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Farmers processors eligible for frost damage loans
Gov. Rick Snyder has signed legislation intended to encourage banks to make low-interest loans to Michigan fruit growers and processors who will incur major losses this year due to the severe frost that destroyed most of the fruit crop throughout the state in late April.
GreenStone Farm Credit Services and Huntington Bank wasted no time in issuing a press release announcing they would partner on making those loans, which the state is encouraging by offering partial reimbursement to the banks for administration, origination and risk costs.
House Bill 5717, sponsored by State Rep. Ray Franz, R-Onekama, includes a one-time $15 million state appropriation to cover some costs for banks willing to make 1 percent interest loans of up to $1 million. The banks will be taking the credit risk, and the loans must be entered into before March 31 next year.
“This is the worst natural disaster to strike Michigan’s agriculture industry in more than 50 years,” Snyder said last week. “Agriculture is a key component of our economy and these loans will help keep our fruit farmers afloat until next season.”
He said the losses to farmers statewide are estimated at $210 million.
Franz indicated the Agricultural Disaster Loan Origination Program Act of 2012 will permit funds from the state’s general budget to help pay loan origination fees and administration costs to eligible financial institutions, equal to 5 percent of the loan principle.
Franz, who is from Michigan’s most heavily concentrated fruit area in the northwest Lower Peninsula, introduced the legislation as a result of the frosts in late April that killed cherry, apple and other fruit buds that had set prematurely this year due to the unusual warm spell in March.
The loans are limited to $400,000 for individual farmers in the frost disaster areas; $800,000 for individual processors and handlers; and $1 million for processors with multiple locations.
According to Jennifer Holton, director of communications at the Michigan Department of Agriculture & Rural Development, farmers will have to certify by affidavit that they have suffered a loss of 25 percent or more in major enterprises, or production loss of 50 percent or more in any one crop.
Fruit processors and handlers would be eligible if they can certify by affidavit a 50 percent or greater loss in volume of one type of fruit, compared to the prior three years. Agribusinesses with at least 75 percent of their sales direct to farmers could qualify based on a 50 percent reduction in sales, compared to the prior three years.
The individual farmers will pay a fixed 1 percent interest rate, or a fixed interest rate based on the five-year United States Treasury note plus one-quarter of 1 percent. The maximum term of the loans is five years.
“Agriculture has been a prominent example of strength and growth in Michigan’s economy and it really helped to carry our state’s struggling economy during the last decade,” said Franz. “Now, with the devastating losses to growers and processors from this spring’s erratic weather, it is agriculture that needs our help.
“This program brings everyone together to provide a lifeline through low-interest loans that will make sure our growers and processors can continue to add to our state’s growing economy next year and for years to come. This legislation is not a handout, but a helping hand to ensure resource funds are available if needed to offset this year’s devastating blow to Michigan agriculture.”
According to the press release issued jointly by GreenStone and Huntington, those two were among the state’s financial institutions that provided input to Snyder and the Legislature as the legislation was being developed.