Hoophouse and Organic Farming for Ag Lenders

Project Overview

ENC09-112
Project Type: Professional Development Program
Funds awarded in 2009: $25,329.00
Projected End Date: 12/31/2010
Region: North Central
State: Michigan
Project Coordinator:
Vicki Morrone
Michigan State University
Co-Coordinators:
Dr. Susan Smalley
Michigan State University

Annual Reports

Commodities

Not commodity specific

Practices

  • Education and Training: demonstration, workshop
  • Energy: energy use
  • Farm Business Management: budgets/cost and returns, marketing management, agricultural finance, risk management
  • Sustainable Communities: local and regional food systems, new business opportunities, partnerships, urban agriculture, urban/rural integration, employment opportunities

    Proposal abstract:

    Most farmers need to borrow money to begin farming and/or for annual operations. Access to capital is one of the barriers to enter farming, especially for people who are entering the field from outside and will not inherit a farm. Borrowing can be especially difficult for people who wish to farm in ways that differ from conventional farming approaches. This project seeks to expose agricultural lenders to successful organic farmers and successful hoophouse farmers and to provide them background about both agricultural management approaches and their economic underpinnings. Michigan Farm Service Agency (FSA) state staff members have helped to develop the project and explicitly support their field staff participation in the educational sessions. Other lenders and selected educators will also be invited to participate, including Natural Resources Conservation Service field staff. The educational approach will be through farm visits and workshops, led by farmers and supported by Michigan State University (MSU) educators, which will provide an informal atmosphere, opportunities to ask questions, and the beginnings of better linkages among the lenders, farmers and MSU specialists. Fact sheets will also be collected and developed as take home materials for continued reference. The educational efforts will be evaluated by analyzing the Michigan FSA loan portfolio for evidence of increased lending in these two areas which show increasing farmer interest. Educational sessions will focus on value-added production and management systems that utilize unheated hoophouses for season extension and organic vegetable and field crop production, for which demand is growing.

    Project objectives from proposal:

    This project seeks to expose agricultural lenders to successful organic farmers and successful hoophouse farmers and to provide them background about both agricultural management approaches and their economic underpinnings.

    Outputs.
    • 100 ag lenders, Natural Resources Conservation Service NRCS staff, agriscience teachers and others will participate in at least one farm visit and/or workshop to learn more about organic and/or hoophouse production.
    • Publication to assist with decisions about hoophouse purchase, with at least four different economic scenarios.
    • Package (electronic and paper) of educational resources assembled/developed to support lenders and other ag educators to better work with organic and/or hoophouse farmers.
    • All project materials posted on-line at www.mottgroup.msu.edu and www.michiganorganic.msu.edu, with appropriate links.
    • Selected video posted at www.sustainablefarmer.com.

    Short-Term Outcomes.

    • Ag lenders and NRCS staff will be knowledgeable about organic vegetable and field crop production, hoophouse vegetable production, organic certification, and organic and hoophouse economics.
    • FSA ag lenders and NRCS staff will interact with successful organic and hoophouse farmers.
    • Ag lenders and other ag educators will subscribe to listservs and/or participate in conferences to learn more about organic, specialty crop and hoophouse farmers.

    Intermediate-Term Outcomes
    • Ag lenders will more effectively and confidently review applications from organic and hoophouse farmers.
    • An increase in number/amount of appropriate lending and other services provided to organic/hoophouse farmers.
    • More ag lenders and other educators/service providers will participate in Michigan organic, family farming, small farm and related conferences and workshops.
    • An increase in use of Farm Bill program support by organic and hoophouse farmers.
    • Ag lenders will increase outreach to organic & hoophouse farmers.

    Long-Term Outcomes
    • Organic and hoophouse fruit and vegetable production approaches will be regarded as valid approaches to sustainable farming in Michigan and no longer regarded as alternative or niche approaches.
    • Ag lenders and other educators/service providers will know where to find research-based information they may need about local food systems, organic, hoophouse and related topics.
    • Ag lenders and other educators/service providers will broaden their engagement to include more varied types of agriculture.

    Environment and audience. Michigan agriculture is both similar to and different than that of many other states within the North Central region and country. Its farmers are aging, with 56.4 years the mean age according to the 2007 Census of Agriculture. It has been losing mid-size farms, with some becoming consolidated as parts of larger operations and others divided or ceasing operation. The cost of tillable land is increasing, with the average price per acre nearly 60 percent higher in 2001 than five years earlier and double the price of a decade earlier. It is located in the center of the Great Lakes, with a population of about 10 million, its geography and transportation challenges from being two peninsulas encouraging efforts to produce food locally, but its short growing season posing a barrier for the development of local food systems as many crops are not available locally for much of the year.

    Although the state’s agricultural leaders have not been particularly welcoming to organic agriculture, a small group of east central Michigan farmers committed to organic practices during the 1970’s, providing the basis for what some believe today is the largest contiguous certified organic acreage east of the Mississippi River. The state’s farmers markets have mushroomed to an estimated 250 in 2009, with many newer markets looking for additional farmer vendors – especially with organic products -- and more established markets working to extend their market season beyond the typical May or June through October. Schools, hospitals, correctional facilities and other institutions are showing interest in purchase of local foods. Slowly increasing use of hoophouses to extend the growing season enables consumers to stay in the habit of buying locally. Equally as important, farmers can expand both the total number of market days and types of crops available beyond the typical growing season.

    The FSA in Michigan employs about 50 County Executive Directors and 32 Loan Officers. During FY 2008, they approved 744 direct and guaranteed loans with a total value of $96.537 million, in addition to providing credit counseling assistance. With Michigan’s highly diversified agriculture, second only to California in its number of different products, it is a challenge for FSA staff members to stay current with changing approaches to agriculture. In particular, few have extensive knowledge or experience with organic agriculture or with the use of hoophouses – two farming approaches that help move Michigan’s agriculture toward greater sustainability and are of particular interest to newer Michigan farmers. FSA’s charge is to effectively evaluate loan applications from farmers, including those who wish to use these less conventional approaches. The 2008 Farm Bill included provisions to enhance support for both specialty crop and organic production, so it is important that USDA agency staff members understand these systems and assist the farmers who choose them. Within the organic community, some farmers recollect dealing with lenders who knew little about organic production or its economics. Hoophouses (unheated greenhouses) are springing up across the state, allowing season extension and winter greens production with relatively modest up-front investments, and MSU is just completing a three-year study of their economics, which can support this effort.

    Michigan agricultural lenders have a long history of cooperative work with MSU, but primarily with faculty in the Department of Agriculture, Food and Resource Economics. Recent work on the economics of hoophouse agriculture and organic agriculture has been conducted in other MSU departments. This project will help to broaden lenders’ links to additional MSU people and units that can provide useful information. It will also provide additional resources about economics of newer approaches that will help ag lenders provide appropriate credit counseling and guidance to customers who desire to participate in these types of agricultural production. It fits with the 2008 Farm Bill’s support of specialty crops and organic production and will help develop businesses and create jobs to fill Michigan’s increasing demand for locally-grown foods. Staff members of FSA and NRCS and other ag educators require technical training in this area if they are to effectively serve farmers.

    The core audience will be approximately 32 Michigan FSA loan officers and 50 Michigan FSA County Executive Directors. Russ and Losey have indicated that they will make participation an expectation for these staff members. Since acceptance of our pre-proposal, we have also learned that the NRCS in Michigan recently surveyed district conservationists to determine their priorities for additional education on organic agriculture. We anticipate that some NRCS staff members will participate in project activities. Additional audiences will be other Michigan agricultural lenders, especially those affiliated with Greenstone Farm Credit Services. Extension educators affiliated with the MSU Product Center for Agriculture and Natural Resources and those involved with farm financial management will also be invited as will agriscience educators. Lenders and other ag educators will select the farm visit(s) and/or workshops which are conveniently located for them and which feature agricultural operations in which they have particular interest.

    Inputs. This project is positioned to build on a foundation provided by several other efforts.

    Dr. David Conner, MSU, is in the final year of a USDA National Research Initiative project, Season Extension Technology for Small and Medium Scale Farms: Economic and Environmental Impacts. Additional funding from the Michigan Agricultural Experiment Station, Michigan State University Extension and Generating Research and Extension for Economic and Environmental Needs (Project GREEEN) has allowed expansion of the effort. Collaborating with 12 farmer cooperators, this project placed 12 hoophouses – passive solar greenhouses – on farms, clustered in groups of three near Ann Arbor (southeast); Muskegon (west central), Traverse City (northwest Lower Peninsula) and Sault Ste Marie (eastern Upper Peninsula).

    The project addresses two questions. Are hoop houses economically viable for small and medium scale farms? Are they good for the environment? Economic viability has been measured in two ways – by documenting costs and revenues associated with growing in hoop houses over two years, creating enterprise budgets for each of the twelve farms, and by measuring consumer research demand. In the first year of production, farmers gained revenues of up to $12,750, netting up to $7,290. Consumer research at farmers markets revealed consumers’ willingness to patronize farmers markets year round and to pay premiums for significant quantities of fresh, locally grown produce (Conner et al, in press, Conner et al, 2009). Farmers have noted the learning curve involved in adopting this tool, the importance of site preparation and the hoop house’s contribution to expanded market opportunities (Conner & Montri, 2009). This project is in its final year, with the data collected and currently being analyzed.

    By summer 2010, both scholarly and popular publications from the project will be available. One publication in development especially relevant to this project will create business plan templates assuming several different scenarios for purchasing and operating unheated hoophouses to extend growing seasons of horticultural crops in Michigan, examining cash flow and profitability at various scales, both with and without debt financing.

    Dr. Conner also brings experience in examining the economics of organic farms. He participated in the Northeast Organic Network research project that explored the management and economics of 11 “exemplary” organic farms in the northeastern U.S. (Conner & Rangarajan, 2009). Data collection concentrated on a handful of ‘‘focal’’ crops selected by the farmers and researchers based primarily upon economic importance to that farm. Areas of study included farm development, crop production, pest and weed management, and enterprise budgets for the farm focal crops that reflect the two seasons of production (2002 and 2003).

    A 2009 study by Susan Cocciarelli, MSU, examined the availability and accessibility of capital for beginning farmers in Michigan (Cocciarelli, 2009). After interviewing representatives of 14 financial institutions, loan funds and public entities, she found that increased Michigan local food system activities (including the growth in organic and hoophouse farming) have not, to date, expanded agricultural lending activities and that the institutions do not customarily market to sectors with which they are less familiar. Over 70% of those interviewed relied on word-of-mouth referrals from current customers as their primary means of reaching out to prospective customers, a strategy not likely to connect them with farmers trying new approaches.

    Vicki Morrone, an outreach specialist for organic farmers at MSU, conducts educator training on organic certification and production for vegetables and field crops. She developed Transitioning to Certified Organic in Michigan, an Extension publication, with an accompanying resource CD, which are appropriate as components of the resources that will be provided to project participants. Her Michigan Organic Exchange web site (www.mighiganorganic.msu.edu) and 260-member listserv will also be available for participants to use.

    The three farmers whom we have so far invited have confirmed their willingness to participate and will all be exceptionally capable teachers and their farms wonderful educational environments.

    Michigan Food and Farming Systems (MIFFS) has offered to assist with sponsorship and publicity. They are engaged now in revitalizing their agricultural stewardship committee, with nearly 100 people responding to a recent interest survey and nearly 50 registered for a farm tour to occur in late August. Their links with ag policy leaders will be exceptionally helpful.

    Bonnie Bucqueroux, Michigan State University journalism instructor emeritus and founder of The Sustainable Farmer (www.sustainablefarmer.com), a multimedia magazine and web community for people who grow food and fiber, has indicated her interest in participating to videotape farm visits for subsequent use on line.

    Activities.
    Initial discussion confirmed that Michigan FSA offices are seeing farmer applicants whose farming plans lie outside the usual scope of knowledge and experience of many loan officers. MSU has conducted significant research that will help in developing materials and tools that can help ag lenders evaluate loan applications in these areas. The Michigan FSA farm loan chief and outreach coordinator believe that FSA staff would benefit from learning more about these production approaches, which are gaining in popularity across the state and supported by Farm Bill programs. This project builds on that strong foundation by compiling and adapting educational materials, organizing a series of farm visits and workshops, specifically targeting ag lenders and USDA service providers, and – perhaps most importantly – designing and supporting opportunities for these lenders and educators to see successful farms and talk with successful farmers who have ventured outside Michigan’s conventional agricultural approaches.

    A series of six farm visits and two workshops will be organized in Michigan during 2010. Farm visits will be to organic field crop, organic vegetable, and hoophouse operations. Workshops will focus on the process of organic certification, the economics of organic farming, and the economics of hoophouse production.

    Planning will involve MSU, Michigan FSA state staff and farmer hosts. We anticipate that most Michigan FSA loan officers and County Executive Directors will participate in at least one farm visit and one organic certification session. Other ag lenders and Extension educators will also be invited. The farmers listed as partners have been contacted and have indicated their interest in participating; other farmer commitments will be secured if a full proposal is requested.

    MIFFS has offered to help publicize the activities by assisting with news releases and related communications.

    During farm visits, the host will explain his/her farming philosophy and show how their farming practices, management strategies and marketing choices reflect that philosophy. They will discuss how their philosophy influences the farm’s financial situation and where they face the biggest challenges. Three host farms/farmers have already been confirmed and the other three will be selected if the project is funded. All will provide:
    1) farms that portray sound management practices that show a positive example;
    2) candid conversations and moderated dialogue about the farm management and financial decisions;
    3) farms located in areas convenient for ag loan officers to visit. Bonnie Bucqueroux will participate in at least half of the farm visits to videotape them, helping to capture content for future use.

    The workshops will be classroom sessions explaining the organic certification process, with particular emphasis on the organic plan that is prepared and maintained by each farmer, certification process and options, and examples of likely costs for various farm types. Research-based information on organic farming and financials for organics and for hoophouses will be presented both through discussion and print/electronic means. The workshops will be organized and led by Morrone and Conner, with farmer co-presenters. Each farm visit and each workshop will be about 2-3 hours long.

    Both the farm visits and the workshops will provide considerable opportunity for questions and open discussion to allow exploration of the areas which most interest the lenders. Participants will also be provided an opportunity to join listservs on organic agriculture or farmers markets, as a way to stay in touch with practitioners of these new approaches.

    These sessions will be conducted by the project team in 2010. Smalley will create and administer end-of-session evaluation instruments as well as intermediate-term evaluation. The latter will occur in the spring/summer of 2011, through telephone follow-up with session participants and state staff asking about use of information, loan applications and conservation plans from organic and/or hoophouse farmers. Although each agreement in the Michigan FSA loan portfolio is tagged with North American Industry Classification System (NAICS) codes, the current (2007) version of those codes does not distinguish either “organic” or “hoophouse” for farming operations.

    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.