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Advice From an Agriculture Lender For Young Producers

img_5310.JPG Ask an ag lender what it takes to be in production agriculture and many will say, “A million dollars.” While the financial aspect of farming and ranching can seem astronomical at times, production agriculture still offers amazing opportunities for young people with realistic goals in mind and a detailed financial plan in place.

While at the Ag in the Classroom event last week, I had the opportunity to discuss this topic with Will Haugen, agriculture lender at First Dakota National Bank in Mitchell, SD, who offered recommendations for young people considering getting into livestock production. Haugen advised young people who are making plans to get into production agriculture to sit down and punch some numbers to gain a better perspective on the initial investments and cost of production. In today’s highly volatile age, it’s increasingly important for producers to know their limits. Read on for additional thoughts to consider on this topic.

“So many people expect to just come in and sit down with a banker and immediately get a loan,” said Haugen. “It’s critical to know your cost of production and bring in good records for the lender to consider. Part of my job is educating and guiding producers in developing a plan, so sometimes it’s beneficial to come in and simply ask questions.

I understand the trials and tribulations of farmers and ranchers today. It’s important to know where you are financially and to not bite off more than you can chew. Debt can be beneficial if producers use the funds effectively and can make money off that debt. The average farm has a rate of return of 14%. If producers keep that in mind, they can make smart investments in the future.

The key is to have supplemental income, 70% of farms rely on off-farm income but just because you have a job in town, doesn’t mean it’s okay to go ahead and pay escalated rent prices, buy that expensive tractor or use it as an excuse for sub-par management. It’s still important to keep your cost of production down, and strive to be the most efficient producer.

Finding a mentor to learn from is a great way to ask questions from someone who is already successful in production agriculture. Also, producers need to look for ways to improve their operations, and it’s important to work closely with nutritionists, veterinarians and geneticists. Never stop learning. Another great way for a young person to get in the business is to work for another producer. This gives young people the opportunity to have cows on shares, lower their risk and keep debt to a minimum.”

Thanks for the advice, Will! I certainly found the information and advice incredibly useful, and I know others will, as well. For more information on ag lending, see the listed resources from BEEF. So, what's your story? Are you just getting into production agriculture? Are you a seasoned veteran? Do you work elsewhere in the industry? I want to hear from you!