- Education and Training: survey
- Farm Business Management: business planning
- Sustainable Communities: sustainability measures
This project surveyed agricultural lenders, crop insurance agents and farmers involved in sustainable agriculture on their perceptions of sustainable agriculture and crop insurance. Farmers expressed a significant level of discrimination in crop insurance based on their use of sustainable practices and systems, while lenders and insurance agents believe there is no discrimination. Lenders and insurance agents also demonstrated a significant lack of knowledge about sustainable agriculture, especially the economics of such practices and systems. Based on these survey results, an education curriculum was developed and presented at five educational seminars throughout Nebraska in February 2003.
A survey was developed that questioned three separate groups on their perceptions and knowledge of sustainable agriculture and how crop insurance treated those farmers employing sustainable agricultural practices and systems.
The groups surveyed included:
1. Agricultural Lenders – A mailing list of the members of the Agricultural section of the Nebraska Bankers Association was obtained. One hundred surveys were mailed to this group.
2. Crop Insurance Agents – A mailing list of those insurance agents specializing in crop insurance was obtained from the Nebraska Department of Insurance. One hundred surveys were mailed to this group.
3. Farmers – A mailing list of members of the Nebraska Sustainable Agriculture Society was obtained and combined with those names on the Center for Rural Affairs database that had provided a CFRA interest code pertaining to sustainable agriculture and participants in the Center’s Land Link Program and recipients of the Center’s former “Beginning Farmer Update” newsletter. This list was eventually narrowed to include active producers only and to represent all areas of the state. One hundred surveys were mailed to this group.
Specific surveys were mailed to each group. The surveys mailed to lenders and crop insurance agents asked about their experience in agriculture lending or crop insurance, and asked about their knowledge of sustainable agriculture. They were asked if they provided credit or insurance to farmers using sustainable agriculture practices, and whether they had ever requested a client not use sustainable agriculture practices. Finally, they were asked about discrimination in providing credit or crop insurance coverage or payments.
Farmers were asked about their farming operation, use of sustainable agricultural practices and discrimination they or other farmers had been subject to by lenders or crop insurance agents.
For purposes of reference, the following definition of sustainable agriculture was used in the surveys: “Sustainable agriculture has been described as having the goal of incorporating more ecologically-sound practices that preserve and renew the nation’s soil, water, plant and animal resources through the elimination or substantial reduction of dependence on energy, synthetic fertilizers and pesticides.” Copies of each survey are attached.
Surveys were returned to the Center for Rural Affairs and tabulated. The results and finding are as follows:
Responses to the banker/lender survey yielded 26 respondents. The majority of respondents had been in the lending business 10-19 years, representing 21 counties.
Of the banks that responded, all but one specialized in agricultural lending. Nearly 85 percent of their loan portfolios are agriculture. Respondents’ knowledge of sustainable agriculture is limited to “some knowledge” with a very small percentage with “a great deal” of knowledge. Of the respondents who replied with “some” knowledge of sustainable agriculture, 40 percent indicated that they did not provide loans or credit to farmers and ranchers practicing sustainable agriculture.
Most banks will lend to farmers and ranchers using sustainable practices, 68 percent said they do loan money to farmers using sustainable practices. Of the respondents who answered no, the reasons included:
a. lack of knowledge how the practices work (2),
b. the practice isn’t proven and producers aren’t willing to try it,
c. no requests for such funding (5),
d. practice is not generally an issue when deciding whether or not to finance (2).
A comment was made that there would be more concern about the financial trends, not the practice.
One banker said that they had requested that a farm or ranch client not use sustainable agricultural practices. The reason given was that lower productivity from those practices leads to economic shortage in cash flow. Ninety percent of lenders require their clients to carry crop insurance.
According to the respondent bankers, there does not seem to be any discrimination against producers using sustainable agricultural practices. Agriculture lenders were not aware of other lenders or crop insurance agents speaking against sustainable agricultural practices, nor was there any knowledge of farmers and ranchers being denied crop insurance because of their practices.
Producers who direct market their products are not denied financing. Approximately 25 percent of the lenders require product liability insurance.
B. Crop Insurance Agent
Responses to the crop insurance agent survey yielded 41 respondents. The majority of respondents had been in the insurance business 10-29 years, representing 29 counties.
Over 77 percent of the crop insurance agents responding had “some” knowledge or were “aware” of sustainable agriculture. Half of the respondents do not offer policies to sustainable farmers and ranchers. Reasons that were offered include:
a. no requests (13),
b. no local market, clientele is too small,
c. agent does not make the final decision – would offer it if asked.
Those agents not offering insurance to sustainable agriculture clients were aware of sustainable practices (47 percent) or had some or no knowledge (47 percent). Agents do not feel that there is any discrimination among other agents. Comments include:
a. practice must be profitable,
b. won’t give credit for higher per unit price when figuring cash flows,
c. lack of knowledge, and
d. most insurance may be based on an average yield for a county that was primarily e. based upon conventional farming yields.
Agents are not requesting clients use practices that are not sustainable, nor are they aware of others speaking against it. A very small percentage, eight percent, knew of farmers being denied insurance because of sustainable practices. There was increasing awareness of farmers/ranchers receiving less in crop insurance payments because of their sustainable practice (16.22 percent).
There is affordable product liability insurance being offered to sustainable farming or ranching operations that direct market their products, but of those that responded, more agents did not offer the coverage (56 percent).
Of the 73 respondents, 74 percent considered themselves a diversified operation. Eighty-two percent of the respondents had been farming or ranching for more than 15 years. The respondents represented 41 counties.
Half of the respondents purchased crop insurance and obtained operating credit for their operation. Farmers and ranchers had at least some knowledge of sustainable practices while almost half were aware or had a great deal of knowledge. Half of all respondents indicated that their practice was both conventional and sustainable, while only 18 percent indicated that it was completely conventional. The reasons for conventional practices or a mixture of the two included:
a. their tenant won’t do it (3),
b. costs too much, and
c. the labor involved in weed control was too much.
Most respondents did not feel that they had been denied insurance because of their practices. Four respondents had been denied insurance, giving the following reasons:
a. grazing corn that was not mechanically harvested cannot be insured (1).
b. an agent that wanted a client to pay 5% more to cover any weed problem.
c. one responded that crop insurance doesn’t pay and
d. another had not sought out coverage.
Two respondents felt that their crop insurance agent was against sustainable practices. Both cited perception of lower productivity as the reason.
Our respondents did not feel they had been denied credit because of their practices. Three respondents had been denied credit. Reasons included:
a. bank said I was too small and
b. another said they were denied on a sheep plan because it was “different”.
Those respondents that believed bankers were against sustainable practices included an even mixture of perception of lower productivity, economic reasons, landlords won’t allow it, and the lack of knowledge or understanding of the practices.
Half of the respondents felt that there was discrimination against sustainable agriculture by insurance and banking, but did not offer solid defense. Comments included:
a. operations that are all row crop with no rotations help big agriculture and big insurance
b. bankers want the predictability of chemical agriculture
c. small farmers that practice sustainability can’t get big enough to compete
d. industries only look at yields
e. should organic producers be eligible for loans and LDPs since they already receive higher prices for their products?
f. agriculture credit is based on high yield farm practices
g. mindset is on production only
h. big farmers plant fence row to fence row and look down their nose at sustainable practices
Of the respondents who direct market their products, about half, 72 percent do not have product liability coverage to manage their risk.
As would be expected, those that hand out the benefits, i.e. bankers and insurance agents, do not believe there is discrimination. Those that receive the benefits feel there is discrimination. There seems to be little knowledge of sustainable agriculture among insurance agents and bankers. Perhaps the reason why they feel there is no discrimination. More education in this arena is necessary. Many insurance agents claim there have not been many requests for coverage of sustainable agriculture, while there were responses from farmer/rancher surveys that suggest that it is better to not mention your type of practice. Most farmers and ranchers seem to conform to the system and comply when necessary.
An outline of recommendations resulting from the survey results and their analysis is included below in the “Recommendations” section.
A more extensive report on the survey and its results is attached to the written copy of this Final Report. In addition, a summary “Issue Brief” of the survey results was published.
Survey results indicate a lack of clear definition and knowledge of sustainable practices by lenders, insurance agents and farmers. Educational seminars responded to the survey results by providing clarity and understanding among participants as to viable sustainable agriculture practices and systems, available risk management tools, and the economic benefits of sustainable agriculture systems and practices.
As a result of the survey, over 160 people including farmers, lenders, and insurance agents indicated a desire to attend educational seminars to learn more about risk management and its relationship to sustainable agriculture practices and systems. We used that information to engage the USDA Risk Management Agency in a partnership to deliver educational seminars on more common risk management tools such as crop insurance, revenue insurance, financial management, basis contracts, forward contracting and futures and options.
The seminars provided a full day divided between sessions devoted to information on sustainable practices and providing examples of how sustainable practices have actually provided higher economic and stewardship returns to the farmer and information related to common risk management tools and how they work with and complement sustainable agriculture and practices.
The curriculum for the seminars is explained in more detail in the next session.
Educational seminars entitled Exploring Your Risk Management Toolbox were delivered in Ogallala, Curtis, Scotia, Tecumseh, and Bloomfield, Nebraska, February 3, 4, 5, 10, and 11, 2003 respectively. Copies of promotional materials are attached to the written copy of this Final Report. The Center’s Communications Department was employed for local media and press to inform people of the seminars. Press releases were published in local newspapers (including newspapers in Colorado, Kansas, Iowa and South Dakota for seminars near such states), and announcements were provided for local radio stations and farm news programs.
Ninety-four (94) individuals attended the seminars. Of those attending, 40 were beginning farmers. Farm advisors in attendance included lenders, crop consultants, attorneys, and agricultural organization leadership. Members of the staffs of U.S. Rep. Tom Osborne, U.S. Senator Chuck Hagel and U.S. Senator Ben Nelson also attended.
Lenders expressed a need for additional copies of workshop materials to share with their clients. As a result, a packet of seminar materials were provided to every financial institution outside of Omaha and Lincoln. Agricultural organization leaders were also provided with additional materials to provide to their members as educational materials. An additional 200 copies of seminar materials were also provided to the Nebraska Sustainable Agriculture Society for distribution at their Annual Meeting.
Each workshop included presenters from the University, CFRA, and area farmers. Area farmers shared information on techniques that they had employed and the fiscal advantages afforded them with their specific strategies. Each farmer presentation included detailed information on how participants could employ risk management strategies on their operations. Farmer presentations also offered area and regional applicability.