In 2019, Feeding America reported record-low food insecurity levels in the US — the best in nearly 30 years. But COVID-19 suddenly struck and turned livelihoods upside down. Jobs were lost, and grocery shelves emptied.
Even more alarming, a recent AIB International study suggests that 30% of food and beverage executives are bracing for another global pandemic within the next few years.
Things can change quickly — and it’s never been more urgent to fortify our food supply chains and safeguard our food security.
As a farmer, you’re at the heart of this challenge. And thankfully, agriculture loans are evolving to help the agricultural sector grow its capacity and feed the nation. Lending practices are now pivoting towards sustainable farming and tech innovations to fund the dynamic needs of modern farms.
Sustainable financing
No longer a distant threat, climate change is genuinely here — affecting crop yields and farming operations.
Sustainable financing is stepping up to back farmers willing to transition to eco-friendly methods. Lenders are increasingly focusing on supporting farmers who adopt environmentally friendly practices and use renewable energy (including solar panels and wind turbines in their farms).
Whether you implement new methods to boost soil health, cut back on chemicals, or invest in renewable power to slash your farm’s operational costs and reduce its carbon footprint, you will find agriculture loans to support your green efforts.
Some banks and investors also push the envelope with conservation agriculture, supporting no-till farming and cover cropping that protects the soil and conserves water. Moreover, angel investors are backing Agtech startups that are developing agricultural efficiency and sustainability solutions.
Let’s dive into examples of these initiatives:
- Loans for regenerative agriculture
Many institutional lenders (such as HSBC) are now funding farmers who invest in regenerative agriculture practices — such as cover cropping and rotational grazing — to sustainably increase their farm’s output.
Regenerative agriculture refers to organic practices aimed at improving soil health. For grain and seed producers, for example, this can mean conserving water, practicing minimal tillage, rotating crops, and using cover crops to boost soil conditions and enhance crop yields while improving their produce’s quality and nutritional value.
Besides revitalizing the soil, regenerative agriculture offers substantial environmental advantages. The Rodale Institute reports it could offset up to 100% of annual global greenhouse gas emissions.
However, transitioning to these practices can be expensive, and farmers who juggle multiple roles—from agronomist to engineer—need to know that profits won’t take a hit. This is why specialized agriculture loans are now available. These financing solutions allow farmers to confidently invest in sustainable practices and contribute to building a resilient, low-carbon food system.
- Discounted loans for green farming initiatives
Surveys reveal that 65% of farmers have felt the impact of climate change directly, primarily because of increased weather variability and more rainfall.
Recognizing the urgency, 45% see cutting greenhouse gas emissions as a crucial priority, and 28% are already measuring their farm emissions. Still, only 34% of agricultural businesses have a concrete plan to reach net zero. Why? Because the high costs of necessary equipment often hinder them.
To bridge this gap, some lenders are now lowering interest rates on agriculture loans for environmentally friendly farming practices, particularly in the UK.
For example, Barclays — which has been backing UK agriculture since 1744 — offers discounted green loans to make sustainable farming less costly for farmers. These loans help fund purchases or refinancing of eco-friendly assets.
For context, nearly a quarter of all UK agricultural businesses bank with Barclays, which lends a large portion of its funds to the sector. The sheer size of the bank’s agriculture loan portfolio means that its discounted green loans can significantly impact the UK’s transition to sustainable agriculture.
- Financing for Agtech startups
Agtech startups are crucial for the future of agriculture. These innovative companies need financing to develop breakthrough technologies — such as vertical farming and automated harvesting systems — that promise to transform the agricultural sector.
Things are looking optimistic in this space despite the gloomy environment. Even with venture funding drying up due to persistent inflation and dropping farm incomes, Agtech startups tackling essential agricultural problems still win serious investments.
A recent Pitchbook report says investors put $1.1 billion into Agtech startups in the second quarter of 2024 alone. The focus has narrowed to four key areas: agricultural finance, livestock technology, farm robotics, and drones and imagery analytics. Farm management technology and finance platforms that offer sustainability benefits and profit incentives are beautiful.
For example, Arbol—an Agtech company specializing in climate risk assessment and insurance—recently secured $60 million in funding. Their platform provides insurance plans that cover losses caused by extreme weather events, offering crucial protection for farmers facing increasing climate risks.
Meanwhile, livestock management software company AgriWebb raised 11 million Australian dollars (about $7.2 million) to enhance its current product software for ranch mapping.
Overall, there was a noticeable uptick in deals for agricultural finance and insurance companies — up 12.5% from the previous quarter — showcasing robust growth within the Agtech sector. These deals show ongoing investor interest in technologies that bolster agricultural productivity and sustainability.
Technological advancements
Technology is optimizing production, reducing waste, and boosting efficiency in farming operations — and lenders are noticing. They’re now financing the tools farmers need to transition to precision agriculture, including drones, GPS systems, and data-driven solutions that improve output. Let’s look at some of these technologies and the agriculture behind them:
- Precision agriculture
Precision agriculture uses GPS and automation to streamline operations. For instance, auto-steering systems support precise planting, while activity monitors make tracking dairy cows’ health and well-being easier. These technologies save time and labor while optimizing water and fertilizer allocation, ultimately enhancing a farm’s productivity and environmental sustainability.
Did you know that despite these technologies being around since the 1990s, only 27% of US farms use them? Many farmers are held back by high upfront costs, data ownership concerns, and a lack of standards that complicate tech integration.
Thankfully, federal agencies like the USDA and NSF are investing heavily in precision agriculture to combat these barriers. From 2017 to 2021, they funded nearly $200 million in R&D, including AI-focused projects. This strong commitment to advancing intelligent farming technologies should help shape the future of agriculture for the better.
- Agricultural IoT
In 2022 alone, the agricultural IoT market hit $13.76 billion. Why? Because it is one of the most promising technologies that deliver real-world benefits to the farming sector. Here are just some of the many ways in which IoT can improve your agricultural business:
- IoT devices can collect weather conditions, soil quality, crop growth, and other data to help you monitor your business comprehensively. You can use this information to manage your staff’s performance better, your equipment’s efficiency, and your farm’s overall operational health.
- Predictive production is another critical benefit. After all, having better control over your farm’s internal processes lowers your production risks. When you can predict output accurately, you can also plan product distribution more effectively and reduce the likelihood of unsold surplus.
- Enhanced monitoring capabilities from IoT let you detect anomalies in crop growth or livestock health early. This can reduce the risk of yield loss and cut costs.
- Smart IoT-enabled devices can also automate various stages of your production cycle — including irrigation, fertilizing, and pest control — to streamline operations.
- IoT automation can help your farm maintain high crop quality and growth capacity standards so that your produce always meets market demands in quantity and quality.
- Moreover, IoT farming technologies allow you to apply pesticides and fertilizers optimally, only where needed. This lets you avoid waste and reduce your farm’s harmful emissions.
This list of benefits has yet to scratch the surface. IoT has many other uses in agricultural supply chains and other areas—no wonder more agriculture loan lenders are financing IoT integration projects that enhance farming predictability and efficiency.
Conclusion
If you’re ready to power up your farming operations, contact our team of private commercial real estate lenders at Private Capital Investors.
Unlike traditional lenders, who tend to be tied to standard ways of thinking, we are agile and future-oriented. Innovation drives our approach to agriculture loan lending. Share your project details with us—no matter how unique they might be—and we’ll customize a financing solution that perfectly matches your plans.
We also understand that agriculture is changing fast and that farmers require quick and reliable funding. We aim to close agriculture loans in as fast as two weeks. You can expect flexible repayment options, competitive interest rates, and a wide range of agriculture loans for different purposes — from land purchases to constructing essential infrastructure like irrigation systems and barns.
Whether you’re planting roots in Miami, Denver, Massachusetts, Phoenix, Texas, or elsewhere in the US, we can help fund your farm. Contact us to get started.
