A new loan product developed for farmers seeking organic certification on all or part of their crop operations recently was introduced by Rabo AgriFinance. The loan is designed to help make transitioning from conventional to organic practices more financially viable, according to the company.
The loan program provides farmers flexibility to receive capital needed for upfront costs associated with changing production practices. Farmers can schedule repayments when they receive revenue from selling certified-organic goods.
The U.S. Department of Agriculture requires a three-year transition period for farmers to certify land as organic. During that period farmers often experience yield loss in comparison to conventional production, and they can’t begin to collect organic premiums for crops to compensate for reduced yield, said Shawn Smeins, deputy head of Rabo AgriFinance.
The challenge has created a financial barrier for many farmers who may be interested in entering into organic or expanding their organic footprint, he said. This is especially the case after several years of tight margins and decreasing cash reserves.
The United States has been annually importing 9 million to 12 million bushels of organic corn. It also has been annually importing 2 million to 16 million bushels of organic soybeans, according to the U.S. Department of Commerce. Those numbers show demand has grown faster than domestic production, said Stephen Nicholson, senior grain and oilseed analyst with Rabo AgriFinance.
Demand for organic grain and oilseeds is expected to grow. That supports price premiums of 110 percent to 130 percent more than the price of conventional soybeans and 120 percent to 150 percent for corn, according to estimates by the RaboResearch Food and Agribusiness team. Visit www.raboag.com for more information.