Editor's Note: Rising land costs, low grain prices, sharply higher input prices, market instability and other factors have combined to challenge profit margins for agricultural producers. Farmers and ranchers continue to evaluate multiple options to finance their short- and long-term farming needs. This ranges from types of lenders and lending programs to what role farm policy/government policy plays. Whether you're a young farmer starting out, arranging your succession plan for the next generation, or wondering what lenders foresee for the next few years and how best to approach them, this special DTN series Finding Farm Financing provides insight and tips to help you.

Today, the second story in the series looks at some of the new credit opportunities for farmers and why they might want to consider different ways of doing business, including using a new digital calculator tool to help them.

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Farmers may be harvesting the 2025 crop, but they're preparing for 2026, too. While most look for deals on next year's seed, chemicals and fertilizers, many will also shop for lenders and compare the cost of capital closely.

"It's challenging, at times, out there," said Matt Falk, chief financial officer (CFO) for his wife's family farm as well as a fractional CFO for several large, primarily cash rent operations. "The farmer is trying to manage cash-flow however they can, and so having access to credit, even if they don't use it, is very helpful."

After several years of near- or below-breakeven profits, farms in crop-heavy production areas are repaying their non-real estate loans at a lower rate, according to survey data from the Kansas City Federal Reserve. Data shows demand for operating notes is rising.

"Obtaining and ensuring we have an operating line of credit is always the most important thing," Falk explained, "because if a farmer doesn't have a loan, then they don't have a farm."

For some, 2026 will be business as usual. For others, it may mean restructuring debt with their current lender to obtain next year's operating note. For a few, it may mean finding a new lender altogether.

Cash isn't necessarily king in this environment, said David O'Malley, manager of agribusiness and aftermarket for John Deere Financial North America. "There's not a lot of it out there, and if you do have it, it's probably best to hold onto it and use alternative sources of financing and capital."

BEYOND THE BANK

Without large portfolios of farmland to use as collateral, many of Falk's clients are limited to a handful of nontraditional lenders, like Ag Resource Management, FarmOp Capital, Conterra and others. These tend to be private-equity-backed organizations that lend based on your anticipated production, crop insurance and future cash-flows.

These types of lenders, when combined with vendor financing and individuals, hold roughly 10% of U.S. farm debt, according to data from USDA's Economic Research Service. As of 2023, 46% of farm debt was held by the Farm Credit system, 35% by commercial banks and 3% by USDA's Farm Services Agency.

Kansas State University Flinchbaugh Agricultural Policy Chair Jennifer Ifft said she thinks alternative and vendor finance's share of farm debt is larger than currently reported.

"We hear that demand for alternative financing is through the roof," she said, but since these companies are not subject to the same reporting requirements as banks, it's difficult to assess how popular they are.

Keir Renick, CEO of FarmOp, said businesses like his don't take customer deposits, so they can make more flexible credit offerings.

Renick said private credit lending has been around for more than 40 years in the commercial real estate and corporate lending space.

"I think ag has just been a little bit behind because it hasn't really needed it, in my opinion," Renick added, stating that the creation of Farm Credit solved many of farming's lending struggles until "the catalyst of young farmers that are renting more ground" presented different lending needs.

DIFFERENT WAY OF DOING BUSINESS

Doing business with FarmOp or any of the alternative lenders is different in a lot of ways, Falk said. While they carry higher interest rates than what you can find at a bank, their timing and structure allow farms to buy inputs at optimum times.

"In an ideal world, you would have a lender capable of opening a 2026 line of credit in late 2025," Falk said. This is an advantage FarmOp and others have since traditional lenders may want end-of-year financials before renewing. One of the farms Falk manages saved 14% on seed last fall because it could prepay using the operating line for his upcoming season.

He said he finds nontraditional lenders take less time to underwrite loans but are more involved in the operation. Rather than being able to draw on a line of credit for any cost, most break costs down into subcategories, like rent, seed, inputs, etc., and make the funds available during specific time frames. Checks for large expenses, like rent, will be cut directly by the company.

"It takes a bit of getting used to," Falk said, adding that it's how these companies "prove to their funding source that the loan is well-managed."

In addition to being involved in crop-insurance decisions, they're often involved in the hedging of grain and monitoring inventories, since this is their collateral.

LEAN ON SUPPLIER CREDIT

Falk said his clients regularly use credit from suppliers and vendors alongside their operating notes to manage their cash-flow, whether it's to secure discounts on products, earn lower interest rates or secure repayment terms that fit with their production schedule.

John Maman, Nutrien Financial's senior director of North America, said these unsecured lines of financing can free up the primary operating note to pay for critical expenses like rent and labor. There are a wide variety of programs available, but they all vary by product and brand.

"It's not that individuals fail to use these programs because they're not beneficial. The real challenge is awareness -- many simply don't know these resources exist," he said, adding that his company just launched the Nutrien HUB, which connects customers and their crop consultants to financial services and resources.

Deere's O'Malley said their interest rates for crop inputs, parts and service are significantly lower than what farmers can find from banks and traditional lenders.

Farmers also have more tools than ever to research what's out there. The website https://InputFinance.com/… was launched by John Deere Financial to help farmers locate the best offers, rates and terms for seed and crop-protection products. A digital calculator is integrated to analyze how much interest you can save versus your operating line of credit at the bank.

"For example, a $100,000 crop input purchase at 1% interest would save a farmer over $9,000 a year in interest and would not be due until after the 2026 harvest. Lower overall interest costs and improved cash-flow ultimately help a grower lower their cost per acre as they work toward a profitable season," he said.

Maman said the amount of transparency and resources farmers have to navigate these programs is at an all-time high. But, while the digitization makes it easy, sometimes the best approach is old-fashioned.

"If you have trusted advisers, put them in that combine with you and talk about options to improve your financial position," he said, adding it's an especially good time to include retailers, because fall is often when the best promotions are available.

Falk added that farmers will be looking for all possible sources of savings this year.

"Any little spot to help with profitability or to cut costs is helpful," he explained. "It's absolutely, positively tough times out there in ag."

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See more on DTN's Finding Farm Financing series:

-- Finding Farm Financing - 1, "Farmers, Lenders Work Together to Help Farms Stay Profitable Even With Tighter Margins," https://www.dtnpf.com/…

-- Minding Ag's Business, "Off-Farm Jobs Won't Salvage This Farm Crisis," https://www.dtnpf.com/…

Katie Dehlinger can be reached at katie.dehlinger@dtn.com

Follow her on social platform X @KatieD_DTN

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