Smarter Farmers, Smarter Lenders: Educating Toward a Sustainable Community

Smarter Farmers, Smarter Lenders: Educating Toward a Sustainable Community

Summary

We are in the midst of an organized response to the myths and misunderstandings unveiled in the analysis of surveys to lenders and sustainable farmers delivered in 2002- 2003. Field days have targeted lender education needs for on-farm exposure to sustainable practices; more are planned for this season. Business planning workshops and a scholarship fund have addressed the need for record-keeping by farmers; credit liaison workshops and farmer/lender exchanges are being planned for this summer. We have made great strides with two major organizations of lenders and agriculture educators and judging by the continued press on the topic, have generated an interest in “smarter” credit for sustainable farmers.

Objectives/Performance Targets

Please refer to the final report made for LNC00-200, especially the “Future recommendations” section. It aptly set the stage for our current work. From that report:

“The surveys allowed us to pull aside the protective curtain of distance from some serious issues related to credit and sustainable farming. While it is not all ugly, the picture that emerges suggests that myth and bias were not too strong for the barriers that stand in the way. Always, always, myth and bias are conquered best by up-close and personal time between those who would hold the barriers in place rather than remove them for the painful but rewarding journey forward.”

Seven specific activities address our desired outcomes:
i. Credit liaison training – Training people to be credit liaisons provides the beginning farmer – and a prospective banker – with a bridge across one of the most confusing and intimidating aspects of farming, accessing needed credit.

Participants will be sought from a pool of Farm Beginnings™ graduates and agriculture educators. During two separate trainings – one each in Western and Southeastern Minnesota – liaisons will be trained to educate farmers about lending regulations, filling out financial plans, and restructuring tips. They will learn how to facilitate whole farm planning, goal setting, and self-assessment with farmers. The program emphasizes how to teach farmers about the importance of record keeping, how to use the inter net to learn about government programs, and how these programs can be beneficial to a farming operation.

The goal of a credit liaison is to help a farmer overcome the lack of familiarity with programs, paperwork, and fear of failure that can paralyze a loan applicant. But in the bigger sense, a sound farm plan built around goals and reinforced with useful record-keeping lead not just to a viable loan application but to smarter farming and better financed farming as well. The availability of liaisons bodes well for greater exposure and activity between lenders and sustainable farmers.

Equally significant is the potential for greater engagement by agriculture educators with sustainable farming. In a recent survey of educators (LNC00-200), 43% of respondents indicated more interest in sustainable farming in their regions in the past five years, a third are farmers, and the group exhibited a strong working knowledge of financial terms. This is a population well suited to wearing a liaison ‘hat.’ Mileage will be provided as needed.

ii. Business planning workshops – Two hands-on business plan training programs will be offered. Participants will be farmers and agriculture educators, the latter whom will be paired with willing farmer participants. The course will be held in Western and Southeastern Minnesota.

The new Minnesota Institute for Sustainable Agriculture-produced manual entitled, “Building a Sustainable Business: A Guide to Developing a Business Plan for Farms and Rural Businesses,” will form the core material provided free to participants. Related materials in the form of a new video and software will be part of the classroom presentation. In addition to a professional trainer (manual principle author Gigi DiGiacomo), there will be an informal teaching role for a Farm Business Management instructor and a banker. The course will be geared with a loan application, business partner, or collaborative marketing group in mind.

Several outcomes are addressed in this activity, including educator awareness of and potential engagement in sustainable farming enterprises. In a recent survey of Extension educators and Farm Business Management/Production instructors (LNC00-200), 40% or better indicated that they included materials on sustainable agriculture at meetings and consultations. But there are indicators to the contrary. For example, the “2002 Accomplishments and Results Report” by the University of Minnesota Extension Service indicates nearly no such activity. And Minnesota’s FBMP cannot run reports on sustainable agriculture enterprises because the database is statistically too small.

In addition, farmer attitudes concerning business plans, actual business plans, and record-keeping and financial planning skills are among short-, intermediate-, and long-term outcomes addressed by this activity.

iii. In-service/farm tours – Lenders and educators alike have expressed the need and enthusiasm for learning about sustainable agriculture by going to the source. Accordingly, four or more farm tours and in-service presentations will be arranged with lenders, educators, and farmers in mind. More formal indoor venues will be included at the recommendation of several lenders.

This category of activity addresses such outcome-related issues as awareness and knowledge concerning sustainable farming for two populations who appear willing and in need of exposure.

iv. Partial scholarships – In order to provide on-going farm business training, cross-fertilization between Farm Business Management instructors and sustainable farmers, the beginning of a viable data base of sustainable agriculture enterprises, and gain the attention of some lenders, partial scholarships will be provided to Farm Beginning™ graduates to enroll in the Farm Business Management Program.

It is highly likely that these pairs of farmer/instructor will participate in both educator and lender in-services. The dual purposes of financial and sustainable agriculture training address attitudinal and awareness gaps, the need for benchmark data and sound business practices, and the long-term goal of greater and smarter access to credit by sustainable agriculture practitioners.

v. Roundtable – A working group of lenders, Extension Service educators, FBM instructors, related credit and business trainers, and Farm Beginning™ participants will convene to describe, validate, and improve respective program materials that relate to credit access for sustainable agriculture enterprises.

The goals of this one-day event include some semblance of cross-endorsement – so that lenders view the Farm Beginnings™ course as a valid borrower education venue, the Farm Beginnings™ curriculum better reflects lender interest in substantiated numbers, and FBM instructors absorb some of the “planning for profit” mind set that permeates Farm Beginnings™ curriculum. Two intermediate outcomes will be addressed by way of clarifying mutual goals, recognizing the variety of ways to present and prepare financial information, and a friendly assessment of the strengths and weaknesses of the financial training models explained by participants.

vi. Whole farm planning short course/farm tour – Two, day-long introductions to Whole Farm Planning (WFP) will be offered to Western and Southeastern Minnesota lenders, educators, and farmers. Farm Beginnings™ graduates and staff as well as WFP trainers and graduates will provide the basics of this as well as the on-farm component dedicated to the specifics of sustainable agriculture.

This activity addresses lender and educator needs to see practical aspects of sustainable enterprises as well as Farm Beginnings™ needs to redirect the thought process of those pondering how and why farmers choose to define themselves as sustainable.

A short day with reimbursed mileage and the added incentive of a farm tour will make the event attractive to some lenders as well. Participants will be invited to join Farm Beginnings™ classes for a bigger dose of Whole Farm Planning and to interact with beginning and current sustainable farmers.

vii. Written outreach – While the proposal puts a strong focus on hands-on and face-to-face work, some degree of written outreach is needed to touch those who cannot make it to organized events. Some pieces are already in the mill – an opinion piece and separate article in banking journals, a separate article for an agriculture lending journal, a curriculum review, a fact sheet on lender survey results, and a short list of credit resources. Others need to be – in disseminating survey results, FB curriculum, farming practices, lender needs, liaison contacts, and financial Best Management Practices as a result of the training on business plan writing.

These will be written as needed to meet the challenges of outcomes pertaining especially to awareness, knowledge, and attitudes.

Accomplishments/Milestones

i. Credit liaison training
The business planning workshops of a year ago helped pave the way for this Spring’s planning for credit liaison workshops. “Going to the bank” means many things and preparing for the trip requires more than just a good idea. Discussions with both Lou Anne Kling, who will conduct the training, and with several engaged farmers is ongoing now. I remain unclear about the shape of this workshop and very sure about its need.

ii. Business planning workshops
We conducted successful workshops in southeastern and western Minnesota during January-March 2004 for 39 students. Most but not all were Farm Beginnings™ graduates or current participants, and they ranged from the landless and dreaming to full-fledged sustainable farmers on their second or third iterations of a business plan. Gigi DiGiacomo, principle writer of the “Building a Sustainable Business: A Guide to Developing a Business Plan for Farms and Rural Businesses,” along with a banker, a Farm Business Management instructor, a Farm Beginnings™ graduate, a private business consultant, and the students themselves provided the workshop expertise. No one disavowed the need for such plans, everyone struggled with them, and several have real plans and real financing to show for their labor. Students were clear in their evaluations that they had not been ready for such depth while in the Farm Beginnings™ course itself. All expressed conviction that the workshop was worthwhile and could be repeated. The problem of being just in the planning stage was a major deterrent for many students. The presence of experienced farmers was a powerful asset. Students actively participated in class; attendance was steady and high, though few did the carefully crafted homework. The inclusion of FMB and a lender provided the start and continuation, respectively, of solid relations that continue to bear fruit in this work, including a discussion to get instructor/student pairs to present to the FBM instructors at large.

Next time, I will ask the landless to create a scenario in which to place themselves for the duration of the workshop and on which to base all number-crunching and practice decision-making. I also will make the workshop longer; I will charge money (even a little, or a sliding fee), and I will simplify it so that only one or two aspects of a business plan are covered and then really cover them, with hands-on required and budgeted in within the class as opposed to homework that falls prey to everyday life.

iii. In-service/farm tours
We organized two fabulous farm tours with impressively low (but not nil) lender/educator attendance. Outreach to the lenders was strong; outreach to educators could have been better, and attendance at the second event was way better than at the first. Both events were open to Farm Beginnings™ graduates and to the public at large, and were well attended otherwise. Regardless, they form part of the ground work and “ammunition” for encouraging lenders to attend similar events being planned for this summer. We knew that lenders could not easily break away for a day, so planning now is considering shorter events and more of them in a wider band of the state. Since last summer, we also have the ear of some of the movers and shakers in a significant banker’s organization, whose membership passed a motion in December (2004) to accommodate greater outreach. We have also been able to nurture a willingness among some farmers to consider going to banker committees, perhaps with their own bankers in tow. Finally, we’re working on combining one of the banker meetings with a farm visit. The project PI has presented to bankers (followed by the afore-mentioned motion). Several pieces have since been written in lender publications. Last year’s small attendance was just a beginning.

iv. Partial scholarships
Six sustainable agriculture farmers have received fee assistantships ranging from approximately $200 to $500 to offset the cost of record-keeping courses offered through the Farm Business Management Program. A quarter of the fund remains; new Farm Beginnings™ graduates and the word getting out assure it’s being bottomed out by the Fall. Recipients are obliged to “pay back” by contributing to a field day or other meeting. Instructors have agreed that their colleagues could benefit from hearing how they work with these alternative farmers. The state wide data base is a little richer, since the minimum to pull a report is 5 farms – this addresses the issues of benchmark data. In the next year, we will address the possibility of running such reports, formal classification to capture the data of other, undefined sustainable farmers, and getting FBM instructors and lenders (especially Farm Service Agency) together, since the FBM program is an authorized vendor for borrower training.

v. Roundtable
Slowly but surely, the goals of the roundtable are being met, albeit in discreet meetings to date rather than everyone at one table, as initially envisioned. That may yet happen. Then again, we may need more time for the requisite relationship building. I feel it to be a chicken and egg situation and see our ongoing conversations as vital. Eventually, I do want some key players at one table; the need is very much there and so far, for the most part, players are increasingly speaking with me but not with each other on topics pertinent to sustainable farmers. I am aware of this need and am trying to find a natural timing for a one-table meeting to happen in the next 8 months.

vi. Whole farm planning short course/farm tour
As with v. above, this is a delicate objective requiring groundwork on going now and with some success. We have strengthening relations with lender and ag. educator groups, and with farmers willing to talk numbers. The public attention on organic agriculture has been a door-opener (with some careful explaining). Our business planning workshops and record-keeping scholarship fund also have allowed for cross-fertilization and essential conversations. Last summer’s field events reinforced the need to design this activity in a certain way to meet banker requirements – shorter, with a clear financial component, and probably in conjunction with an already-scheduled lender meeting so that there is a captive audience. All this to say that were we on the steering committee of a more blustery or gregarious nature, perhaps we could sweet talk everyone to the farm for a dose of whole farm planning. But given the reality of cautious lenders and careful farmers, we are picking our way through. One note of optimism is the interest of a major player in the Independent Community Bankers of Minnesota group as well as the head of Farm Service Agency’s farm loan program. But getting the lenders themselves to the farm is evidently another matter.

vii. Written outreach
We’ve done a fair amount of writing and also been written up in lender (AgLender, Independent Community Bankers of Minnesota NEWS, Journal of Agricultural Lending), organic (Organic Broadcaster), sustainable (Land Stewardship Project Letter, Livewire, and LSP web), and SARE publications (Field Notes and the upcoming annual Highlights report), as well as in both agricultural and general media (by way of event coverage).

The Farmer Lender survey results and a highlights sheet are on our web site at last: www.landstewardshipproject.org/pdf/edsurvey.pdf.

The work has been presented at the Upper Midwest Organic Farming Conference (February 2004) and at an ICBM meeting (most recently, December 2004).

We have a one-pager on the overall project, and on things lenders could do to address the issues. I also have created a shortened version of a benchmark data report. This summer’s field events and related farmer/lender exchanges will require other one-pagers. All events have and will again generate press releases. I think there also is a need for one-page fact sheets on such topics as credit card borrowing, easy cash flow and other Best Management Practices, benchmark data sources, lender needs in a nutshell, and others- we hope to get to some of them.

Impacts and Contributions/Outcomes

Our greatest achievement to date is that we still have people who want to talk about credit issues – in fact, we have even more people than when we started, and those people include lenders, farmers, and some within the ag. educator community, our targeted audiences. The work has attracted attention to the concerns at hand – the need for bank-friendly records that lead to financed sustainable agriculture. We can point to participants who now have business plans AND financing, both of which presumably (though there is no guarantee) increase the chances of better land management and smarter access to funds. Lenders really perk up at learning about benchmark data, especially when shown an example of a side-by-side price comparison (as with New Farm’s OPX). How could we have reached them with this gem if there hadn’t been conversations along the way? This accomplishment has reverberating impacts, ones that point to our long-term goals related to bank and farmer practices and the land and communities each supports.

Collaborators: