A banker’s perspective on organic farming

Here at AgriEnergy Resources, we take the ‘resources’ part of our name very seriously. We strive to bring you resources to enhance your operation whether conventional, biological, or organic. We believe in working together for the future of agriculture. And what better way than to sit down one-on-one with an ag lender with over 23 years of experience?

Richard Ritter, Senior Vice President of Agricultural Lending at Flanagan State Bank, took the time to talk with hundreds of farmers who are thinking about transitioning to organics at our seminar. He believes organic farmers can generate more consistent income and more annual net income at less risk to the lender.

Ritter offered a few pointers:

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Over the years, seed, farming practices, experiences, and science all have helped improve today’s organic yields, which have been rising since 2011, and continue to rise. 

  • Organic crop insurance coverages have been improved over the past few years, which can help a producer lock in profits and reduce risk. The organic producer can now insure their crops at the same price per bushel if sold before the acreage report. Example $12 corn sold and $30 soybeans sold.
  • The United States presently imports 60% of the organic products needed. The demand is here!
  • You must work with experienced and knowledgeable mentors in organic farming that can both help and advise you. This will save you a lot of money, time, eliminate numerous mistakes, speed up your success, and help the producer cash flow quicker. This is important for producer success.
  • Every organic producer must have their own transitional plan for converting conventional crop acres to organic certified acreage. This process will take a minimum of three years, and could take as much as eight years on a gradual basis to convert. This plan should include: time frame, crops to be planted, estimated crop prices to be received, available markets, a cash flow for each year of transition, and an estimate of all expected fees or costs for you to become certified.
  • The lease – Ritter recommends a fixed cash rent of $200, with a 25% flex bonus payable back to the landowner once gross income per acre exceeds: $750 on corn, $600 on soybeans, and $300 on other crops. He’d also encourage to strive for a long term lease if possible. If not a long term lease, then try to negotiate in the lease to prorated cash settlement for the producer for their investment in improving the farm, if they’re terminated before they can recapture their cost.

He then went on to share some real-life scenarios in his 14-page handout. If you’d like to get your hands on a copy, we have a few left. Give us a call and we’ll hook you up!

 

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