Low-interest loan program offers relief to Michigan’s fruit industry

A new bill creates a partnership between growers, processors, private lenders and the state to support Michigan’s fruit industries after this spring’s unprecedented loss to fruit crops.

What started out with an amazingly warm stretch of weather in March resulted in significant damage to Michigan’s tree and vine fruit crops. Freeze events that occurred in April after the warmest March ever recorded for Michigan caused losses of 80 to 95 percent to Michigan apple, cherry, peach and other tree fruit crops. Blueberries, asparagus and wine grapes suffered 20 to 50 percent damage. For apples, blueberries, grapes, peaches, sweet cherries, tart cherries and asparagus, the estimated loss is 58 percent of the 2006-2010 average, a loss of $209.8 million.

As a measure of the impact on Michigan’s economy, the output of goods and services in Michigan will be expected to decline by about $503 million compared to 2006-2010 as a result of these crop losses.

House Bill 5717 was introduced on May 31, 2012 and will provide for a low interest loan program for growers, processors and agribusinesses affected by the freeze events this spring. This bill creates a partnership between growers and processors, private lenders and the state to support our fruit industry following this unprecedented crop loss disaster.

This is designed to be a privately administered and funded loan program, to help protect and maintain the infrastructure supporting our unique fruit growing areas in Michigan.

This program utilizes a low interest loan where growers and processors or handlers pay a one percent interest rate; lenders evaluate and take the credit risk, and are compensated partially for their administration costs. The state augments the process by paying lenders a loan origination fee totaling fiver percent of the original loan amount, paid out over five years.

Because these loans are privately administered, using private funds, the administration costs on behalf of the state are minimized and private loans will not pose a risk of losses to the state.

A Federal disaster request has been submitted by Governor Snyder to the United States Department of Agriculture (USDA), but Federal programs can be unpredictable and will not come soon enough to help growers and processors with little or no cash flow this growing season.

For a maximum $15 million investment in natural disaster relief to fruit growers through a low interest loan, the State of Michigan is supporting more than $500 million in annual economic activity.

According to Derek Bajema, legislative liaison of the Michigan Department of Agriculture and Rural Development, the bill will be signed on June 26 and appropriation will follow in the fall.

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