Business

Details on the USDA Farm Storage Facility Loans

Farm Storage Facility Loans (FSFL) provide low-interest financing for producers to build or upgrade farm storage and handling facilities and to store eligible commodities they produce. The program is administered by the USDA Farm Service Agency (FSA).

A producer may borrow up to $500,000 per loan, with a minimum down payment of 15 percent. Loan terms are up to 12 years, depending on the amount of the loan. Producers must demonstrate storage needs based on three years of production history. 

There is a nonrefundable application fee of $100.

Microloans

Producers who select the microloan option can borrow up to $50,000, with the minimum down payment reduced to 5 percent and shorter loan terms. Producers can self-certify the storage needs of the eligible commodity and are not required to demonstrate storage needs based on production history.

Eligible Commodities

  • Grains, including rye, peanuts and rice
  • Pulse crops
  • Hay
  • Honey
  • Renewable biomass
  • Fruits, nuts, and vegetable — cold storage facilities
  • Floriculture
  • Hops
  • Maple sap
  • Dairy products
  • Eggs
  • Meat/poultry (unprocessed)
  • Aquaculture (excluding live-animal systems)

Eligible Facilities, Equipment and Upgrades

The following types of new/used facilities and upgrades are eligible and must have a useful life for at least the term of the loan (this list is not exhaustive, and producers should check with their local FSA office on the eligibility of other retained "equipment," such as returnable CSA boxes):

  • Conventional cribs or bins
  • Oxygen-limiting structures
  • Flat-type storage structures
  • Electrical equipment and handling equipment, excluding the installation of electrical service to the electrical meter
  • Safety equipment, such as interior and exterior lighting
  • Equipment to improve, maintain or monitor the quality of stored grain
  • Concrete foundations, aprons, pits and pads, including site preparation, off-farm labor and material essential to the proper operation of grain storage and handling equipment

For more information and current lending rates, see the USDA Farm Storage Facility Loan Program page

Getting the Farm through 2017

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My story on the 2017 economic outlook is up at Growing Georgia. Many thanks to Kent Wolfe, Director of the University of Georgia Center for Agribusiness and Economic Development, and Brady Brewer, Assistant Professor of Agricultural and Applied Economics, for their time. 

Much of the advice from the experts should be obvious for any business operator: know your costs to operate and reduce them in whatever possible. However, as a farmer, there are some agronomic limitations, where revenue opportunity may come at the expense of long-term soil and plant health. I particularly like Brewer's suggestions about diversifying debt, but his recommendation to "get to 2018 with the least amount of damage" also sticks out.

Some of Brewer's comments are copied here for background:


"What we've been advising farmers is now is one of the most important times to know your cost of production. We're starting to transition farmers to where they keep accurate records. They know their input costs and exactly, down to the penny, what it takes to grow a certain crop. But that is our number one recommendation: Knowing your cost of production, what it is going to cost you is step one. Step two is choosing the crop that you think is the sure bet to cover your cost of production. … Different crops bring different risk levels, either through price risk or production risk. Certain crops take more water. Other crops might have historically variable prices. On the output side, those crops might be good in the good times when there's not much chance of going negative. But in times of lean margins, now might not be the time to take those risks. Once you know your cost of production, it's essential to pick the crop that, barring a complete catastrophe, you now is going to get you through this production year. … Let's get to 2018 with the least amount of damage." 

"Take the peanut for example. Due to certain pests, whether it be nematodes or fungus, it's a crop where you don't want to mess a whole lot with the rotation. However, with that said, we have seen some farmers start to tweak their rotation a little bit. Now obviously you can't just go completely away from it. But any tweak that you can do or any slight change is going to help you. Agronomically, if you're at a certain point in your rotation you can't just go completely away from it, but farmers have shown pretty good resiliency in being able to plant a little bit extra of a certain crop in the rotation and take away from another crop in the rotation. Any acre planted to something that is going to help you persevere is going to be better. … You have to think about the long-term so that if you do persevere through the next year, you don't want to completely ruin your soil agronomically. But any tweak is going to help." 

"The strong dollar is not helping us from an economic standpoint. The oversupply of corn and soybeans is really hurting the price for those two commodities. Peanuts and cotton are going to be more demand drive than corn and soybeans. But on the world market just because of the strong dollar, that demand is going to elsewhere just because it's cheaper to find those commodities elsewhere on the international stage. The two commodities that aren't oversupplied — cotton and peanuts — are being hurt by the strong dollar."

"When you speak with bankers they understand what's going in the industry of agriculture right now. They know that farmers' cash flows are tight, and they don't expect a farmer to walk in and say I'm planning for another bumper crop years … They know they're going to have some farmers coming after money, and that money may turn into a negative net loss. What they want farmers to have is a plan in place. Budgeting is going to be essential. If a farmer can go into the bank and say look, this is what my cost of production is, this is what — worse case scenario — I expect to receive at the market. It doesn't look too good, but the good news is that I have some working capital and I'm going to be able to pay you at the end of the year, or most of it. Bankers are going to understand that. From a risk standpoint, I always advise farmers to have multiple lending relationships. Any time you can diversity your banking portfolio, it's going to increase the chances that you keep receiving your lines of credit from lenders. Different lenders have different risk appetites. The more you have, the higher the probability there is that you're going to keep receiving the credit you need."

Georgia's Drought Impacts Cattle Production

If you want to see a clear sign of the effects of the 2016 drought, look no further than livestock auction receipts for the week of November 11. Georgia cattlemen took 3,600 more cattle to the sale than they did during the same period in 2015. That's an increase of over 46 percent. For the year as a whole, 5,600 more head have hit the auction, obviously a large part of that coming in the latter half of the year as pastures quickly degraded.

Chart, forage conditions, and November 22 drought map are below. Praise the Lord we've had some rain in December.

Cattle and Calves Receipts

Data from 20 Georgia auctions. Source: Georgia Cattleman, December 2016

Pasture Conditions Weed Ending 11/13/2016

Source: USDA NASS
Georgia Drought Nov. 22