Ag Corner: Helping Hands. Community banks offer tutorials on farming for beginners

Independent Banker magazine

March 2003

Ag Corner:

Helping Hands

Community banks offer tutorials on farming for beginners

by Raylene F. Nickel

When Tim Gossman first accepted an invitation from Minnesota's Land Stewardship Project to speak to a class of beginning farmers about community banks' lending policies relating to farm loans, he didn't know what to expect.

What Gossman, senior vice president and farm loan officer of Root River State Bank in Chatfield, Minn., discovered at the Farm Beginnings Program class was a group of enthusiastic, aspiring farm families. Though their experience in agriculture ranged from little to extensive, all had specific farming goals.

"I have continued to commit my time as a presenter for the Farm Beginnings Program because I have a personal interest in seeing family-sized farming operations succeed," says Gossman. "Unfortunately, it's really tough for young people to get started in agriculture right now. Meanwhile, the farmers who are presently customers of community banks are getting older. We need a new group of people who will continue farming the land, people who will be the future customers of local banks."

Indeed, helping beginning farmers get started in a difficult economic climate is precisely the goal of the Land Stewardship Project. "Participants can use the educational tools we provide during the program to help them achieve their farming goals," says program coordinator Karen Stettler.

The Farm Beginnings Program is a 10-month educational and mentorship training program, now into its sixth year. This year's class, offered at locations in both western and southeastern Minnesota, has 23 families participating. Like members of previous classes, they range in age, experience and interests. Some want to become dairy farmers; some are interested in raising livestock for meat production; and others want to get involved in some type of community-supported agriculture," Stettler explains.

During the first five months of the course, participants attend various educational seminars. Every other week, for instance, farmers attend either a six-hour seminar on Saturday, or a three-hour seminar on Thursday night. In between seminars students complete practical assignments. Seminar topics include values clarification, goal setting, decision-making, writing financial and business plans including a marketing plan, completing a balance sheet and developing a cash flow plan.

The program also used on-farm education by exposing students to the farm enterprises they are specifically interested in. For instance, for participants interested in learning about grazing management, Stettler will arrange a tour of a farm practicing management intensive grazing. Or, prospective hog producers might tour a farm where hogs are raised by a Swedish deep-bed system of management. This phase of the program also pairs students with farmers of similar interest so that they can more fully realize the true farm experience.

Reaping Just Rewards
Participants completing the Farm Beginnings Program are able to apply for a revolving, no-interest livestock loan offered by Land Stewardship Project in partnership with Heifer International, a charitable group using zero-interest livestock loans as a tool to support beginning farmers starting sustainable farming operations. These loans are available for a variety of livestock species, including dairy and beef cattle, swine, poultry, goats and sheep.

Recipients of Heifer International livestock loans pay the loan back with offspring from the original animals. Dairy producers who acquire 15 bred heifers, for instance, would return five bred heifers to Heifer International the third year after acquiring the initial animals. In the fourth and fifth years they would also return five bred heifers annually. The loaned animals help to build recipients' equity bases, increasing their chances of getting livestock loans from traditional lenders.

"We really try to put a workable process together for each of the participants in the Farm Beginnings," says Stettler. "We try to help them piece together a plan that helps them identify a starting point and action steps to take them where they want to go."

Indeed, that's precisely why Dave and Erin Varney, 33 and 30 respectively, joined the Farm Beginnings Program. The Varneys, who now own a 35-acre vegetable and permaculture farm in Wisconsin, grew up in the suburbs. Before buying their farm, the Varneys worked in the food-service industry for many years. But they experimented with growing organic vegetables during the summers by renting an acre of land from an organic grower.

"From that experience we decided we wanted to live a more rural lifestyle," says Dave Varney. They joined the Farm Beginnings Program in 2000 because they saw it as a way to clarify their objectives and develop a plan permitting them to buy a farm.

As part of their course work and to prepare for their eventual application for a farm loan at their local bank, they met with Minnesota lender Gossman for a practice run, so to speak, through the loan-application process. "They came to the practice session completely prepared, with a farm plan and financial statement, for instance," says Gossman. "We went through the application process, so they could get a feel for what questions lenders might ask."

Learning Market Dynamics
They Varneys' experience highlights the importance of community lenders and beginning farmers working together through such innovative programs as the Farm Beginnings Program. For starters, experienced lenders can teach aspiring farmers much about the process, possibilities and constraints of applying for loans from community banks.

For example, says Gossman, a lender's counseling of a beginning farmer can help instill needed confidence. "Beginning farmers need to let lenders know what their strong points are," he says.

"If the prospective customers are going to be marketing niche products, they need to have confidence in their marketing plan. They need to assure the banker that they're a good risk. At the same time, they should understand that the bank is looking for good customers just as much as they are looking for a lender."

The learning process resulting from pairing lenders with young farmers also helps lenders better understand the issues young farmers are grappling with, Stettler says. Difficulties in accessing land, markets, financial assistance and appropriate education cause unique needs and interests among the new generation of farmers, she says. These issues pose problems requiring creative solutions.

"It's helpful when lenders understand the alternative, sustainable production methods that are of growing interest to beginning farmers," Stettler adds. "It's also helpful for lenders to have an understanding of what income levels are possible resulting from alternative marketing or production methods."

The Land Stewardship Project is conducting a survey-of which the Independent Community Bankers of Minnesota are participants-of community banks and beginning and established sustainable farmers. Survey results, to be released later this year, will show ways in which lenders might better meet the needs of beginning farmers.

"We should do what we can to help families get started in farming," says Gossman. "We can put them in touch with helpful programs. And we can approach the loan-application process with an open mind and truly look at the ideas beginning farmers have to present."

Raylene F. Nickel is a free-lance writer in Kief, N.D.

SIDEBAR:
A PROGRAM WORTH REPEATING

Organizations outside Minnesota are considering ways to implement programs similar to the Land Stewardship Project's Farm Beginnings Program in Minnesota.

We've been contacted by organizations from Vermont, Pennsylvania and Nebraska through the National Farm Transitions Network, for instance, about ways they might duplicate our program," says Farm Beginnings Program coordinator Karen Stettler. "These groups are also interested in finding out how to work with Heifer International in offering revolving, no-interest loans to beginning farmers."

Minnesota's Farm Beginnings Program is funded through grants from small, private organization. But accessing adequate funding is an ongoing challenge for her program, Stettler says. "Individuals or organizations concerned about securing a future for rural communities might consider starting or funding programs that help beginning farmers," she offers.

For more information, contact Stettler at (507) 523-3366 or e-mail her at stettler@landstewardshipproject.org.

Other sources of information include Teresa Opheim, regional coordinator, Midwest Sustainable Agriculture Working Group, (515) 270-2634; and Jeff Schahczenski, Western Sustainable Agriculture Working Group, wsawg@ncat.org.