the Farm Credit Administration, the Association’s independent regulator. The Association paid a cash patronage distribution of $79.5 million to its member-borrowers in the first quarter of 2024.

For more information about the financial results and Horizon Farm Credit, click here.

By Nathan Briggs, Ag Relationship Manager

In today’s poultry industry, most growers operate under contracts with integrators, where the integrator owns the chickens, provides the feed, and handles the processing. However, some integrators, particularly in the laying industry, are beginning to offer options for growers to own all or a portion of their flock. While this arrangement allows growers to receive more revenue for their product, flock ownership also comes with increased responsibilities, risks, and costs.

To help determine whether the risks of flock ownership are worth the potential rewards, growers should carefully consider the following questions:

Key Questions to Consider Before Flock Ownership:

1. Timing and Motivation:
   • When did you start considering bird ownership?
   • Why do you believe now is the right time to move forward?
2. Industry Experience:
   • Do you have prior experience in the poultry industry?
3. Partnerships and Contracts:
   • Are you seeking to partner with an integrator for bird or egg purchasing?
   • Can you secure a reliable and long-term egg purchasing contract?
4. Expert Guidance:
   • Who will provide veterinary advice?
   • Who will offer nutritional guidance?
   • From whom will you purchase genetics lines?
5. Financial Considerations:
   • How will you cover upfront feed and pullet costs?
   • Do you need a revolving line of credit for operating expenses?
   • What is your exit strategy if the investment does not work out?

Starting any type of poultry operation is a significant investment. Poultry barns and fixtures are typically financed over 12 to 15 years. If a grower is considering flock ownership, they may also need financing for the birds, with the loan term generally matching the length of rotation. For laying birds, this term is typically 15 to 18 months. Additionally, since flock ownership means the grower is responsible for providing feed, a revolving line of credit may be necessary to finance feed and other operating expenses. It is expected that this line of credit should fully revolve with each flock rotation.

Maintaining appropriate levels of working capital is crucial for any poultry operation, but especially for those with flock ownership. Unexpected expenses can arise, making it essential for growers who own their birds to have cash readily available.

Flock ownership is a significant decision, with many opportunities and risks to weigh. If you are considering flock ownership, reach out to our team of experts at Horizon Farm Credit today to discuss your individual situation.