Working for credit where credit is due

Gary Matteson

Gary Matteson splits his time between Washington, D.C. where he is campaigning to lift limits on farm credit lending, and New Hampshire, where his family grows cut flowers for wholesale markets. Operating greenhouses on a former dairy farm has given Matteson a wide perspective on the needs of agriculture on the urban edge. He served for 15 years as an elected director of the First Pioneer Farm Credit serving six states in the Northeast and is currently a paid lobbyist for the Farm Credit Council. He wrote “Is Your Town Farm Friendly — A Checklist for Sustaining Rural Character” available online. FPR spoke with Gary July 10, 2007.

FPR: Gary, I know you’re down in Washington this week working on the farm bill for the Farm Credit Council. Tell me what you are doing… what are you saying farmers need in the way of farm credit?
MATTESON: Well, what Farm Credit is looking to do is make a few incremental changes in our authority. Right now, in basic terms, Farm Credit can lend to agricultural producers, people who are actually growing something, including timber and fishing. What we are seeking to do is have the ability to finance those businesses that are one step away from the farm. In other words, those businesses that are primarily engaged in selling inputs to farmers like seeds, feeds, fertilizers, equipment … and those businesses that are involved in buying things directly from farmers like farm output, whether its grain or fruit or something else. Those businesses would have to be primarily engaged in directly buying product from farmers or selling inputs to farmers. We’re not talking about financing Wal-Mart or the Main Street hardware store, we’re talking about financing the businesses farmers depend on.

FPR: Right. And you relate that to the specific needs of urban edge agriculture…
MATTESON: The farm-related business legislative proposal is related to the urban edge. As we’ve studied this over the past couple years, there was a lot of anecdotal information along with some academic studies that indicated that those farm-related businessesÑlike for instance the tractor dealer or a feed dealer that are located on the urban edgeÑare in peril as far as their ability to continue. We have quite a number of friends in those businesses and they suffer the same sort of urban edge pressures of land development as farming operations. As far as credit availability, we found that as the urban edge moves outward and starts to encompass some of these farm-related businesses, very often the specialized lending department of the local commercial bank that was involved in agriculture shifts its focus away from agriculture to take advantage of the growing housing market on the urban edge. The expertise they have in agricultural lending in a commercial bank is often not replaced, and that loss of farm enterprise understanding hurts farm-related businesses, too. Farm-related businesses are in a tough spot of being dependent on agriculture. Often it’s a seasonal income just like a farm has, for instance a fertilizer dealer… a Farm Credit institution is used to dealing with the ups and downs of seasonal income as well as cycles of agricultural income overall, where a typical commercial lender is not.

FPR: I imagine the change you are seeking would help communities re-create a food distribution system based on fresh foods grown locally.
MATTESON: Yes. Farm Credit is certainly in urban edge areas around the country, as we found in an internal study. We are making a lot of loans to brand new agricultural enterprises that are popping up on the urban edge. The new businesses are atypical farming businesses – things like nursery stock or sod or equine operations or even agritainment operations, and they’re frequently started by people new to farming. We’re still financing an ever higher percentage of a typical farm businessÑthe farm customers we’ve always had. But what we’re seeing is a great increase in the number of new farm operations that are starting up based on selling directly to consumers in the urban areas. Sometimes it’s ornamental stuff, sometimes it’s the farm experience. Most often it’s coming up with a specialty crop that they can market directly and get a retail price for. Some kind of food stuff, whether it’s fresh vegetables or wine or apples… there’s a great deal of integration of growing and processing in many farm operations.

FPR: Right.
MATTESON: Some of the urban edge farm-related businesses that are just popping up are the new agricultural support businesses that supply the new local food systems in urban areas that the public is clamoring for. It’s not that we have all the distribution systems and warehousing and the other infrastructure that’s needed to take the locally grown food supply and aggregate it and then deliver it into the local grocery stores and restaurants. Right now the scale at which it is often done is in the back of a pickup truck going to a farmers’ market.

FPR: That’s the way it’s been done for quite some time…
MATTESON: And that’s a great thing. But the next scale up, which I think we are right on the edge of, is taking an informal, producer-driven distribution system, and doing what resource economics would dictate. That would be instead of five guys driving into town with a pickup truck full of zucchini, one guy with a bigger truck does it for everybody. And that one guy with the bigger truck figures out he can also deliver to the nearby grocery store, whether it’s Whole Foods or a local chain. In small steps, that informal distribution system of farmers’ markets becomes something that has greater capacity… a higher volume, more reliable way to market local foods.

FPR: Right. A more constant supply flow.
MATTESON: I see that Farm Credit’s ability to finance farm-related businesses, as in our legislative proposal, would be there to accommodate that kind of food distribution system as it pops up in local areas. Somebody isn’t going to reinvent a nationwide Sysco Corporation food distributor for local produce. It won’t happen on any kind of scale like that. The solution providers are going to be small businesses that are supplying local markets, and people finding local solutions where there’s a demand from urban dwellers to have a local food supply. That kind of new and innovative business that helps sell farm goods Ñ what many commercial lenders would look at as some kind of oddball businessÑis basic bread and butter for Farm Credit, where helping farmers succeed is a normal thing we do. We want Congress to grant us the lending authority to make sure the farm-related business infrastructure can grow to allow farmers to prosper within their local markets. It’s extending the benefit of being a specialty lender to farming for the sake of urban edge agriculture. Farm Credit is one of the big opportunities for financing local food systems that work.

FPR: Do you see local food systems popping up on their own that are in trouble because they can’t get enough financing, or are you envisioning this need and want to get this capability in place to be ready?
MATTESON: I think the driving force right now in seeking to finance farm-related businesses is on the input side for conventional agriculture on the urban edge. In my experience in New Hampshire, when I started in the flower growing business 25 years ago, there were four John Deere farm equipment dealers in my state. Now there’s one. If that remaining dealer goes out of business, I’ve got a problem keeping my equipment running. And it’s that kind of concentration of farm-related business infrastructure that suffers on the urban edge, causing supply acquisition problems for urban edge farmers. We’ve found across the country, because of the crazy quilt of rules that Farm Credit has limiting who we can lend to, that we end up not being able to stay with a business that is essential to an area. Many of the farm service businesses that you see across the country were started by farmers. If a farmer starts a businessÑlet’s say it’s somebody who is farming 500 acres of corn and beans in Iowa who decides to start a fertilizer business so he can get a better deal on fertilizer. Then he decides to sell some of it to his neighborsÑwell he’s fully eligible to borrow from Farm Credit because he’s a farmer. If his operation grows and matures and he looks to retire and sell out to his kids who grew up in the fertilizer business, if they are not farmers also, we can no longer finance that business.

FPR: That must be frustrating.
MATTESON: It is. In some instances borrowers have restructured their business operations and who they have taken on as partners so they can continue to have Farm Credit eligibility… making these farm-related businesses directly eligible solves a great many problems for existing businesses, and offers great opportunity for future local food processing and marketing that I see popping up around the urban edge.

FPR: Are you finding support for your proposal?
MATTESON: We have good support from many individual legislators but need to do a lot of educating. My own New Hampshire legislators, when I visited them this week, seemed surprised there are farm businesses back home that are prosperous and thriving. They’ve all been to farmers’ markets, but I don’t know that they make the connection that most of the farmers in those markets are Farm Credit customers. We need to build a coalition of people interested in the success of urban edge agriculture. The Farm Bill presents an opportunity to convene three constituencies that haven’t really worked together before. One is farmland preservation advocates, another is specialty crop growers and the third is Farm Credit. By enacting provisions that involve land, market development and finance, federal policymakers can create a framework that could do much to help stimulate sustainable urban edge farm economies. Educating a legislator is a slow process. I think we’re getting there…