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Re: Crop Insurance and Farm Credit Barriers
About a year ago, a subcommittee of the California Department of
Pesticide's Pest Management Advisory Committee took up this subject. We
held a meeting to discuss the role of financial institutions in promoting
reduced-risk pest management. There were representatives from several
banks, as well as other sources of loans. (We did not discuss crop
insurance.) Committee members represented academia, pesticide registrants,
growers, and regulatory agencies. We decided to hold the meeting based on
the common perception that financial institutions ere reluctant to provide
loans to "unconventional farmers." We were somewhat surprised, therefore,
at the rather unanimous agreement among financiers that they didn't care
about pest management practices; all they wanted to see was the bottom
line--does this grower have a good track record of making enough money to
repay loans. Bankers agreed that "in the old days" they might require a
complete farm plan and get involved in day-to-day decision-making. And,
yes, the loan officer might have discouraged the use of some unfamiliar
pest control method. But, as part of the general trend of banks to try to
cut overhead costs, they had pretty much ceased being partners in farm
management. It was probable that a loan officer would not even discuss
pest management with a grower.
The financiers also mentioned, however, that a grower making a transition
to a different method of farming could have problem getting financing. If
the grower did not have a record showing that the new strategy would also
be profitable, that could cause problems. Growers in transition to organic
farming could be particularly caught here--without certification, they
could not yet command premium prices for organic crops, but the organic
practices might result in lower yields.
Another identified problem was organic cotton. Cotton growers were usually
financed by gins and organic growers were having real difficulty finding
gins that wanted to handle organic cotton, much less finance it.
I must point out that this was a single meeting. The financial people
there were be no means a carefully selected representation of all sources
of loans. What we discussed applied mainly to California, and shouldn't be
taken as representing anywhere else.
****************************************
Kathy Brunetti, Agriculture Program Supervisor
California Department of Pesticide Regulation
1020 N Street Room 161, Sacramento, California, USA 95814
voice (916) 324-4100, FAX (916) 324-4088, brunetti@empm.cdpr.ca.gov
Our Web site: http://www.cdpr.ca.gov
References: