When it comes to talking farm finances, few conservation professionals are comfortable wading into those waters with producers. Limited knowledge on the topic and concern about staying in one’s lane are among the reasons many shy away from the topic.
Given the weight of the financial implications of conservation practices in an average producer’s decision-making however, there might be a need to help conservation professionals feel more comfortable talking dollars and cents. One partner who can potentially be of help is another professional whom producers also look to when making decisions about their operations: agricultural lenders.
“We think we work in different worlds, but ultimately, we’re really connected much more than we originally thought,” said Kim Meyer, an agronomist with Dane County Land and Water Conservation in Wisconsin.
Meyer was one of nearly three dozen participants of a recent workshop that brought together conservation professionals, farm business management educators, and agricultural lenders to learn from each other about how they support producers’ decision-making and where there might be opportunities for synergy in helping producers adopt conservation practices. One of the things Meyer took away from the event was the need to get outside the conservation bubble.
“It never crossed my mind that maybe I should know [the basics of farm finance]. It really should be an integral part of conservation training. And lenders can obviously be good partners as far as helping to guide conservation professionals in the right direction,” said Meyer.
According to Paul Dietmann, senior focused lending specialist for Compeer Financial who spoke at the event, agricultural lenders have a lot of influence over their customers, making it important for conservation professionals to get connected with them.
“They’re often working with the same groups of people. So, it would make sense that they would know each other and know what sorts of advice each are giving to their mutual clients,” said Dietmann.
Lenders can help conservation professionals understand the basics of farm finances, how farmers are looking at financing their operations, and what sorts of dollars it really takes to produce corn, soybeans, and other crops. Dietmann says that learning how much a farmer must invest to grow their crops is often an eye-opener to many conservation professionals to whom he’s spoken.
“If you’re doing cost sharing and writing a check to a farmer for $30,000, it seems like a lot of money. But when you’re talking to a farmer who is putting $250,000 in the ground, hoping they get a crop out of it, $30,000 isn’t a whole heck of a lot of money,” said Dietmann.
Meanwhile, conservation professionals can help lenders understand the cost-share programs that are available to their producers and what it looks like in terms of dollars, labor, and equipment to adopt a conservation practice.
Even though many of Dietmann’s lending colleagues are also farmers themselves or own land that they lease to farmers, he says he’s amazed at how little they know about conservation programs.
“If they don’t even really know about it from the perspective of being landowners, how would they know what to tell their farmers,” posed Dietmann.
Building rapport with your local lender can also help with maintaining good rapport with local farmers, such as if a farmer becomes frustrated by the costs or the permitting process of installing a practice and complains to their lender.
“If the lender doesn’t know the conservation staff, doesn’t have a personal connection with them, it might be easy for them to side with the farmer,” said Dietmann.
A first step to remedying this disconnect is for conservation professionals to simply get to know the ag lenders in their communities. Typically, there aren’t many in any given county, and they often work across multiple counties. Connecting over email or inviting them to a field day or workshop are a couple ways to get started.
Serge Koenig, a conservation technician for Sauk County in Wisconsin, says that talking to lenders in his community has helped him see things from the producer’s perspective better.
“I didn’t work with ag lenders much early in my career. And I think it left me in the dark. It leaves a lot of us in the dark,” said Koenig.
Where Koenig wondered why a producer would be reluctant to adopt a “seemingly simple” conservation measure, the producer was questioning how it would affect their credit. Building relationships with ag lenders has allowed him to understand better where a producer might be coming from and subsequently shift his messaging.
While Koenig doesn’t interact frequently with lenders, he sees such interactions as opportunities to educate. For example, he’s invited lenders to pasture walks he organizes, and he says those experiences have enlightened them on what they’re loaning money for.
Koenig acknowledged that lending lingo might sound like Greek to most conservation professionals, but he urged not to let that be a barrier to talking with lenders.
“You need to just develop a core enough understanding of what [ag lending] is about, so you understand your producers better,” he said.
One concept in lender lingo that is important for conservation professionals to be aware of is lender liability, a legal principle that lenders must treat their borrowers fairly and cannot exercise improper control over the borrower’s affairs. As a result, lenders are reluctant to tell farmers what to do.
“Lenders tend to be pretty cautious about recommending farmers take a specific action. They’re not going to say, ‘you should definitely adopt cover crops on your farm’,” said Dietmann. “But they may say, ‘you could take a look at cover crops. I’ve seen the numbers, it looks like they pay, maybe not right away, but a long-term investment is there’.”
Another note of caution from Dietmann is that some farmers might say that lenders don’t want to finance someone who’s interested in doing conservation and prefer to work only with traditional operations. But that’s not really the case.
“It’s really more about the credit worthiness of the borrower than it is about the specific practice that the farmer is adopting,” said Dietmann.
Meyer, the agronomist with Dane County, has already followed up with some of the lenders she met at the workshop. She sees lenders as a “connecting piece,” especially for reaching farmers with whom conservation professionals may not normally interact.
“Farmers are dealing with significantly more complexities than they ever have been. I think we can give better guidance if we understand their barriers a lot more, more than just the agronomic barriers,” said Meyer.
Header photo credit: USDA photo by Lance Cheung
