Farmers dealing with sodden fields could qualify for some financial assistance if they are unable to plant crops. Courtesy iStock
Farmers may feel the trickle-down effect of a possible interest rate reduction.
In June, the Michigan Legislature passed House Bill 4234 that provides $15 million to lending institutions for farm loan interest rate reductions through the Agricultural Disaster Loan Origination Program.
The program is geared toward helping farmers and agricultural businesses that have experienced extensive crop loss due to a declared agricultural disaster.
According to the Michigan Farm Bureau, the $15 million for interest rate reductions can translate into more than $300 million in loan values.
“Farming is facing uncertainty that we haven’t seen in years,” MFB President Carl Bednarski said. “It’s humbling to see the Legislature understand what’s happening and be willing to step up to the plate for our industry, and we are grateful for their support and fast action. Having this additional tool available to our farm families helps the food and agriculture industry remain the strong economic driver and job provider it is today in rural, urban and suburban communities across the state.”
The announcement comes during a time when farmers are affected by heavy rainfall, preventing them from planting their crops. Michigan has experienced above-average rainfall, with state statistics pegging it as the third-wettest year in history. Just shy of 40 inches of rain fell in Michigan between May 1, 2018, and April 30, 2019.
Grand Rapids experienced its 12th-wettest period, between January and April, in 56 years, per the National Centers for Environmental Information’s April 2019 National Climate report. During that same period, the level of precipitation in Muskegon was the 17th-wettest in 116 years.
Ken Nobis, president of the Michigan Milk Producers Association and a dairy farmer in St. Johns, said there are thousands of crops that still have not been planted, such as corn, soybeans and hay. Crops contribute $8.2 billion to the Michigan economy, per statistics provided by National Crop Insurance Services.
“Depending on where you are, I think that some farmers may not have any crops planted as of yet because it is too wet,” Nobis said. “We have had unprecedented levels of rain this spring. I have never experienced anything like this.”
Nobis said almost all dairy farmers grow alfalfa hay, but it has been too wet to get it harvested on a timely basis. Alfalfa usually cut every 35 days, he said, averaging about four cuttings per year starting around May.
Although the funds in interest rate reductions have not yet been distributed to financial institutions, there are parameters already in place for eligibility requirements:
Any farmer that suffers a loss of 25% or more in major enterprises or production loss of 50% or more in any one crop.
Agricultural businesses that suffer a 50% or greater loss in volume of one commodity.
An individual engaged in retail sales direct to farmers that suffers a 50% or greater reduction in gross retail sales volume.
The details of the program include the state paying the loan origination fees that equal to 5% of the original principal amount, per the MFB. The loan interest is set by the financial institution at a rate of 1%. The loan cannot be for more than five years.
“The loan shall be not more than the value of the crop loss and cannot exceed $400,000 or the value of the crop loss minus insurance proceeds,” according to the MFB. “If crop insurance was offered and the producer did not purchase the crop insurance, the amount of loan is reduced by 30% or $100,000, whichever is less. The loan cannot be more than $800,000 per facility or $1 million per person applying for the loan.”
To immediately help Michigan farmers who are suffering from the harsh rainfall, the U.S. Department of Agriculture announced it will provide flexibility within the Federal Crop Insurance program by allowing farmers to hay or graze cover crops planted on prevented plant acres on Sept. 1, 2019. According to the state, the USDA also announced the Farm Service Agency will be extending the deadline to report prevented planting acres in select counties.