Savings for Farmers – Challenge 3Problem Statement + Target UsersAfter the recession of 2008, corn and soybean futures declined significantly, with farm profits falling by 38% in 2009, which has led farm debt to increase to its current value of $372 billion [1]. Although some farmers saw increases in profits, such as sugar farmers, farmers with cash crops like corn and soybeans who reside in what’s known as America’s farm belt did not. Demand for crops such as corn and soybeans increased significantly in the years leading up to the recession largely in part due to pressures placed by the ethanol industry [1]. In 2009, U.S. corn farmers produced a record of well over 13 billion bushels of corn in anticipation of this increase in demand [1]. In the aftermath of the recession, corn and soybean prices dropped drastically and the market was flooded. Consequently, farmland values also dropped [1].Farmers were left with no profits and often deficits, decreases in land value, and an increased need to provide for their families. The number of US farmers dropped by 4.3% from 2007 to 2012 [2]. Although this percentage seems small, it represents a significant statistical change [2]. Although farmers make up merely 2% of the American population [2], agriculture and agricultural related industries comprise nearly 6% of the GDP [3]. In order to continue operating, farmers are opting to borrow from banks in order to buy essentials like seeds and fertilizer [4]. However, if markets do not improve, increased borrowing can send farmers into more debt, creating a vicious cycle. Research by Robinson, Barry, and Burghardt has shown that farmers will continue taking on more debt in a “go for broke” manner in order to avoid liquidating fixed assets, like equipment [5]. Thus, it is imperative that farmers are given tools to encourage them to save, in order to ensure they have a safety net that will keep them from engaging in high-risk borrowing behaviors. Despite increased pressure placed on American farmers due to debt, few institutions are in place to protect farmers from sinking deeper into debt. Agriculture is a difficult industry: crop yields can be determined due to weather catastrophes and prices are largely impacted by global markets [4]. Although we can’t protect farmers from external factors such as the market or environmental factors such as droughts, we can establish institutions to help farmers save their profits during good years for a cushion for bad years that might come. We’re targeting farmers who suffered losses after the Great Recession or natural disasters in income and farmland value – particularly corn and soybean farmers. In particular, we are targeting farmers 35 and younger, since their debt levels have increased more than those of older farmers [6]. This group is an ideal target due to their comfort with technology and their receipt of income in lump sums. As younger people, they are more likely to be comfortable with technology, particularly mobile banking using computers or phones [7], presenting an opportunity to use mobile tools to help them save. Like most farmers, they receive income in lump sum payments after each harvest instead of in hourly wages, meaning that an intervention that targets them when they receive significant sums of money could have real impact on their savings. SolutionSince there are no specific savings programs that target young, Midwestern corn and soybean farmers in their thirties, we aim to create such a program. This program will be offered by local and national banks that offer loans and financial services in farming communities in the Midwest. Banks will recruit farmers within the target age range through online advertising and targeted outreach to farmers within the target demographic. The target behavior for our users is to save. In order to create a target behavior, an individual must have the motivation to perform an action, the ability to do so, and a trigger [8]. When a farmer enrolls in the program, they will be prompted to set a savings goal and a date they would like to save that amount by. To increase a farmer’s ability to to save, our program operates via direct deposit. Whenever a farmer receives a deposit, a percentage of that amount will be placed into the savings account. If a farmer receives a particularly large sum of money, the farmer will be prompted via push notification, email, or letter to save an additional percentage of it at the click of a button (or via mailing back a letter in an stamped envelope) that serves as a trigger. The motivation portion of the algorithm will be included in two ways. First, when the farmer is prompted to save, the farmer will see a graph of his or her current savings and goal amount, giving the individual a visual representation of their progress. The motivation will include spotlights or testimonials from local farmers who saved a certain percentage of their income and were able to get out or debt or make an improvement to their business. Thus, the plan motivates farmers through extrinsic motivation (reaching a goal) and also reinforces behavior by using peer influence. Our program also profits banks – the savings program increases bank funds thereby allowing the bank to make more money off of loans.Citations[1]http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/399137013?rfr_id=info%3Axri%2Fsid%3Aprimo [2]https://www.agcensus.usda.gov/Publications/2012/Online_Resources/Highlights/Farm_Demographics/ [3]https://www.ers.usda.gov/data-products/ag-and-food-statistics-charting-the-essentials/ag-and-food-sectors-and-the-economy.aspx[4] http://www.npr.org/sections/thesalt/2016/03/03/468887506/with-economy-stuck-in-the-mud-farmers-sink-deeper-into-debt[5] http://www.jstor.org.ezp-prod1.hul.harvard.edu/stable/pdf/1242712.pdf [6] https://www.kansascityfed.org/publicat/mse/mse_0610.pdf[7] https://www.federalreserve.gov/econresdata/consumers-and-mobile-financial-services-report-201603.pdf[8]https://www.dropbox.com/s/q9we1r3xu4sm5ti/behavioral%20change%20model%20Fogg.pdf?dl=0 [9]http://ageconomists.com/2015/07/07/digging-into-farm-debt/

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