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Iowa Study Finds Gap in Knowledge of Sustainable Agriculture Among Lenders and Crop Insurers

October 3, 2011 |

Is it more difficult for farms that practice sustainable agriculture to obtain loans and crop insurance due to institutional bias and lack of domain expertise? That’s what researchers at the Center for Rural Affairs, with support from the Iowa Farmers Union and the Leopold Center for Sustainable Agriculture at Iowa State, apparently discovered.

“Our study found there is certainly a gap in the knowledge level amongst bankers, lenders and crop insurance agents in their awareness and knowledge regarding sustainable agriculture,” Traci Bruckner, report author, policy analyst and rural policy program assistant director at the Center for Rural Affairs told the Public News Service.

The bias against those trying to farm using sustainable agricultural methods and techniques extends all the way up to the 2012 Farm Bill, one aspect of which stipulates that sustainable agricultural producers, deemed to be riskier investments, must pay a 5% surcharge premium for being an organic producer, Bruckner noted.

She also said that bank lenders and crop insurers need to learn more about sustainable agriculture and the profitability of farms and ranches that practice it.

Bruckner and report co-author Kim Preston mailed surveys to a total of 593 subjects that included agricultural lenders, crop insurance agents and farmers across Iowa to find out the extent of their knowledge and familiarity with sustainable agriculture and if discrimination against sustainable farmers existed. Ten percent of bankers/lenders, 17% of crop insurance agents and 28% of producers responded to the survey.

To establish a common base of understanding among the survey participants, sustainable agriculture was defined “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.”

Each group surveyed was asked the identical question on knowledge and awareness of sustainable agriculture as defined above. Among producers, only 1.5% said they were ‘unaware’ of sustainable farming. Nearly 44% considered themselves ‘aware,’ 28.8% said they had ‘some knowledge’ and 25.8% said they had ‘a great deal of knowledge.’

More than 61% of crop insurance agents reported they had ‘some knowledge,’ 27.8% said they were ‘aware’ and 5.6% said they had a ‘great deal of knowledge,’ while 5.6% said they were ‘unaware.’

Among bankers and lenders, nearly 67% said they had ‘some knowledge,’ 27.8% said they were ‘aware,’ 5.6% said they had a ‘great deal of knowledge,’ and 0% said they were ‘unaware’ of sustainable agriculture.

Based on these responses, Bruckner and Preston concluded that “there isn’t a significant amount of awareness and knowledge of sustainable agriculture.”

“It is interesting that the depth of knowledge is not greater among the farmer respondents…It is also clear that more education on sustainable agriculture is necessary among crop insurance agents – more than one-third of the respondents indicated only awareness or less of what sustainable agriculture is,” noted the co-authors. “Awareness by nearly half of the producer respondents is a good basis for an educational program aimed at that cohort.”

Asked whether loans, credit and crop insurance were provided to farmers and ranchers practicing sustainable agriculture, 74% of lenders answered that they do provide loans and credit and 47%, of crop insurance agents answered that they provide insurance.

When asked why, if applicable, their products weren’t offered to sustainable farmers and ranchers, the report authors wrote that bankers/lenders and crop insurance agents’ responses fell along two lines:

  1. Sustainable farmers and ranchers don’t seek out operating credit
  2. Producers don’t define themselves as ‘sustainable’ when seeking credit, and that lenders are not concerned with labels and are concerned foremost with cash flow and other economic/financial considerations.

Fifty-six percent of responding producers said they had sought out operating credit and 75% said they had purchased crop insurance. “There did appear to be a possible perception of discrimination against sustainable producers that may account for producers not defining their practices or operation in certain ways,” the authors noted.

The full “Credit, Crop Insurance and Sustainable Agriculture in Iowa” report is available free for download at: http://files.cfra.org/pdf/credit-crop-insurance-survey-iowa.pdf

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