Cross-posted with The Human Capital blog on The Confluence for Watershed Leaders
Agricultural lenders are often farmers’ closest financial partners, and they have significant influence on a farmer’s financial decisions, including whether to invest in conservation practices. A recent survey of 179 agricultural lenders in the Upper Midwest revealed there may be promising opportunities for collaborations between them and conservation professionals in supporting farmers’ conservation decisions.
As the first of its kind, the survey asked agricultural lenders about their perceptions, existing knowledge, and information needs about conservation agriculture. The results provide valuable insights for conservation professionals, agricultural finance institution leaders, and other stakeholders who can help lenders better support farmers in making conservation investments.
An important finding for conservation professionals to know is that they are among agricultural lenders’ most trusted sources of information about conservation agriculture and its financial implications. Farmers, university extension specialists and researchers, NRCS, and local conservation staff all ranked ahead of their peers in ag lending and banking as a source of information about the financial implications of conservation practices.
Despite this, few conservation professionals have a relationship with their local agricultural lenders. Therein lies an opportunity for conservation professionals to connect with agricultural lenders, which this previous blog post on The Human Capital blog also underscores.
The good news is conservation professionals are likely to find a welcome mat if they reach out to loan officers. The survey also showed that loan officers are aware of reasons for supporting their clients’ adoption conservation practices. Over half of the responding lenders (51%) think conservation agriculture is very or extremely important to them personally, and 59% believe conservation practices are very or extremely environmentally beneficial.
Despite this recognition of conservation’s importance, conservation does not seem to play a significant role in responding to lenders’ interactions with clients. Only 40% currently finance conservation practices or equipment for at least one client and 24% have at least half of their clients doing conservation practices.
Moreover, few lenders saw the economic benefits clearly. Only 15% see conservation agriculture as very or extremely economically beneficial in the short term, and 28% agreed it improved farmers’ profitability in the long term.
In terms of knowledge about conservation practices among the lenders, there is room for learning. Twenty-seven percent indicated they were very or extremely knowledgeable about how conservation agriculture impacts soil and water resources, 49% said they were moderately knowledgeable, and 21% considered themselves slightly or not at all knowledgeable.
There is even more room for learning when it comes to knowledge about the financial costs and profits of conservation practices. Fifteen percent considered themselves very or extremely knowledgeable, while 44% felt moderately knowledgeable and 38% felt slightly or not at all knowledgeable.
To close these knowledge gaps, agricultural lenders in the survey said they most desire information or training about the financial implications of conservation practices and incentives and funding programs to implement practices.
The full report also digs into the challenges that loan officers face to supporting conservation investments. For example, they are concerned about the costs associated with implementing the practices, hesitant to tell farmers how to farm, and lack knowledge about the financial costs and benefits of investing in conservation.
For conservation professionals, the report’s findings provide both reasons and recommendations for building bridges with the ag lenders in their area. Conservation professionals can provide lenders valuable help in navigating incentive and funding programs for conservation practices, information the lenders can then relay to their clients.
If all of farmers’ key advisors – such as conservation professionals and agricultural lenders – can help each other onto the same page in supporting farmers’ conservation investments, farmers will have a more informed and better coordinated support team to adopt conservation practices.
Download the full survey report here. The survey was a collaborative effort between Environmental Defense Fund, University of Wisconsin-Madison Division of Extension, University of Minnesota’s Water Resources Center, and Compeer Financial. Funding was provided by the North Central Region SARE program.
Header photo credit: USDA photo by Lance Cheung