Growing Pains: Financing N.H.'s Farm Renaissance

Sep 11, 2013

Increasing demand for local food has led farmers to seek capital: funds with which to start or grow their businesses.   In most industries, an increase in demand from consumers spells profits, so banks and other lenders will pull out their checkbooks.  But farming is a little different.  In New England, farmers aren’t actually likely to make much money.  This isn’t new: farmers have always relied on farm credit co-ops and the federal government for loans to grow their businesses.

Phil Brand and Rebecca Moore got married, then started the aptly named Brandmoore farm one year ago.  They grit their teeth, leased 400 acres from a Rollinsford land owner, and headed to the bank for a loan.

"We went to Farm Credit East, took out a $50,000 farm start beginner farmer program," Brand says.   

The loan had to cover ten cows at $1,500 a piece; a truck and livestock trailer for $8,000; and living expenses. Luckily for the Brands, their lease included farm equipment. If it didn’t, they’d be shelling out about $50,000 on tractors and hay cutters, too.   After a second loan, the couple is $65,000 in the hole. “I would say we’re in the red, overall,” Brand says, “but I think we’re making good progress.”

Jay Phinizy runs the New Hampshire branch of the Farm Service Agency, the lending arm of the USDA: "We're allowed to take more risk than a conventional lender," he says.

This year, the NH Farm Service loaned out $3.1 million, that’s 24 percent more than previous years. “We’ve run out of our allocation,” Phinizy says,  “and quite frankly we’re going to have to put people on hold until the beginning of the new fiscal year.”

Phinizy says the FSA funds about 85 percent of applicants.  But a new organization has stepped up to the plate to help farmers out, too. That’s the New Hampshire Community Loan Fund, a nonprofit that lends to underserved businesses.

Two years ago, John Hamilton started a farm and food initiative at the Community Loan Fund. So far, the organization’s loans to farmers range from $10,000 to $500,000.  In the future, Hamilton says, he plans to lend more.

But it’s not just capital that farmers need these days. “Part of the thing that we unearthed,” Hamilton says, “was borrowers sometimes came to our door not prepared.”

Like the Jefferson, N.H. farmer, Kris Von Dohrmann. “I knew how to raise good cattle,” Dohrmann says, “I knew how to raise good meat. I didn’t know how to run a business.”

Von Dohrmann raises Belted Galloways for beef and jerky. You know, those cows with the large, white stripe around the middle.

The Community Loan Fund set her up with business mentors, group workshops, and a small microloan for cattle branding equipment.

Von Dohrmann’s herd grew, and she decided to expand:  selling beef jerky, along with meat.  In a tiny cabin-like building off of her barn, Von Dohrmann explains how her jerky starts out as frozen ground beef. "Then we thaw it, weight it, mix it with the spices, strip it out, and then we have this wonderful dehydrator."

Von Dohrmann paid for the $6,500 dehydrator with a loan from the Community Loan Fund.

It’s not that there’s anything inherently wrong with a non-profit making loans to ambitious farmers. But when it comes to funding local food in New Hampshire, Food Policy expert and UNH law professor, Margaret McCabe, says slow down.

She says farmers, funders, and consumers should be asking one important question:

“Where do we want to end with this?” See, 80 percent of New Hampshire farms gross less than $10,000 a year, and, as McCabe points out, “you can’t make a living!”

She says farmers who want to make a profit are looking to the Community Loan Fund and others for ways to scale up. But, she worries, that might just lead us back to the industrial model the local food movement was trying to avoid in the first place. “When you get to what local food means to people,” McCabe says, “that’s not what they’re looking for.”

Finding a way to be both efficient and small isn’t easy for Phil and Rebecca at Brandmore farm.  They say they need to grow somewhat in order to get efficiencies of scale – to be able to afford things like health insurance. But they want to keep their farm small, too.