Beginning farmers and the next generation in agriculture face significant hurdles, including the high cost of capital and limited access to land. Technology is allowing the older generation to stay in business longer, too, creating a difficult environment to bring people into farming.
As senior vice president of business development at Farm Credit Services of America, Jason Edleman is focused on helping young producers and beginning farmers develop stronger financial skills so they can make better and more informed business decisions on the farm.
“One of the ways we are doing this is by setting up our lending officers to also serve as coaches for about four years with a group of about 50 to 60 customers,” Edleman explains. “From balance sheet training to cash flow lessons to understanding your family’s living expenses, their goal is to help customers through one-on-one coaching and classroom-style lessons to hone basic skill sets that will help them be financially responsible.”
He says it’s surprising how many people would guess they live for about $35,000 a year when in reality it’s likely closer to $120,000 a year.
“As lenders, we think about these things all the time,” Edleman says. “But for a beginning farmer or young producer, those skills take time to develop.”
Empowering Risk-Takers with Financial Understanding
He is excited about the next generation in agriculture as they bring a lot of different skill sets to the industry that are new and exciting. They’re also very creative in how they’re going to market, too.
“Their adaption to technology and how they learn and grasp information is so much different,” Edleman says. “I use the example of how my son (who is not a farmer) learns. He watches a 3-minute YouTube video, and then he goes and does it. His generation is not afraid to tackle stuff, but they just need some access points to learn.”
Farm Credit Services of America (FCS America) wants to help fill those learning gaps, he adds. FCS America is doing that through its Starting Gate program designed to empower and develop the future of agriculture by providing young and beginning farmers with personalized coaching in agricultural finance. Participants work with FCS America professionals to build skills in budgeting, financial planning and risk management, creating a strong foundation for their business goals.
For more than 20 years, they have been hosting the Side X Side Conference for producers 35 years of age or under or farmers who have been farming less than 10 years. It features educational sessions, inspirational speakers and networking opportunities all geared to help producers better understand the financial side of the business.
“We recognize the challenges our producers are having and believe this program and hands-on coaching can have a generational impact,” Edleman says. “Years ago, we realized from a financial acumen standpoint, a majority of producers can’t put their balance sheets together on their own and don’t have a good understanding of how a cash flow can help them in their operation’s decisions.”
He admits farmers may be good at the “napkin math,” and usually have all the numbers in their head. However, this doesn’t always translate when they tell their story to a lender and may not fully encapsulate all of their expenses.
“The more successful farmers understand financials – cost production, cash flows, balance sheet trends and what it means to their income statement – the better decisions they can make about the risks they can take,” he adds.
One of the best parts of the events is the networking that takes place.
“The boards in the back of the room are a great tool to build relationships,” he explains. “We challenge producers to put things on the board they are looking for. Maybe it’s a connection point on how to sell something, or maybe they need hay. Ultimately, they end up sharing ideas and sharing numbers.”
Several peer-to-peer groups have formed because of these conferences and now regularly meet to share ideas, best practices and build relationships, Edleman says.
Navigating Income Diversification and Side Hustles
Whether the new generation wants to add a second business or not, most have to find a way to dive into other sources of income such as contract finishing, hunting, spraying or trucking businesses.
“We’re seeing about 44% of young or beginning farmers have a side job whereas a traditional farmer probably is only closer to 36%,” he notes.
As lenders, Edleman says their goal is to help producers. Close communication and a greater financial acumen help producers better prepare for the unknowns in farming.
“I think this young group really shines because they’re not afraid to try new things,” he adds. “From drone technology to how they use AI to make decisions, they’re grasping things more quickly. I think that’s been a good thing as it creates other sources of income that these operations can leverage as well.”
Early Engagement and Succession Planning
For the “coaches” at Farm Credit Services of America, the extra one-on-one time allows them to really get to know their clients and bring up hard topics of conversation like succession planning.
“Personally, I don’t think any of us want to work on estate planning and think about the inevitable,” he says. “We’re trying to engage conversation around the fact that life doesn’t always shake out like we think. The more we can prepare people to think about these tough topics earlier, the better. We can’t change the direction of what that looks like, but we can continue to influence communication.”
Although coaching young and beginning producers one-on-one is where Starting Gate financial officers spend more of their time, Edleman says many are also branching out to teach classes and present on financial topics at technical schools and land grant universities.
“We’re spending more time engaging future farmers earlier,” he says.
At one technical school in South Dakota, lenders do mock interviews with students. They aren’t interviews to practice landing a job, however. They are interviews to practice seeing your lender for the first time.
“Where are young producers at when mom and dad go to see the lender? They’re at home doing chores,” Edleman says. “Their professors and our coaches help them apply for their first loan or learn what to ask during an interview. It’s a simple thing, but it’s a huge thing when you think about where they’re at in their journey.”
