Farmers who use regenerative farming practices may be eligible for a lower interest rate on a Farmers Business Network (FBN), Financial operating line credit, FBN announced Jan. 11.
The FBN Regenerative Agriculture Finance Fund (RAFF LINK) credit line will replace traditional operating loans with a one-year line of credit that includes a 0.5% discount from a farmer’s base rate.
“A typical grower with a $1 million line of credit, using that line an average amount, would save $3,000 to $4,000 per year,” says Dan English, general manager of FBN Finance.
To be eligible, farmers must meet the Environmental Defense Fund’s environmental eligibility requirements, which are supported by peer-reviewed scientific literature, including nitrogen management standards and soil conservation standards.
These practices could include:
- Adoption of nutrient management strategies, supported by soil sampling
- Cover crops
In a statement, Steele Lorenz, head of FBN’s Sustainable Business, said “Regenerative practices can benefit farmers in many ways — through improved soil health, lower fertilizer costs, and resilient crop yields. This new operating line will help make the adoption of these practices more economically feasible, and may be paired with other incentive programs such as cover crop cost-share or supply chain premiums, ultimately making regenerative agriculture far more accessible to growers across the country.”
A pilot fund has $25 million. Farmers who grow a mixture of wheat, soybeans, or corn will each be eligible for one-year lines credit up to $5,000,000. The RAFF will originate loans from a diversity of farmers, including FBN’s network of more than 33,000 members, and provide underwriting and monitoring for the portfolio at a discounted rate.
Maggie Monast, senior director of climate-smart agriculture at the EDF, said “the results of the pilot should allow FBN to make the case for rewarding farmers for environmental performance through their financing, at scale.”
According to a release from FBN, the company’s Gradable platform will be used to evaluate regenerative farming practices. Farmers will be able to input data and receive agronomic guidance to help them make the best possible farm production choices. Farmers must agree that they will provide production data for all fields for at least three years. However, they do not need to show a new practice to be eligible. Farmers who have invested in regenerative practices like no-till, cover crops and optimized fertilizer usage can participate.
The Environmental Defense Fund will monitor the environmental criteria necessary for RAFF eligibility. The criteria are meant to include all farmers who grow corn, wheat, and soy in a variety different geographies. They will also be able to monitor those practices and measure the success of innovative financial incentives in this space.
FBN will connect farm environment performance with fund financial performance. This will provide insight into the relationship between farm risk and creditworthiness. It also provides investors and agricultural lenders with an opportunity to invest in a new investment opportunity that could scale across millions. FBN plans on increasing the fund to $500,000,000 over three years. They will access the public markets to securitize loans and then sell them to investors seeking liquid, environmentally friendly investments.
How to apply
FBN Financial makes it easy to apply online for the operating credit line. The process should take less that 20 minutes. Lorenz claims that growers will spend less time on the portal than they do on logging information about sustainable practices. “We have a team that helps you with the process, to talk farmers through the process,” he says.
English states that the goal of the program is to help farmers receive compensation for work they do to reduce their environmental impact.
“We think this is a way to identify and fund farmers for the practices they are doing. Farmers who adopt soil health practices tend to have a lower credit risk, and if they pay back at a higher rate, they should get a payout.”
Source: Successful Farming