The Carrot Project: Farmers' financing needs assessment

Final Report for CNE07-028

Project Type: Sustainable Community Innovation
Funds awarded in 2007: $10,000.00
Projected End Date: 12/31/2007
Region: Northeast
State: Massachusetts
Project Leader:
Julia Grigg
The Carrot Project
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Project Information


Many smaller, limited-resource farm operators cannot find the financial assistance they need to maintain or improve their productivity. There has been scant research on the roles of debt and financing gaps as they affect smaller farms. Farmers’ financing dilemmas and the limited research on financing gaps are affirmed by lenders and organizations providing technical assistance.

In order to design the best financing products or services to meet the needs of smaller sustainable farm operations, focus resources, and attract the desired investment, The Carrot Project needed better information. The Carrot Project needed to understand more completely the funding gaps that farmers face, and how those gaps affect farm operators’ abilities to meet business goals and maintain and improve productivity while using the most ecologically sound production methods. The key components of the project included establishment of a working group to advise the project, a farmer survey, outreach to farmers through multiple farm organizations, and a final report — Are Northeast Farmers in a Financing Fix? —as well as publicity for the findings.

Project Objectives:

The following are the data we wanted to obtain through this project:the size and range of financing gaps; the types of financial vehicles most useful for different groups of farmers; the terms or conditions most beneficial to different groups of farmers; the resources used by smaller farmers to seek information about financial services; how absent or limited financing impacts a farmer’s ability to maintain or improve productivity; effects of financing on types of production methods used; whether farmers using sustainable methods face financing obstacles different from those faced by traditional farmers.


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  • Stephen Burrington
  • Chris Cavendish
  • Duncan Hilchey
  • John Mitchel
  • Kathy Ruhf


Materials and methods:

The Farmers’ Financing Needs Assessment was guided by a four-member Working Group that included a farmer, a Cooperative Extension agent, a small-farm policy expert, and an Advisory Board member from The Carrot Project. The needs assessment had two components. One consisted of two lender focus groups to provide perspective and insight into the financing situation for smaller farms and to help focus survey outreach. The focus groups were added to the project on the advice of the Working Group. The other component — the Farmers’ Financing Survey — was completed by more than 700 farmers in New York and New England. The survey helped us to understand better farmers’ financing needs by geography, stage of business, and type of business. An extensive outreach campaign to encourage farmer participation was conducted with the help of 35 farm support organizations, including non-profits, associations, departments of agriculture, and universities.

The focus populations for the survey were small- and mid-sized farmers, limited-resource farmers, and those using ecologically friendly production practices. Because of the numerous organizations working with them, the group of farmers easiest to contact were those either USDA certified organic or using organic practices. A literature search, interviews, and the focus groups provided no indication that farmers using ecologically friendly production methods were disadvantaged when seeking financing. There are fewer organizations working with small farms, but de facto, many of these farmers were reached through a number of our other outreach efforts. Lacking a straightforward way to reach limited-resource farmers, the Working Group decided that a more-inclusive outreach campaign would be most effective in reaching all target populations, as well as in gathering responses from the non-target population that could be used for comparative purposes. Approximately 5,000 farmers were mailed an introductory letter and one or two follow-up postcards. Countless others read about the survey through organizations’ newsletters and listserves, as well as on websites and in ads targeted to farm populations.

The survey questionnaire was drafted with assistance from the Working Group and tested by six farmers, including some who had affiliations with farm organizations. The survey was available in hard copy as well as online, where it could be downloaded or completed online using Forty-eight percent of surveys were completed online; the rest were manually entered. Analysis was completed using both Survey Monkey and SPSS, Inc. statistical analysis software.

The findings summarize 706 farmers’ responses to queries about farm financing and their types of farming operation. The survey provides a snapshot of farmers’ financing needs. Gross farm and household incomes were requested for 2006, the last completed tax year. Respondents reported their requests for operating and capital financing for 2006 and for farmland financing between 2001 and 2006. We did not ask about intentions to seek financing because such information could lead to unrealistic projections. The survey did not measure the number of farm operators who would like to seek financing but did not because of past negative experiences or expectations of rejection. Some of this information was gathered from the numerous comments provided at the end of respondents’ surveys.

Research results and discussion:

The project was able to meet most of the objectives for data collection. However, some questions were removed as the goals of the survey were honed and in an effort to shorten the survey to encourage farmer participation. The “outcomes and impacts” cited for any removed questions were drawn from the comments collected at the end of the survey and any subsequent follow-up with and from farmers.

The reported need for debt financing for farm real estate, operating, and capital ranged from 20% to 26% of respondents. The median requests for operating and capital financing were $29,000 and $28,000, respectively. The median request for purchasing farmland was $162,500. The farms most likely to apply for operating or capital financing were those with managers or operators with more than fours years of farming experience, higher gross farm incomes, and more mature businesses. This profile was strongest with operators with gross farm incomes of $117,000 or more who applied for operating and capital financing at rates of 60% and 46%, respectively. This is at least double the application rate for all respondents. Start-up farms (those running businesses for four years or less) were 7% more likely to apply for financing for farm real estate than the average of 20%.

The average rates of denial for operating and capital financing were 25% and 26%, respectively. For farm real estate, the denial rate was 20%. When measured by stage of business, start-up operations are the most likely to be denied financing of all types. Farms with the highest gross farm income ($117,000 or greater) were the least likely to be denied financing, and farms in the three lower income categories below $117,000 did not follow a trend. Because of their relatively low loan application rate, the number of start-ups denied financing is comparable to the number of expanding businesses that were denied. Expanding businesses had income levels similar to the average, but were slightly more likely to be in the highest or lowest income categories: 46% versus 54% in the lowest income category, and 26% versus 20% in the highest income category. Sixty-four percent of expanding businesses had been operating for between 5 and 20 years, as compared to 42% in the general survey population.

Start-up and expanding businesses were the most likely to be denied debt financing and the most interested in equity financing. Approximately 30% of start-ups and expanding businesses, and 15% of mature businesses were interested in equity financing. The interest from start-ups and expanding businesses could indicate that for dynamic and growing businesses the available capital is inadequate. It may also reflect receptiveness to new types of financing arrangements. For start-ups, this may be true because of their rate of denial of debt financing; however, this is less likely to be true for expanding businesses, based only on rate of denial.

Respondents perceived that financing with flexible payments was the most difficult to obtain, with long-term financing being somewhat easier, and short-term being the easiest of the three. This finding corresponded to lenders’ perspective — that there is an opportunity to provide flexible payment schedules such as deferring principal payments, skipped payments, and annual payments. This information is important because it indicates that flexible payment options should be considered when developing or modifying existing financing programs.

The perceived ease of obtaining financing was lowest among start-up operations, average among expanding businesses, and highest for mature businesses. The perceptions of respondents reflect the actual experience of respondents trying to secure financing, i.e., that newer businesses have more difficulty securing financing. Female respondents tended to have smaller farms, were less experienced, and were more likely to be start-ups than the average respondent. However, when their rates of denial were equalized for various farm characteristics, they were not at a disadvantage in receiving financing, even though they perceived financing to be more difficult to obtain than did male respondents.

In one of the final drafts, the question that would yield this answer was removed in an effort to shorten the survey. However, in the written comments, which have not been formally tabulated, the resources most frequently cited were web searches, friends, nearby banks, Farm Credit, and USDA-FSA.

The series of questions needed to answer this query was sufficiently large to double the size of the survey, so those questions were removed. From the written comments it is clear that farmers’ inability to find financing frequently had serious implications for their businesses, such as: negative effect on the ability to maintain an operation’s viability; prevention of business growth; lost opportunities to expand onto new land; inefficient operations because of the need to repair facilities or the continued use of inadequate equipment; or the inability to purchase needed supplies or processing equipment. In some cases, farmers turned to creative strategies to get around the lack of financing; in other cases, the businesses slowly ground to a halt.

There was no indication from the survey or the lender focus group that farmers using organic production methods, conservation practices, or any other ecologically friendly practices were at a disadvantage because of their farming practices.

Though there was no indication that farmers using a specific type of production practice were differently affected, there was some indication that farmers with non-traditional businesses — such as small animals, or diversified operations in a dairy region — were at a disadvantage when approaching lending institutions. However, the data set was too small to yield meaningful explanation.

Participation Summary

Education & Outreach Activities and Participation Summary

Participation Summary:

Education/outreach description:
  • The final product of this project was a report, Are Northeast Farmers in a Financing Fix? Research Results on Financing Gaps and Program Opportunities. Publicity and educational efforts have included the following:

    • In July 2008, 304 visitors looked at the web page containing the report; in August, the number was 131. We were unable to track how many downloaded the report.
    • Four individuals participated in a conference call about the report and its findings. The participants included representatives from a CDFI (Community Development Financial Institution) and a foundation, a USDA FSA state director, and a non-profit consultant.
    • A news release was sent to 15 different organizations. The report was mentioned in numerous (5–10) listserves and e-newsletters of other non-profit organizations and government entities.
    • Results were or will be presented at: The Organic Summit, June 2008, sponsored by New Hope Media and the Organic Farming Research Foundation; The Politics of Food, September 2008, sponsored by the Environmental Leadership Program; and The Young Farmers Conference: Reviving the Culture of Agriculture, sponsored by the Stone Barn Center for Food & Agriculture, December 2008. We will continue to seek opportunities to discuss this work.
    • The Carrot Project met with senior vice presidents John Caltibianco and Jim Putnam, from First Pioneer Farm Credit, to discuss findings and what First Pioneer could do to reach out to more beginning farmers.
    • A full-page article on our work will appear in the Fall 2008 issue of The Natural Farmer; there will also be upcoming articles in Innovations in Sustainable Agriculture (NESARE), and the Small Farm Quarterly (Cornell University).

    Based on the wide circulation of the report through The Carrot Project’s outreach efforts, as well as through simple digital forwarding, the word about the report and its results was definitely spread. Two of the opportunities to present the findings are a direct result of the report; such opportunities can only help lead to a better understanding of small-farm financing. This fall (2008), we plan to contact a recently developed list of media outlets that have agricultural writers who may find our report useful as background for articles.

    The outreach effort could have been improved with participation of a consultant with communications and writing expertise to make the report’s language and results more accessible.

Project Outcomes

Project outcomes:

We exceeded our goal of receiving 600 completed surveys by 15%. With the assistance of 35 organizations, we received responses from 726 farmers, of which 706 were usable. The higher number of respondents lends greater confidence to the interpretation of the data.

The number of thoughtfully written comments from farmers who were having difficulty finding financing, and from those who simply wanted to be helpful, was telling. It not only provides us with material to use as we promote our work, but also offers encouragement as we analyze the data. We received only one comment asking “why another survey,” but in the same sentence, the farmer acknowledged the need for alternatives for smaller farmers seeking capital. The number, depth, and type of comments spoke to a need for smaller farmers to have a forum in which they might learn about and discuss financial issues. Their questions about where and how to find financing also spurred The Carrot Project to make a higher organizational priority of a web page that encompasses links to governmental, non-profit, and commercial lenders as well as resources for business-planning technical assistance. Surprisingly, this does not already exist.

Assessment of Project Approach and Areas of Further Study:

Potential Contributions

The data from this project are being put to immediate use in the development of the Microloan Fund for New England Farmers and in planning for the Northeast Farm Financing Fund. Both of these projects will strive to provide financing to farmers to improve profitability, advance good stewardship through the application selection process, and help to improve local economies by making it more likely that individual farms will thrive. The Microloan Fund for New England Farmers is a partnership with Strolling of the Heifers and Chittenden Bank and will serve 6–10 farmers in its first year. The Carrot Project will continue to rely on the data in developing new programs and in cultivating conversation about small-farm financing.

Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture or SARE.