April 27, 2012
Financing Assistance for Young Farmers interested in Feedlot Operations
In 2011 a feeder-to-finish operation required 37% more equity than 2009…and prices continue to climb in 2012. When dealing with the increased equity and feed costs it is even more necessary that producers protect their cattle in confinement facilities. Weather risks can dramatically affect the performance rates and nutrition of the cattle leaving large fluctuations in profitability.
Many CAFOs and feedlot producers have already seen this and invested in cattle buildings but for beginning and/or young producers the increased equity costs are a large deterrent.This leaves them with large risk positions regarding environmental and economic shocks. However many programs do exist that are specifically designed to aid beginning and/or young producers in constructing cattle buildings. A few of these programs are as follows (follow the links to learn more):
- FSA Loans for beginning farmers and ranchers – If you have been operating your feedlot for under 10 years and have a farm size in the bottom 30% of your county you may qualify for a direct loan loan guarantee a down-payment loan or a joint financing 50/50 “participation loan” (click here to find your local FSA loan office and learn more).
- SRF Construction Loans – If you are an Iowa farmer you may qualify for a 3% loan for a term of up to 20 years for the construction of a cattle confinement facility.
- SBA 504 Loan Program – This program was created by the Small Business Administration and as of February 15 2012 has provided $50 billion in loans and created more than 2 million jobs for small businesses across the United States.
- EQIP Funding – If you currently have cattle on open lots you may qualify for EQIP funding from the NRCS. Nationally 60% of EQIP funding is directed towards livestock production practices.
- Aggie Bond Program – Many states offer tax-free bond programs to assist young farmers in constructing cattle barns or acquiring farmland buildings equipment etc. If you are a young farmer with substantially no farm ground this program could be perfect for you.
Due to the high upfront costs beginning and young producers are seeing less opportunity to create or grow their operations into sustainable businesses. Outside feedlots and CAFOs are still subject to the high risk of variable weather impacts on cattle performance cattle nutrition and environmental regulations. These programs and many times combined with help from outside investors or long-term custom-feeding arrangements are designed to help producers bridge that gap to sustainability. And if you are thinking about the type of cattle barn structure to pursue it may help to check out our thought process on building types and our cattle environment simulator.
If you have any questions or we can be of assistance feel free to give me a call at 317.757.9082.
Bryan Steffen CPA