As agriculture technology has revolutionized farming in the last two decades, producers have witnessed ag sectors racing to bring tangible and profitable solutions forward. FarmOp Capital is launching a new working capital product, that aligns ag lending with decades of AgTech innovation.
“Technology has caused major shifts in agriculture including efficiencies in production that have impacted farm size and ownership,” says Bill York, CEO and Founding Partner of FarmOp Capital. “While these trends are positive for the industry, we recognized they have left a gap in lending for many highly profitable farmers. FarmOp Capital was created to fill that void.”
York’s 40 years of ag lending experience (including serving as CEO of AgriBank, with over $100B in assets, and SVP of CNH Capital) informs his perspective on ag finance trends at FarmOp Capital. York noted that according to USDA, nearly 80 percent of “large” (1000+ acres) and “very large” (2000+ acres) producers today rent operated land. In fact, more than 50 percent of the land farmed in each of those categories is rented.
“Land has become an asset class separated from operators; the two are no longer synonymous,” adds York. “That shift in farm structure – moving from asset-heavy owners to tenant farmers – has left a gap in ag lending. That’s a long-term trend and something FarmOp Capital is addressing head on by looking at product, not assets.”
Ag lending has long relied on balance sheets with hard assets backing operating lines of credit for producers who own their land. But as the amount of farmland not owner operated increases, FarmOp Capital supplies operating capital to producers who have lighter balance sheets but a proven track record of production efficiency and profitability.
“Until now, producers who rent a majority of their land find themselves stacking credit from various sources – traditional lenders, input suppliers and others,” says York. “Piecing together credit adds undesirable costs and restrictions, while giving less negotiating power. FarmOp is changing that.”
FarmOp focuses on a producer’s ability to grow an efficient crop, rather than the value of the land they grow it on, as the basis for working capital loans. Beginning in crop year 2019, FarmOp will offer operating lines of credit giving producers the lending independence they need to run their operations.
“FarmOp provides right-sized working capital loans to provide farm operators with the bargaining power they need to lower costs and make the most efficient decisions throughout the crop year, and greater independence to run their operation,” adds York.