Redefining Success in Farm Lending

In some banking circles, lenders judge farms who spend less on crop inputs as ‘not trying hard enough.’ This is the opposite of how resiliency is defined going forward.

Glorifying yields – rather than profits and long-term resiliency – is the great mistake of industrial agriculture. Ultimately, it’ll be lenders left holding the bag when the money runs out of commodity farms.

Already feeling painted into a corner, prospects for sustained low grain prices are creating dire prospects for monoculture farms, which are said to be losing around $100/ac in the 2024 season. Unless a farm has already diversified beyond grain production into a side business (custom application, seed sales, equipment and product distribution are common examples), it’s going to need regenerative agriculture to survive financially in the years ahead.

Understandably, using backward-looking reports like tax returns and balance sheets, commodity grain farms still look like the most successful production system to banks. But now, traditional metrics such as a farm’s current ratio, equity and cash flow, leave lenders oblivious to future financial challenges and risks.