Across the entire U.S. agriculture system, we have witnessed a steady increase in farmers and ranchers seeking sources of diversified income over the years. With the recent impacts of the COVID-19 pandemic, agribusinesses and financial partners alike are turning their attention to diversified income streams far beyond the farm field for financial stability.
Revenue diversification provides nontraditional income to agribusinesses. It also increases ag businesses’ long-term resilience to offset commodity instability and creates a strategic roadmap that benefits farmers, ranchers, and their financial partners, including lenders, insurers, and landowners.
But revenue diversification is often not that simple to attain. Ag businesses today are finding significant value in the form of renewable energy opportunities. While acting as an advocate for farmers and ranchers from a financial standpoint, I have recently noticed that there’s a noticeable disconnect in conversations with lenders regarding these new revenue streams. The complex contracts involved in the areas of solar, fluid minerals, wind, and other resources can often blur the bottom-line impacts of these revenue streams, making it difficult to analyze credit, assets, and cash flow in the long term.
Lenders must be able to mitigate potential risks and ascertain the value and impact that renewable energy diversification can deliver.