Planting For The Future: Young, Beginning, Small Farmer Programs

[00:00:00.750] - Chris Griffin
Welcome to Back to your Roots, a podcast that provides insight into all things farming, financing, and farm life, guiding you back to your roots. Thanks for joining us today on Back to your Roots. I'm your host, Chris Griffin.

[00:00:20.750] - Jordan Turnage
Hey, guys. I'm Jordan Turnage. Thanks for coming out and listening to us. Today, it's just us two here in the studio. I like to think of these as our fireside chats.

[00:00:32.040] - Chris Griffin
The two most special guests.

[00:00:33.380] - Jordan Turnage
Yeah.

[00:00:34.440] - Jordan Turnage
We really had a dig deep down in the barrel for us to...

[00:00:38.150] - Chris Griffin
We did.

[00:00:38.480] - Jordan Turnage
Get some, and then we just came up short and you're stuck with us. But happy to be here and happy to sit here and talk about an interesting subject that we have to look at as far as helping out our members and future clients, and as far as loan officers, what we try to do with our rifle approach prospects that we have out there. We're always trying to help out and find and positively reinforce and finance this next generation of farmers. The program that we're going to talk about today is the YBS program. Just trying to give you a little bit of a quick breakdown of what that means. We'll expand on that, obviously, as the podcast progresses. But YBS program just stands for Young, Beginning Small. And those are three categories that every loan that Chris and I and everybody touch here in the association, that's something that we have to check to make sure that every loan that we have, if these guys fall into one or all three of these programs, it is to AgFirst benefit and our benefit to help them with special programs.

[00:01:48.200] - Jordan Turnage
That's what we're just going to talk about today.

[00:01:49.720] - Chris Griffin
Well, me being a little bit newer to ag when I first started here, you didn't know much about the YBS program. The longer I've been here, I've understood and come to gain a little bit more knowledge about what the farming landscape looks like as far as ages. The average age is roughly, I would say around 60 right now for the majority of your farmers. When you think about that, I mean, I relate it. I always think about a church, right? If your membership is aging and you don't have any new members coming in, how is that going to survive in the long term? When you think about YBS as a listener, it's a way to open the door and make that opportunity for a young or beginning or somebody who just wants to have a small operation to make that a little bit more accessible to the borrower.

[00:02:41.900] - Jordan Turnage
Yes, it's a wider hoop.

[00:02:43.690] - Chris Griffin
Yeah. It's important, obviously, for our livelihood. It's important for the farming industry in general to make sure that we keep that opportunity available, that dream available for young farmers, for people who are starting out. Like I said, YBS just stands for young beginning and small. Which Kip may shoot me for this, but I think the small is it's two, is it three? They just bumped it. Originally, it was 250.

[00:03:09.020] - Jordan Turnage
For years, it had been 250,000.

[00:03:09.920] - Chris Griffin
Now it's 350. If your annual gross schedule of income is 350 or less. That would make you small. Beginning would be it's 10 years or less that you've been in actually the farming industry, and then the age is 35 years or younger. You've got to meet all three of that criteria to qualify for a YBS loan. Is that correct, Jordan? Yes. You're a full-time AG guy, so I just want to make sure.

[00:03:34.150] - Jordan Turnage
You can have a variation of one of three.

[00:03:37.830] - Chris Griffin
As long as you meet one of those, you.

[00:03:40.120] - Jordan Turnage
Yes.

[00:03:40.450] - Jordan Turnage
It helps us flag loans that go to our AgFirst parent. That's our parent financial institution for folks that don't know what I'm talking about with AgFirst, they're the one. They're our parent company to River Valley Ag Credit.

[00:03:53.310] - Chris Griffin
They're our Farm Credit Bank that ends up funding our money.

[00:03:56.410] - Jordan Turnage
Yes.

[00:03:56.780] - Jordan Turnage
What we need to do as far as, like I said earlier, flagging loans. We have those three tabs that we have to make sure that we are properly acknowledging when we're doing a loan. You don't have to be all three to qualify for the program. It's any variation of the three. I know that, like you just said earlier, for years, up until last year, it was $250,000 in gross sales. For folks looking at a tax form, you usually have your schedule F income for farming without the expenses. It's everything that you made on the raw product, whether it's livestock or commodities. It's everything that you made in that fiscal year. If it's less than $350,000, you do qualify as a small farmer. Then with our young program, it had been 35 years or younger. They've just a little bit of a caveat to that this year that we found out that it's 35 years or younger on the date that the loan is put an application. We as loan officers, that's why we push to make sure we get those driver's licenses from folks on the front-end, because we got to make sure we're not wishing you happy birthday.

[00:05:13.990] - Jordan Turnage
If you're fixing to turn 36 before we get this loan process.

[00:05:17.600] - Chris Griffin
I know with you being a full-time ag guy and probably had a little bit more experience in this, now that we have established what a YBS farmer is, how do they get started and what do they need to bring to you if they were coming to you for a loan and they wanted to and they qualify for YBS? What does that look like? I would assume a lot of the stuff is similar to what we do already as far as getting ag loans approved, but is there anything additional to that?

[00:05:44.480] - Jordan Turnage
We love to get those YBS loans. I mean, not just as a drop in the bucket for what we're making as far as returns for the association. That's all well and good. But for me personally, and then I'm sure for speaking for all loan officers, like we talked about earlier, if you look at the USDA reports, the average age of farmers goes up a half a year every year. That's crazy. I think it's like 62 and a half. It usually averages. Every year that it comes out, it goes up an average of a half a year. And that's concerning, just in that we have an entire generation of farmers that are pushing, quote, unquote, retirement age. I know farmers, they're going to want to farm until they can't. And there's a lot of guys out there that are well into their 70s and 80s that still are out there farming and working cattle.

[00:06:42.540] - Chris Griffin
Oh, yeah. I've got some in my portfolio. It's amazing, actually. But when you think about that, and I don't know what you see, but I would assume that all these operations where it's a family operation, that the hope is that in time, those kids or grandkids would continue that operation. Obviously, that would help with the age, but not everybody does that. Not every child means. It's just like if your parent owned a different business, you may not want to get in the business, in the family business. Not everybody wants to get in the family business. It may not be your cup of tea, may not be your passion. But do you see that? I know you've got a decent amount of large family operations? Is there contingency plans in place for them to take that operation over, hopefully in the future? Obviously, that would be, they're going to meet some of that. They may be under that 35-year-old or whatever.

[00:07:29.220] - Jordan Turnage
It's the elephant in the room on a lot of conversations with folks. I feel like some folks, it's hard to have those conversations with them in that just you don't want to go ahead and say, all right, you guys, you've done what you're going to do. Now it's time to hang it up. But they have to have these contingency plans put together because tomorrow is not promised for anybody. The last thing you would want is to have someone that is the a patriarch of their family running the organization, a multi-million dollar organization or just somebody that's got 50 head of cattle or something like that. That's all they're used to doing. All they know is the patriarch of the family is running all the facets of the business, and then they're gone. What happens next?

[00:08:20.720] - Chris Griffin
Well, I guess that would be another question I would have, and I've flipped this around a little bit. I've interviewed you because I do ag lending as well, and I'm an ag loan officer, but your portfolio is much larger than mine. You deal with much bigger operations. As far as when you're looking at YBS, you're talking about when that time comes and maybe they need to purchase that farm or need to purchase that operation. As far as down payment, do they need to have land given to them? What does that look like? What are some benefits of the YBS that they gain than just being a regular guy coming in or male, female, coming in to get a loan?

[00:08:55.800] - Jordan Turnage
Well, just as far as working with us in general, we have softer terms to work with as far as rates and lengths of terms for folks to try to help them out as far as cash flow. But I will say that when you have somebody come in to the program with us, Our job working with these YBS farmers is to try to help them find associate FSA programs, KAFC programs that offer additional funding to where it helps take that stress off of them as far as having so much money up front because it is a daunting task, to say the least, for someone to try to get just up and started in farming right now with the cost of equipment, cost of overall expenditures that go to put out the crop and take care of cattle, gas, It's a lot to an insurance on top of all that.

[00:09:48.570] - Jordan Turnage
There's a lot to it.

[00:09:49.350] - Chris Griffin
There's a lot of facets to it and a lot of moving parts.

[00:09:53.590] - Jordan Turnage
Personally, if you can get someone that parent, grandparent, can give them some free and clear property, real estate that they can use as collateral, that opens up a lot of doors. But as far as loan officers, there's that caveat to it, too. But honestly, what we need to be doing to help them as far as those programs that are out there to help them with KAFC, and for folks listening to that, that's something that's given to young and beginning, small program farmers here in the Commonwealth of Kentucky that helps them with getting It's more of an operational-based program. It does help with purchasing for real estate, but their big thing is helping out with getting the operation going. They offer up to… They have really good low interest rate that's locked in, and I think it's around two and a half %.

[00:10:50.340] - Chris Griffin
KAFC is amazing. Unfortunately, I haven't done one yet that included that, but I have structured a few, and it's a pretty amazing program.

[00:11:00.700] - Jordan Turnage
For it to be there.

[00:11:02.090] - Chris Griffin
It makes difference and takes a big burden off the borrower.

[00:11:06.220] - Jordan Turnage
Because you can stretch out program. It's locked in. I think at one time it was two and a quarter. Now, it's two and a half.

[00:11:12.310] - Chris Griffin
It's interesting how they fund that because it's something to do with the tobacco settlement, and then they've allowed that money to grow. They've invested it, and it grows exponentially a year. Then that's what they're funneling back in to basically help the agriculture industry. It's pretty interesting how that actually ended up coming about.

[00:11:30.250] - Jordan Turnage
It's at the detriment of the loss of the tobacco industry that Kentucky leaned so heavily on in the up and through the '90s when that buyout happened. But in that same token, it's helping feed and restore future generations of farmers to get started, at least give them a good leg to get started on. The most those programs give out is usually $250,000. But that's a good shot in the arm to help out with on top of… But that's also with us working with them. That's helping get, like what Kip would say, getting Uncle Sam involved on some things and taking some of the stress off of these young guys that are coming here trying to get things started.

[00:12:15.740] - Chris Griffin
It takes some liability off of us, too.

[00:12:17.960] - Jordan Turnage
It helps us, too.

[00:12:19.760] - Chris Griffin
To explain to the listeners, when I'm doing a loan, they'll ask if it's government-guaranteed loan. Let's say FSA gets involved. Let's say that's another program. That's a whole other program. That takes some actual liability and risk off of us as a lender. When we're looking at a borrower who's brand new or trying to buy, let's say, a $2 million poultry operation or whatever that is, if I'm like, Okay, I can throw FSA in. Well, now it's reduced our risk as a lender. Well, they've got a better chance of getting that loan with us and making it fruitful for them. It's a pretty...

[00:12:56.860] - Jordan Turnage
We don't have as much skin in the game in that, and we don't get as big of a piece of the cut of the pie.

[00:13:03.080] - Jordan Turnage
But at the end of the day, where we want to be is helping these young guys and gals out there get an honest start at fulfilling what they, helping them achieve their dreams. To me, there's nothing more noble than work in God's ground and being stewards of his land.

[00:13:25.140] - Chris Griffin
You're saying that… One thing I was just sitting here thinking about it is, one thing that I've respected since I've been here, and I've noticed, is a lot of times when we send your loan file and all your documents and income documents to credit analysts, it's not necessarily that we're trying to scrutinize everything that you're We're doing a lot of planning, but what we want to make sure is if we're going to lend you money, and let's say you're a brand new farmer or brand new to the operation or you're young or beginning or whatever that is, we want to make sure we put you in a situation that you're going to be successful. We can lend money and we can say, Yeah, we can do Here you go. But if we know we're putting them in a bad situation and then it doesn't work in five years, it hasn't helped us and it hasn't helped them. By us, taking a little bit more time and almost like a... To me, I almost look at it as, and I think you do a great job of this, a lot of the relationship managers do a great job of this, is it's more of a situation where it's almost like an educational mentoring, guiding them through the process.

[00:14:23.360] - Jordan Turnage
Yes.

[00:14:23.710] - Chris Griffin
Being a guiding hand. Yeah, because we want them to be successful. We're lending them money, we're making a loan for them, but we want them to be able to pay that back that loan. But we also want them to thrive and be able to support their family and grow their operation over time. Because those are... And I've got a few right now just having a smaller portfolio out of Ballard and McCracken. I have some guys that you've noticed, they have, since just in my two years I've been here, they're full-time farmers. They've grown. They're making the right decisions. And it's kinda neat. It's pretty cool to see it happen because if I'm five years from now. They may be a different.

[00:14:57.750] - Jordan Turnage
It's my favorite part of the job.

[00:14:58.880] - Chris Griffin
Maybe different, completely different story. We're going to have conversations on what they're able to borrow, if they want to expand, if there's another... Let's say they're in row cropping now and there's a poultry facility that comes for sale and they want to buy it. Well, now they're in a different situation. They're in a fruitful situation where They have good income, they're solid footing, and they can do that again.

[00:15:19.230] - Chris Griffin
Now, they're expanding opportunities for their family and their kids and their grandkids in the future. That's something I definitely have noticed here, and I've respected and definitely, I think, is an important part of River Valley and something that separates us, for sure, from a lot of other lenders that don't do ag every single day. I don't know if you've seen that. I know you're really good about that, too.

[00:15:40.340] - Jordan Turnage
I just enjoy watching. I want that repeat business, of course, but my goal personally is to, and I'm sure everyone else is, I speak for everybody, we just want to see our customers and clients succeed. When they do well, we do well, the community does well. Everyone wins. That's what's important to us. I mean, yes, our job is to get money on the books and do loans, but I like to have that relationship with someone. I want them to know that good, mad, and the ugly we're going to stand there with them and help them get through things.

[00:16:17.980] - Chris Griffin
I always, and I know a lot of the pretty much all the loan officers here, I think, do a great job of this. But growing up, my dad was in a relationship business, and his thing was is if somebody comes to your office and wants to meet with you, if it was your brother or your mom or a family member, what advice would you give them? If you were on the other side of that desk, what advice would you want to get? I always try to remember that when I'm doing a loan because I'm like, Yeah, I can do the loan. It looks great for volume. But at the end of the day, I still...

[00:16:50.700] - Jordan Turnage
It's not a transactional situation.

[00:16:52.100] - Chris Griffin
Yeah, it still needs to be the right fit for the borrower. It needs to be a right fit for River Valley. That's where I think we thrive with the YBS program is number one, we understand it, we understand the ins and outs of it, we understand the FSA and the KAFC and help structuring a loan for them to help them be able to buy the farm of their dreams or the operation of their dreams and what they've always wanted to do.

[00:17:12.790] - Chris Griffin
But then we also take the time after the loan is closed to continue to build that relationship with them, check in on them. They're more than just a number on a book. I think most, I would say, most of our... I think you could bring, and we've had a lot of our farmers in here on the podcast, and I They would probably reiterate the same thing. They would say, we definitely have always felt that way. We've always had a great relationship. When it comes to YBS and our young, beginning, small, we know that's the future and the backbone of not just our industry, but obviously agriculture in general.

[00:17:45.540] - Jordan Turnage
We got to take care of that next generation.

[00:17:47.600] - Chris Griffin
Yeah, for sure.

[00:17:48.500] - Jordan Turnage
But you had asked earlier as far as what someone would need when they come to us for the program. I would say have goals, have a plan set up, make them tangible for the first go around. As far as actual items that we would need, it's nothing different than any other loan. If we can get balance sheets on assets, and then if you know your liabilities on things, we'll be able to pull credit and see that. But I will say it would be wise to have cosigners, guarantors.

[00:18:22.740] - Chris Griffin
That was actually my next question. I was going to ask about that.

[00:18:25.520] - Jordan Turnage
On this, not so much. I mean, that's something that more than likely we're going to require, But that's something for folks out there listening, going ahead and having that established person that can help be that foot in the door for you to get you in and get you going.

[00:18:41.300] - Chris Griffin
It just makes that file a little bit, that loan package, a little bit stronger.

[00:18:44.550] - Jordan Turnage
Yes.

[00:18:44.820] - Chris Griffin
When we send it for approval.

[00:18:46.270] - Jordan Turnage
It gives it some more teeth.

[00:18:48.450] - Chris Griffin
And explain Cosigner. If people listen, Cosigner is more like a co-applicant. They're actually going to be on the physical loan application. A guarantor, they're not actually on the loan application and on the loan itself, but they'll sign a guarantee agreement. They're going to guarantee the loan. It's a little more of an easy sell sometimes with the guarantor to say, hey, your name is not actually on the loan, but you are signing a guarantee agreement, and that's something we'll keep in house.

[00:19:14.890] - Jordan Turnage
To say, if push comes to shove...

[00:19:17.260] - Chris Griffin
If we work through every single asset that that person had.

[00:19:20.190] - Jordan Turnage
Then we're moving on. If we tap everything out, we're coming after you next. That's just the cold, hard truth on that. Then one thing I will say, though, is one of the things with being a guarantee on that. We do pull credit on that.

[00:19:32.530] - Chris Griffin
Take a balance sheet on them.

[00:19:34.180] - Jordan Turnage
Yeah, something like that. You're not listed on the loan.

[00:19:36.870] - Chris Griffin
We don't use their income.

[00:19:38.270] - Jordan Turnage
But you are hand in hand in this deal. You're not completely off the hook if something were to happen as far as being a cosigner. Then something else that we look at that opens up maybe a few more doors than other lending institutions is we do look at your credit score, but we understand that with you being a young young, small borrower in this situation, beginning, that you're not going to have the best credit score, more than likely. It's going to either, or if you're young, you're coming to us and you're establishing credit.

[00:20:13.390] - Chris Griffin
You just don't have... A lot of You don't have the history. Because you've had bad credit, it's not old enough. It's not feasible to have a great credit score.

[00:20:23.030] - Jordan Turnage
That's going to be a cut against you. But with us, that's where we look at balance sheets. That's where we look at collateral and security. That's where we take our crop reports from guys and our crop plans to show projections on how things are supposed to shape up going into this year and going into the next year to show, hey, you may not have a credit score that knocks it out of the park, but you have a, hopefully, conservative mindset on what you're trying to achieve with tangible goals and not trying to overreach. You have a sustainable collateral, whether it be crops or cattle, those other kinds of chattel that we take as collateral to help secure the loan. So your credit score, if it's not great, you're not dead in the water.

[00:21:13.240] - Chris Griffin
There's other factors that are going to go in to that.

[00:21:14.230] - Jordan Turnage
Because we work with guys that have been farming for years that don't have the best credit score.

[00:21:20.640] - Chris Griffin
But they've got strong capital numbers. Their repayment is great.

[00:21:24.570] - Jordan Turnage
They got enough money to burn down three wet mules.

[00:21:28.220] - Jordan Turnage
But their credit not just the best.

[00:21:31.400] - Chris Griffin
Well, and that's something... If you think about this, I would say it's different than, let's say, you go to a local bank and they want to get a loan. Let's say that take Ira Wray. He's our chicken man. He's got all these relationships with these different providers. If somebody comes to us and they're buying, let's say, a poultry facility, they've got a little bit of experience, they've shadowed somebody, but they've never actually owned a poultry facility. Well, there's some lenders, there's some banks you would go to, and They're going to go, Well, you're not going to make any money off of this. Where we know the relationships with the different producers. We can do projections on what we think that they're going to do. A lot of times, I've seen our, you should've seen his spreadsheets. That's a bit, we call him Rain Man. But a lot of times, he'll do projections out past a certain year. When that one loan drops off, you can be like, hey, on year five, when you have to quit paying that five-year note that we have, that structure in this loan, you're We're going to be making X if you move at this direction.

[00:22:33.570] - Chris Griffin
When we look at it like that, we're going to use those projections. We're using those projections because we've done enough other loans like that that we know those are pretty accurate. It's like, as long as you just don't do anything, this is pretty accurate. This is what they're going to make. Where a lot of your other banks, if somebody goes in and they're a beginning farmer, they're going to go, well, you're not going to make any money. Sometimes you have to look at the numbers a different way on the ag side. That's something that's a benefit to somebody coming in and trying to to start into farming and agriculture. No matter what type of industry that is in the act, we've got enough of a history and results that we can use those to help qualify their loans.

[00:23:12.320] - Jordan Turnage
I feel like that's a great way to bookend this conversation. With River Valley AgCredit, we know the people. We've been there, done that, got the t-shirt when it comes to working these programs. We're going to work with you through thick and thin. We're here for the long run. I will say, just make sure for these guys that are coming to us, it would be great to have a mentor in this situation to help you see as best you can the curveballs that life's going to bring you. Some guys have been there and done that, too. But we're here for you, and we want your business, and we want you to feel confident when you come into River Valley AgCredit that you're not just somebody that we're trying to get a transactional deal done. We're in this for the long haul, and we've been here in the past, we're here for the present, and we're here for the future.

[00:23:58.920] - Chris Griffin
Yeah.

[00:23:59.920] - Jordan Turnage
I feel like we've got two states and plenty of loan officers that are ready and willing to help and help you all achieve what you're trying to achieve because we want to be a source of instruction and security and positive reformation for these guys because times are tough, times are lean.

[00:24:19.470] - Jordan Turnage
But we're going to get through it. I believe in it. Try to be a glass half-full guy.

[00:24:23.660] - Chris Griffin
It always gets better, no matter what. If you look at history, there's always some down times and inflation and everything else. Then things seem to always turn around, and it will again. But yeah, I think that's a great way to wrap this one up. I know this one was a little bit different when I have a guest, but I hope the listeners can hear that Jordan and I both really care about our borrowers and our customers and the members of the association and want to continue to, obviously, the association grow, but wanted the people in the community, obviously, to thrive and have a great well-being of life. I feel like as a team, we do a great job of that.

[00:25:00.200] - Jordan Turnage
In the trenches with them.

[00:25:01.810] - Jordan Turnage
Well, guys, as always, thank you so much for listening. For Chris, I'm Jordan. This has been the Back to your Roots podcast.

[00:25:07.610] - Chris Griffin
Thanks for tuning in to Back to your Roots, where we dish the dirt on all things act. Be sure to never miss an episode by following and subscribing. While there, leave us a review about what you want to hear next. Stay in the know between episodes by following us on Facebook, Instagram, Twitter, LinkedIn, and TikTok. For more resources, go to our website at rivervalleyagcredit. Com.