How to Use a Loan to Purchase Hay and Feed Storage in Texas
Feed is the biggest bill on most dairies, and storage decides how much of what you buy actually reaches a cow. A loan for hay and feed storage can be a sound move if the numbers are honest.
Why does storage matter so much?
Weather, mold, pests and handling all eat feed. Hay left in the open loses quality, and a dairy with poor storage may buy more than it needs. Good storage also lets you buy when prices are favorable and hold through a dry spell.
Texas adds its own twist. Drought can push hay prices up and make supply hard to find in central Texas, so being able to hold reserves is worth real money, but it needs a place to put it.
A simple walk through the barn with a tape measure and a camera can reveal how much feed you are losing. Note what you see, with dates, and bring the photos to the lender meeting.
What kinds of storage can a loan cover?
Common projects include hay barns, covered pads, silage bunkers or bags, commodity bins and feed mixing areas. Each has a different cost, life span and labor profile. A lender will often match the term to the life of the asset.
Compare designs with the help of Texas A&M AgriLife Extension specialists and look at the dairy feeding and herd care guide for what a herd needs. For help pricing equipment that supports storage, see these farm equipment tips.
- Hay barn or covered storage pad
- Silage bunker, bag or pile with drainage
- Commodity bins and unloading
- Mixing area and scales
- Fire protection and electrical safety
How do you work out whether it pays?
Estimate current feed loss, then estimate loss with better storage. Multiply by what the feed costs. Add the value of buying at better times. Subtract the loan payment, interest and upkeep. If the numbers only work under rosy guesses, scale down.
Use real price history. USDA Dairy Market News and the USDA Economic Research Service offer market information that can support your assumptions, and USDA NASS publishes agricultural statistics. Mark your own estimates as estimates.
Remember that numbers from your own farm beat numbers from a brochure. If you have two years of feed records, use them as the base for your savings estimate.
What type of loan fits?
Buildings generally suit a term loan, while seasonal feed purchases fit an operating line. Mixing the two in one note can strain cash flow. Ask each lender how they treat storage structures as collateral.
Compare banks, credit unions and Farm Credit associations, then see what FSA loan programs might offer. Conservation help may exist for some storage practices through the NRCS, so ask before you build. All terms change, so check current ones.
What safety and insurance issues come with stored feed?
Hay fires, silage gas, bunker collapses and moving equipment around storage are real hazards. Insurance may price in your fire protection, and your lender will usually require coverage on financed buildings. Review the OSHA guidance for farm safety topics, and read farm safety basics before building.
Keep wiring and heat sources away from stored hay, and plan access for fire equipment. Talk to your insurance agent before construction, not after.
If you rent land or buildings, ask whether the landowner will agree to improvements, and who owns them if the lease ends. A lender will want that answered in writing.
How does the Texas climate shape the design?
Heat, wind, storms and wildfire all shape design choices in Hico and the Cross Timbers. Roof strength, drainage, ventilation and distance between structures can matter. Check the National Weather Service for storm patterns and the U.S. Drought Monitor for dry spell risk.
A plan that includes a reserve of stored feed can steady your cash flow during a drought, but only if the building is sound and the feed is high quality.
What should you do next?
Price two or three designs, run the payoff calculation, line up quotes and talk to two lenders. Bring photos of current storage and feed records.
This education site is not a lender and does not offer financial advice. Verify terms with licensed professionals. For a smile after the math, farm.FM's dairy stories and farm economics coverage are good reads, and one farm.FM story on hay and feed prices fits the topic.
Keep your bids and quotes for at least a few months. If prices move before you buy, you will want to show a lender why the budget changed.
Sources and further reading
- Texas A&M AgriLife Extension: Texas extension service
- USDA Dairy Market News: weekly dairy price reports
- USDA Economic Research Service: farm economy data and analysis
- USDA NASS: agricultural statistics and surveys
- Farm Credit: cooperative agricultural lending network
- FSA Farm Loans: FSA direct, guaranteed, microloan and emergency loan information
Ask locally: Ask Texas A&M AgriLife Extension about storage design, your insurance agent about coverage and a licensed ag lender about financing.
General education only, not financial, legal or tax advice, and Texas Dairy Loan Guide is not a lender. Rates, terms and deadlines change, so confirm current details with the lender or agency.