Mediation can help farmers settle disputes
When farmers are facing foreclosure or bankruptcy, their options can seem limited, not to mention intimidating. But that’s not always the case. Mediation services may offer a more cost–effective and less stressful route compared with an expensive legal trek through the courts.
As part of a national program, created in 1988 in response to the farm crisis of that time, Kansas Agricultural Mediation Services provides free and reduced cost financial counseling and legal advice, as well as mediation services.
The farm economy might not be in crisis today, but KAMS typically sees 150-200 cases a year. KAMS staff attorney Forrest Buhler has been there since day one and said that the program was originally designed for agricultural credit issues. About 1995 however, the programs were having so much success with mediation, that Congress decided to expand that to include adverse (or against the producer) decisions made by various USDA agencies, such as the Farm Service Agency or the Natural Resources Conservation Service.
Harvest Public Media’ Eric Durban sat down with Buhler at the High Plains Public Radio studio in Garden City, Kan., to learn more about the program.
(Note: This interview has been edited for clarity and space.)
HPM: Is mediation in agriculture similar to how it might be in other industries?
Forrest Buhler: Mediation in other areas is often kind of a one-on-one with the person you are in conflict with. In agriculture, we’ll see more multi-party mediations. They’ll be not only a bank involved for example, but also the local seed dealer and fuel supplier. And also government agencies. Many of the agriculture loans that are made have a basis in USDA. The USDA farm loan program provides not only direct loans to farmers, but also guarantees loans through private banks.
So in agriculture situations it’s a little different because at the beginning of those types of mediations you’re generally going to have many people involved and with different interests all associated with agriculture. But the number of parties involved and how that all fits together in a rural community is a unique part of agricultural mediation.
Have you seen the savviness of the farming changing in dealing with financial issues? Farming seems like it’s becoming more of a business.
Forrest Buhler of Kansas Agricultural Mediation Services (Courtesy)
It has changed over the years. The farmers and agriculture producers have had to be very flexible and proactive in their approach to their operations. For example, one of the issues that we’ve been facing over the last couple years after the downturn in the economy worldwide was that banks are facing regulatory issues where they have to be more particular and certain in terms of how they manage their loans. So producers have to be able to adapt to that and understand that, and a certain level of communication has to occur. And so mediation helps with that communication level.
Also, the way our financial counselors will work with producers. It used to be in the late 80’s that land prices were high and you could borrow as much as you wanted to without looking at for instance cash flow as much. Nowadays you really have to pay attentions to cash flow and be able to project and show that you’re going to be able to make things work better in your operation and service the debt you have with the lender.
Has the recent drought and the downturn in the U.S. economy affected your caseload?
Over the last few years the farm economy has been very good with high prices in livestock as well as grain, so to some extent our cases have reflected that. When farmers are doing well, there’s not quite as much need in working with their lenders. Our case load is starting to increase a little bit simply because of the extensive nature of the drought. High prices don’t really help you in you don’t have a crop.
If Kansas Agriculture Mediation Services wasn’t available, what would be the end result for a farmer who didn’t have that kind of service?
Oftentimes they would be in a position of not being able to develop a plan for their lender as to how they’re going to work out of this particular situation, which would possibly cause loss of the farm, or sale or liquidation of their operation. Possibly having to file a bankruptcy in order to get out from underneath a lot of debt, rather than finding a way for that debt to be restructured so the producer can stay in business.
There are a lot of USDA programs these days for farmers to consider. Has that multitude of agencies proved difficult for farmers to deal with?
Whenever the USDA makes a decision that is detrimental to the farmer, if they say he is not eligible for a particular program or is not in compliance with a particular program that he is signed up for, the agency will issue an adverse decision letter that tells him that. At that point, he has options that he can pursue. He can either appeal that decision with the USDA system of appeals, through the national appeals division or through appealing it to his local county committee or the state executive committee. In addition to those appeal options, the farmer is also allowed the option of requesting mediation to try and resolve the situation without having to go through a formal appeal with the USDA. So agencies have used that option to find ways to deal with the problem, the conflict or the dispute as to eligibility or otherwise, at a local level using mediation rather than having to deal with the time and expense of going through that appeal.
Where do your mediations typically take place?
Our mediators actually go out to the community where the farmer, agency or lender is located and typically what we’ll use is an extension conference office for example. Oftentimes we’ll use a private conference room in a court house or sometimes we’ll use churches. It’s not a conference room in the bank where a farmer has a loan or at an agency where they have a dispute. It’s a place where there’s no power that’s being imposed on them or they feel intimidated in talking about the situation. It’s very private and confidential to where the parties can have a private discussion and really talk about the situation without have to worry that the farmers in the coffee shop are going to come down and listen to it. It puts people on kind of the same playing field, an equal power level in that respect.
Do you see a level of anxiety or fear with the farmers in dealing with mediation?
The USDA has guidelines for parties interested in mediation. On its website, it says mediation can be helpful for a number of reasons:
"Through mediation, a trained, impartial person (mediator) helps participants review their conflicts, identify options, and agree on solutions."
Very much so. I think anxiety is a good way to put it. From the farmer’s perspective, this involves his livelihood. Whatever decision, whether it’s an agency decision or that of a lender or creditor that’s trying collect their debt that the farmer can’t afford to pay, there is an anxiety level that it certainly could be a loss of operation. So that’s always there. I think you’ll find that in agricultural settings that’s especially true. The farm often becomes a sense of that person’s identity so there is an anxiety when that is being kind of questioned or there are concerns raised about it to the point where some decisions have to be made that affect that livelihood.
Same with the banks. We’ve found that they really want to help producers if they can. There’s a same anxiety there — I don’t want to lose a customer of this bank. Over the years he’s paid interest timely on his loans and I don’t really want to lose him as a customer if I don’t have to.
There’s also the sense of, one of our mediators calls it, rural economic development in terms of what mediation is. Because the farmer has not only has a loan at the bank, but an account at the co-op, at the fuel place, at the repair place and at the implement dealer. The whole community is involved in that sense. All of the creditors per say have an interest or desire to try and work something out if they can, because if they don’t they may experience higher loses if they have to foreclose or go through a bankruptcy. So getting the farmer to look at things realistically and objectively so that they can then talk with their lender about that takes some of the anxiety out of the farmer as well. Because oftentimes they just don’t know where to start.
Have you seen that same level of preparedness or understanding with the older generation of farmers, as well as the new generation coming onto the farm today?
You’ll see a better understanding of what a producer needs to have in order to be successful in the younger generation. Sometimes we see the opposite with the younger generation, because they have more knowledge, is maybe willing to take more risk than the older generation. I think sometimes there are different experiences in families.
One of the things, for example, that we’ve been seeing a need for over the past four or five years is farm family mediations, where there’s a transition from the older generation to the younger generation. There are often value conflicts, trying to figure out how to incorporate the younger generation into a farm. Can we do that do being with? Do we need to expand? What’s the entity going to look like so that mom and dad can retire and still have money for the entire family to be profitable and comfortable? Oftentimes emotions and disagreements, even petty disputes that have basically brewed over many years can get in the way of making a good decision. So mediation and the services we have can help families get past those and try and find a way to make a good business decision out of the transition.
Does KAMS deal with emotional issues in agriculture as well?
We try and deal with them as best we can. There was a program here in Kansas called the Kansas Rural Family Help Line that dealt specifically with emotional issues. Their program was a part of funding cuts, and the ability to specifically work on that angle of it fell by the wayside because of the lack of funding on the state and federal levels. But what we do have, when you call in you’ll get Char Henton and she’s one of the best listeners to farmers in the state. And she will engage you in conversation and help you talk about some of the things that are going on.
One of the persons who used to direct the Kansas Rural Family Help Line, Charlie Griffin, has graciously agreed to work specifically with farmers that have particular emotional needs that need to be addressed. The network of community mental health centers and others, it’s important to have folks who understand the farm situation.
Sometimes we hear a big sigh of relief at the other end of the phone after we’ve talked to them for an hour or two. They just understand that we care, that this is a place they can call to talk and that there are resources out there to help work through the problems that they are experiencing.
What do you see as the future for agricultural mediation services?
What I see and what I take away from agricultural lenders conferences is that the word volatility keeps popping up. Prices have been phenomenal and expenses have been phenomenal as well. Finding how to manage and deal with those is going to require some real communication and education. The volatility will make it difficult sometimes for producers to service debt. There are going to have highs and lows. And I think mediation plays a role in making sure that communication is still there and that business relationship can still be maintained. So that the rural economic base that mediation promotes can be kept intact.
Has awareness of your program and services been a struggle?
It’s always a continuous educational process to let people know we’re out there. I don’t know how many times over the 23 years that we’ve been doing this, we hear people say ‘I wish I would have known you were here when I started having these problems.’ And so we have to continue educating new lenders and producers to let them know that our services are out there.