Among many challenges farmers face, a financial system that drives increasing debt, bankruptcies and foreclosures may be among the most daunting. “U.S. farm sector debt is set to exceed $600 billion this year, and it’s generally been increasing year-over-year,” says Food System 6 Executive Director Lauren Manning. “Farmers are taking out more and more loans. That tells a compelling story: Why do they need more debt? What’s not working for their bottom line?”
Food System 6 (FS6) is dedicated to accelerating the shift to a just and regenerative food system by ensuring farmers and ranchers have the financial security they need to adopt practices that nourish people and the planet. FS6’s vision is a vibrant and resilient food system that restores ecosystems, produces nutrient-rich food, supports rural economies, and uplifts everyone across the supply chain—where healthy soil and healthy balance sheets go hand in hand.
In her role at FS6, Lauren leads initiatives that redesign agricultural finance and expand access to capital for regenerative producers. A lawyer, former regenerative rancher, journalist, and agrifood tech VC, her work bridges law, capital strategy, and on-the-ground farming experience to advance regeneration and financial viability across the food system.
In this Q&A, Lauren shares how the food and finance systems intersect and how we can support both agriculture lenders and producers to create a more robust and sustainable food system.
Food System 6 works at the intersection of the food and finance systems. How are those systems intertwined?
The food system is a financial system. Food doesn’t simply move from farm to grocery store to plate; it moves through a complex web of businesses, each making financial decisions that shape what is produced, how it is produced, and who gets to participate.
That means the agricultural finance system quietly determines the outcomes of our food system. It influences which crops are grown, which practices are viable, and which farmers are able to access capital in the first place.
Right now, the financial system isn’t working very well for farmers. U.S. farm sector debt is set to exceed $600 billion this year, and it increases every year. Farmers are taking out more and more loans. That tells a compelling story: If more borrowing is required year after year, what does that say about the underlying economics of farming?
At Food System 6, we aren’t focused on promoting one type of farming, and we aren’t here to assign blame to banks or farmers. We are examining the systems that cause farmers and lenders to think and act in the ways they do, and finding tangible entry points for them to start thinking and acting differently.
How do you see changing the financial system as a starting point for moving toward a more regenerative agriculture system?
We’re trying to change the agricultural finance system for everyone. We want to help every producer have more financial empowerment, capital access, and the freedom and autonomy to be innovative in their operations. Sometimes people slip into this regenerative versus conventional ag paradigm, and I don’t find that useful at all.
There is a big opportunity if we can frame a conversation not on one particular type of farming but on economic resiliency. Regardless of whether a farm or rancher is new, or a multi-generational, high-yield commodity farmer, or the most diversified producer under the sun, they all speak the language of economics. They all understand profit and loss. They all understand the experience of speaking to a lender.
We want to speak to farmers and ranchers not in a language of altruism or judgment, but through the lens of, “We want you to still be farming in 10 years.” We’re seeing such financial precarity throughout all of agriculture—record foreclosures and scary bankruptcy numbers. We want to redesign the system to keep more farmers in the business of farming.
That’s where regenerative agriculture comes in for us, not necessarily as a moral imperative, but as an economic one. At its core, it’s about aligning ecological resilience with financial resilience, because practices that improve soil health, reduce input dependence, and diversify revenue can increase the durability of an operation in the face of market swings, rising input costs, shifting consumer demand, and increasingly volatile weather. And yet today, many regenerative or transitioning producers struggle to access the same financing as conventional operations because the system isn’t set up to understand or support them.
Could you describe the basics of how the agricultural finance system currently works?
Inherent to all financing is a desire to get your money back and earn a little extra on top. That’s the business of banking, and there’s nothing wrong with that. We all need access to capital to do business, and we want farmers to have that access.
When bankers evaluate a lending opportunity, they look at risk. What is the risk that this borrower won’t be able to pay me back? In the classic example of multigenerational, high-yield, high-input commodities such as corn and soy rotation, bankers think about finance and risk in a very formulaic way. One of their key considerations is eligibility for federal farm safety net programs, including subsidies, crop insurance, and emergency disaster relief. Another is benchmark data, which provides information about what’s happened in the past. The USDA maintains databases on the average yield of a particular crop in a particular county over the last several decades, along with the price at which it sold that year.
If I’m a lender and I know you’re going to get a subsidy for growing a commodity, that gives the loan some automatic repayment capacity. If I know you’ll have crop insurance and disaster relief, I know if something goes wrong, you can get coverage. Alongside that, I can look at the historical data and figure out what you will likely yield this year and what you can sell it for. Additionally, lenders can go to the USDA Farm Service Agency and, in some cases, get a 95% loan guarantee, meaning even if that borrower defaults, the lenders are made whole up to 95% of the financing.
So for conventional farming operations, there are a variety of taxpayer-funded de-risking tools and safety nets. Lenders see these federal farm safety net programs as what finance people call “credit enhancements.” It makes the loan appear less risky and makes it more attractive.
How does this system affect non-conventional producers?
All of these credit enhancements support a very specific type of farming. If you’re a regenerative grower or you want to grow or raise something less conventional, those credit enhancements often fly out the window. Many variables—such as what you grow and where and how you grow it—may make you lose access to or get less subsidies or crop insurance. There’s also likely no historical benchmark data to refer to on your perennial Kernza wheat or your grass-fed beef. And you will likely won’t have access to a loan guarantee unless your lender is willing to advocate on your behalf.
All of this creates what we call “perception of risk”—a lack of the data and access to federal farm safety net programs that de-risk investment in agriculture. If we want lenders at regular ag banks to extend credit to unconventional producers, we have to have a conversation about how we evaluate risk. How do we measure risk? How do we think about it? How far out do we look in terms of risk and repayment? Right now, agriculture mainly operates on one-year crop cycles and budgets. But what happens if an operation continues to lose a layer of topsoil every year? That doesn’t quantify year to year, but over 20 years, it might tell a different story about the yield potential and resiliency. A lot of our work at Food System 6 is focused on this concept of risk in agriculture: How it’s measured, how it’s understood, and how we can start changing the culture of lending to think differently about risk.
It’s worth noting that these federal farm safety net programs—the loan guarantees, the subsidies, the crop insurance—are all taxpayer-funded. You’re funding them. I’m funding them. The people reading this are funding them. As taxpayers, we are derisking commodity agriculture investments for lenders. The question is whether this is the type of agriculture consumers would want to de-risk with their tax dollars.
So how does Food System 6 work with producers to address some of these challenges?
For producers, it’s not so much about whether they want to try regenerative agriculture. It’s whether they can find the kind of capital that enables them to try new things—planting a new crop, expanding into a new market, or buying a new piece of land. It’s not a matter of desire; it’s a matter of capital accessibility. If my lender has been financing my family commodity farm for two or three generations, and I walk in and say, “Hey, guess what? This year, I’m going to transition 30% of my acreage into perennial Kernza and add grass-fed beef,” my lender might have some serious questions about whether that’s going to contribute to their bottom line and whether I will still be able to repay my loan on time.
When we ask farmers and ranchers to transition to regenerative agriculture, we’re asking them to be entrepreneurial—to take a risk, be bold, be innovative, learn something new, and, quite frankly, fail at some point. It’s unlikely every new initiative will be successful right away, whether it’s transitioning land to cover crops, integrating livestock, or growing a perennial crop. I like to encourage the rest of us in the agriculture ecosystem to match producers in that entrepreneurial spirit. How can we as funders and supporters be as bold as we’re asking farmers and ranchers to be?
Is there a specific example of a way you work to support producers?
The USDA Natural Resource Conservation Service (NRCS) has a program called EQIP, or Environmental Quality Incentives Program. It’s a cost-share program that helps producers put conservation practices on farms and ranches. It can be applied to all kinds of initiatives that increase farm resiliency—for example, rotational grazing systems, water management systems, hoop houses, or brush control. When I was a producer, I received a $40,000 EQIP grant, which meant the government would give me $40,000 for a variety of practices I wanted to implement on my farm. The catch is that you have to spend the money up front and then be reimbursed. For many operations, liquidity is not available at certain times of year, such as in the spring when money flies out the door and doesn’t come back quickly. That makes it incredibly difficult to cash-flow these improvements, so many folks end up funding them with high-interest loans or credit cards. We’ve even heard stories of producers taking withdrawals from their retirement accounts to cash flow their EQIP contracts.
We wanted to help with this, so we worked with some partners to raise philanthropic grant capital and said to producers, “Show us your EQIP, explain your goals and project plan, and we’ll give you the money upfront.” We just had our one-year pilot in 19 states, and we’ve seen great success. We shared a report with data and insights on what happens when you give producers all the money upfront. It’s a formula we like at FS6: Get money into producers’ hands now to alleviate cash flow issues, collect data in the medium term, and in the long term, show all of this repayment data to USDA NRCS and say, “What if you had a similar loan program?”
Now we’re raising more capital to expand our work with more producers across the country and take on some even higher-dollar EQIP contracts. Some folks, especially those out West who might control hundreds or even thousands of acres of grazing land, can receive up to $250,000. That’s an incredible opportunity where conservation improvements have a really meaningful scale, but it can create even more cash flow difficulties.
You also work directly with ag lenders. Can you describe that work?
We know a lot of incredible, innovative lenders who are private, non-bank loan funds, and they offer loans to producers who use farming methods ranging from organic and regenerative to local and Indigenous. These lenders think about risk much differently. They don’t rely on federal farm safety-net programs or benchmark data. They’re much more borrower-centered. They want to understand this person’s operation. What are their goals? How does this loan drive resiliency and long-term success? They’re willing to write loan terms that are flexible and can accommodate growth or transition periods.
These are incredibly passionate, dedicated people working hard to provide innovative loans. We don’t talk about it as much, but lenders also face many challenges. They are constantly working to raise capital from high-net-worth individuals, philanthropies, foundations, and family offices to capitalize their funds. We work directly with these innovative lenders to provide support. Anything we can do to help de-risk loans and increase their capacity is helpful. That’s why we take an infrastructure approach. We see ourselves as sitting in a different layer, creating the infrastructure to help innovative lenders do more of the lending they’re already doing. We want to be the rising tide that lifts all boats.
Is there a specific program you’ve launched to support lenders?
Yes, we went to the lenders and said, “We love what you’re doing. It’s so critical. What would help you do more of what you’re already doing?” A lot of them said access to credit enhancements helps them say yes more often and expands the flexibility and innovative nature of the underwriting and terms they extend.
As I mentioned before, one of the most common types of credit enhancement is a loan guarantee. It’s basically a promise to pay if the borrower can’t, like co-signing an apartment lease. Although these non-bank loan funders work with all kinds of producers, because they aren’t regulated banks, they cannot access USDA loan guarantees, which represents billions of dollars in loan-guarantee credit enhancement capacity.
Initially, we worked with the USDA to explore whether we could change these regulations, but then the administration changed and that door closed for the time being. But we thought, that’s no reason to wait, so we launched a philanthropically supported pooled loan guarantee program that pretty closely mimics the USDA program.
Through philanthropic capital, we offer loan guarantees to innovative lenders. In exchange, the lenders share data about how they lend. How do you think about risk? What terms have worked well for you? What is flexible about your underwriting? Where has your risk framework fallen short? Where do you need more information to assess these new businesses and new opportunities?
Over time, we’ll use the data to create a new playbook for underwriting unconventional agriculture. Hopefully, in a few years, we can take that information to more mainstream ag lenders and say, “We know you perceive this as risky, largely due to a lack of information and track record, but here’s the data from folks who have been doing this. Here’s the underwriting template. Here’s the risk framework. Here’s the performance of these loans and the outcomes they led to.”
We don’t want to point our finger at conventional ag banks. We want to help them learn what they need to broaden their definition of risk and look at unconventional borrowers in an equal but different light. In the long term, we would love the USDA to open its loan guarantees to these innovative non-bank lenders and put us out of business.
So you are using philanthropic capital to prove the business case for more innovative ag financing and credit enhancements?
Right. We don’t want to create programs or systems that rely on philanthropic life support indefinitely, but we are using philanthropic catalytic capital to demonstrate how the system should and could work. Philanthropic capital is well-suited to that work because it’s risk-tolerant and willing to be entrepreneurial, as these producers are. We want to explore how we can change underwriting, the federal farm safety net programs, and crop insurance. Our philanthropic partners believe in that same idea, going beyond regular grants or program-related investments and asking how they can use their capital to model an entirely different economic system.
At FS6, our call to action for philanthropy is this: We’re asking farmers and ranchers to take bold action. How are you taking equally bold action in your philanthropy and capital deployments? It’s critical to have partners who understand the long-term system play and are willing to be creative with their capital deployment, using it as a surgical, nimble tool to demonstrate different capital pathways.
Can you share a real example of the impact of this work?
Absolutely. A woman came into our EQIP bridge loan program after running into financial trouble and falling behind on her EQIP contract. The EQIP program rules say that if you don’t get everything done, they can ask you to pay back the money they’ve already given you. This woman was facing that situation. We were able to help her, and she sent us a message after she got all of her practices installed, saying, “You saved my farm. Had I not had access to this money, I don’t want to think about what would have happened.” It’s still hard for me to realize that something as simple as a payment timing issue, something as simple as helping her get through a few months and have the money to buy the materials she needed to get the practice done, saved her operation. That was a feel-good moment that makes all the tough, gnarly days worth it, realizing that your work is having a real impact for real people.
