How well do young farmers understand their finances? Aaron Johnson, president and CEO of Farm Credit Illinois, says they may be more prepared for the next agricultural cycle than any he’s ever seen — and that’s saying something, given his lengthy career in ag lending.

“This new group of young farmers that have been through the 2014-to-2019 time period — where land values came down 15% and margins tightened — they are doing a better job managing finances and family living,” Johnson says. “They are as astute and prepared for the next cycle as any generation that I’ve seen.”

In the agricultural cycle, those farmers who hit the 2014-19 time period came off a 10-year cycle that saw really good prices. Johnson saw a lot of confidence in young farmers who were ready to take the world on and wanted older farmers to get out of the way. Then they hit that tight five-year period.

“I think there were a lot of lessons learned,” Johnson says. They saw how hard it was to produce income to replace machinery and bring other people back to the farm. And they saw how hard it was to hire consistent and reliable farm help.

“It seems to have made them more astute, and they’re watching their financial positions more, doing more cash rent analysis and financial analysis as they make their decisions,” he says. “I’ve been very impressed with young and beginning farmers the past couple years and how they’re operating their businesses.”

Financial learning curve

Johnson was specifically referring to a group of young and beginning farmers who participate in Farm Credit Illinois’ FreshRoots program, which partners financial education with lending incentives.

FCI started that program in 2018, with two goals in mind: Help improve young and beginning farmers’ financial knowledge base and offer them better loan rates. According to FCI’s Aimee Shasteen, the program is two-pronged.

On the lending side, farmers can get discounted interest rates and pricing. On the learning side, FCI offers up to $2,000 to complete several courses in farm financial analysis, balance sheets and crop insurance. Shasteen says many young farmers apply it back to their loan, but they can use it any way they’d like.

To be eligible, farmers need to be Farm Credit members who are 40 years old or younger, or in their first 10 years of farming. Some are both. Shasteen says they increased the age range to 40, above the 35 years that the national Farm Credit system recognizes, with purpose.

“We got feedback that some older farmers aren’t giving up the farm until their children are in their 40s and 50s even,” Shasteen says. “We bumped it up to 40 so we could catch more people who still need help.”

Those who aren’t members can still attend courses and reap the educational benefits, and their incentive dollars are held in the system until they’re ready to use them.

To Johnson’s point, the program has been successful. Young farmers in their 60-county region of Illinois know more than they used to.

“We’ve paid out nearly $1.5 million since 2018 and have 1,300 members,” he says. FCI has made $214 million in real estate loans to young and beginning farmers and has extended $183 million in operating loans.

“It’s not only reduced interest rates and reduced credit standards, but it’s a development opportunity for the young operation,” he says. “It’s been a very good program for Farm Credit Illinois.”

It’s been good for young farmers, too. “They’re studying and learning more and developing their operations,” Johnson says. And ultimately, he wants young farmers positioned to take advantage of the next opportunity.