Unique financing strategies among beginning farmers and ranchers: differences among multigenerational and beginning operations

Abstract

PurposeBeginning farmers have unique challenges securing credit because they are less likely to have established sales and collateral for secured loans. This article explores US beginning farmers’ financing strategies relative to those of established operations, with a focus on the source of financing and debt structure (short- vs long-term usage). Agricultural operations commonly use nontraditional financing tools and strategies to start, build and/or sustain their businesses. This article provides a comparative overview of financing strategies comparing established operators to operations with only beginning operators, as well as those multigenerational operations with at least one beginning operator.Design/methodology/approachThe study uses 2013–2016 USDA Agricultural Resource Management Survey data to explore how various financing patterns vary across US beginning farmers and ranchers with a particular focus on understanding differences where (1) all operators are beginning, (2) there is a mix of beginning and established operators and (3) all operators are established.FindingsThis article explores how the nature of beginning farmer status, human capital resources and alternative marketing strategies may influence financial management strategies and lead to differential use of nontraditional financing sources for beginning farmers and ranchers.Originality/valueThough exploratory, the authors hope that attention to patterns among US beginning farmers and ranchers of reliance on human capital resources including off-farm income and type of beginning farm operation, nontraditional government support programs and alternative marketing strategies can provide important information as to the role of nontraditional credit in the US farm economy.

Guest editorial: Nontraditional Credit in U.S. Agriculture

“…Tetteh et al (2022) highlight the dearth of data on collateral-based lenders, while Lyons and Takash (2022) provide evidence that various types of non-traditional lenders play a significant role in farm real estate lending. The findings of Ahrendsen et al (2022) suggest the importance of studying vendor finance for short-term inputs, while Thilmany et al (2022) suggest that beginning farmers pursue diverse financing strategies and these may not be well reflected in farm survey data. Further, current farm financial data sources tend to reflect producers that contribute the majority of agricultural production and are hence inherently less reflective of groups that contribute a small share of production, such as socially disadvantaged farmers [7].…”

“…The Thilmany et al (2022) study “Unique Financing Strategies Among Beginning Farmers and Ranchers: Differences among Multi-Generational and Beginning Operations” compares beginning farmer financing strategies to those of established operations. Beginning farmers can find it more difficult to secure credit from some traditional lenders, because they are less likely to have established sales and collateral for secured loans.…”

“…The Thilmany et al (2022) study "Unique Financing Strategies Among Beginning Farmers and Ranchers: Differences among Multi-Generational and Beginning Operations" compares beginning farmer financing strategies to those of established operations.…”