Topic:
NON-PROFIT ORGANIZATIONS; RURAL AFFAIRS (GENERAL); STATE AID; TAX CREDITS; LEGISLATION; FEDERAL ASSISTANCE PROGRAMS; BONDS; AGRICULTURE (GENERAL); CREDIT;
Location:
AGRICULTURE; FEDERAL ASSISTANCE PROGRAMS; STATE AID;

OLR Research Report


February 14, 2008

 

2008-R-0104

ASSISTANCE PROGRAMS FOR NEW FARMERS

By: Paul Frisman, Principal Analyst

You asked about state and federal programs for aspiring farmers who have some agricultural training but little or no practical farming experience. We describe several of these programs below. We also briefly summarize several programs offered by non-governmental organizations.

FEDERAL PROGRAMS

Farm Service Agency (FSA)

FSA, a division of the U.S. Department of Agriculture, administers and manages farm commodity and credit and loan programs. It offers direct and guaranteed loans to beginning farmers and ranchers who are unable to obtain financing from commercial credit sources.

FSA considers a beginning farmer an individual or entity who (1) has not operated a farm for more than 10 years; (2) meets the program's loan eligibility requirements; (3) substantially participates in the operation; and (4) for farm ownership loan purposes, does not own a farm greater than 30% of the average size farm in the county. All applicants for direct farm ownership loans must have helped operate a farm business for at least three years. More information on these programs is available at http://www.fsa.usda.gov/FSA/webapp?area=home&subject=fmlp&topic=bfl.

In the 2002 Farm Bill, Congress authorized the Beginning Farmer and Rancher Development Program, the first USDA program, other than farm credit and debt financing, targeted specifically at beginning farmers and ranchers. Competitive grants will fund education, extension, outreach and technical assistance initiatives aimed at new farming opportunities. At least 25% of the funds are targeted to limited resource and socially disadvantaged beginning farmers and ranchers and to farm workers seeking to become farmers or ranchers. The attached report, “Giving the Beginner a Chance in the 2007 Farm Bill,” prepared by the Center for Rural Affairs, a private, nonprofit organization based in Nebraska, looks at a number of recommendations for the 2007 Farm Bill to encourage new farmers. These include creating Beginning Farmer Individual Development Accounts (see California example, below), modifying existing down payment loan terms, and making farm transfer and farm entry issues for beginning, immigrant, and socially disadvantaged farmers a priority research area. The House and Senate are expected to vote on the 2007 Farm Bill in late February or early March.

Rural Entrepreneur and Microenterprise Assistance

This bill (S.566) would amend the Consolidated Farm and Rural Development Act to direct the U.S. agriculture secretary to establish a rural entrepreneur and micro-enterprise business entity to help low- and moderate-income people acquire the skills needed to create small rural businesses (fewer than 10 or 5 employees) and to provide technical and financial assistance. The bill has been referred to the Committee on Agriculture, Nutrition, and Forestry.

Farm Credit Services

Farm credit services is a nationwide network of borrower-owned financial institutions. The fundamental purpose of this government sponsored enterprise is to provide farmers with a source of dependable credit at competitive interest rates. The federal Farm Credit Act (12 USC 2000 et seq.) requires lenders to have programs specifically focused on young, beginning, and small farmers. Services for young and beginning farmers include loans, reimbursements for business classes and financial management tools, and college scholarships. Young farmers are people under age 35. Beginning farmers are defined as those with 10 years or less of experience. Enfield-based First Pioneer Farm Credit serves 10,000 customers in Connecticut, Massachusetts, New Hampshire, New Jersey, New York, and Rhode Island. According to its website (http://www.firstpioneer.com/finance/L3/getting_started.htm) it offers reduced fees or charges to new farmers in several ways. Its FarmStart program (fact sheet attached) helps beginning farmers with start-up, providing investments of up to $50,000 in working capital to those with no previous business or credit track record. Repayment terms are up to five years. To be eligible, farmers must be in the first three years of business. More information on FarmStart can be found at http://www.firstpioneer.com/finance/L3/FarmStart_infosheet.pdf.

First Pioneer also awards up to 21 $1,500 scholarships. These can be used to help pay for tuition, room and board, books, and other academic charges. Applicants must be pursuing a post-high school education and demonstrate a commitment to a career in agriculture, agribusiness, forestry, or commercial fishing. More information on the scholarship program is available at http://www.firstpioneer.com/about/L3/investing.htm.

STATE PROGRAMS

“Aggie” Bonds

These bonds are established through a federal-state partnership that allows private lenders to receive federal and state tax exempt interest on loans made to beginning farmers. The savings are then passed on to beginning farmers at loans at below market rates. Local lenders can often offer first-time farmers rates that are 1% to 3% lower than the commercial farm rate. More information on these bonds and other state agricultural finance programs is available at Types of state agricultural finance programs.

New York is one of a number of states with an aggie bond program. Under New York's Beginning Farmer Loan Program, beginning farmers can borrow up to $250,000 at lower interest rates to buy agricultural property and equipment. The maximum loan term is 40 years. A beginning farmer must be an individual who has not previously owned any substantial farmland. Labor must be performed by the farmer, his or her spouse or fiancée, or minor children. Details about the program, administered jointly by the state's Environmental Facilities Corporation and Department of Agriculture and Markets, are provided in the attached brochure, which also is available on-line at http://www.nysefc.org/home/index.asp?page=12&dc_id=463.

More information on this program can be found at: http://www.nysefc.org/home/index.asp?page=451.

FarmLink Programs

FarmLink programs and websites put aspiring farmers in touch with people seeking to sell or rent agricultural land. Connecticut's FarmLink program (CGS § 22-26l) provides information for aspiring farmers (“farm seekers”) and those interested in selling or renting farmland, at http://www.farmlink.uconn.edu/pages/newfarmers.html. Connecticut's FarmLink program also provides links to apprenticeship and training opportunities, as well as financial and other resources.

California's FarmLink Individual Development Account (IDA) Program provides matched savings accounts designed to help families of modest means establish a regular pattern of savings, and to eventually buy a “productive asset,” such as farm equipment or a down payment on farmland. For every dollar a FarmLink IDA program participant saves, the program adds another three dollars to his or her account. Participants must (1) save at least $100 a month (to be matched with $300 of FarmLink funds); (2) stay in the program for 24 months; (3) attend farm finance and money management workshops; (4) develop and maintain a business plan; and (5) prepare annual tax forms, annual cash-flow projections, and a market plan. To be eligible, a participant must (1) be a beginning farmer with a background and experience in agriculture who is committed to farming; (2) be currently farming leased land or own less than 10 farmable acres; and (3) not have significant financial resources or assets, or a recent history of defaulting on agricultural loans. More information on the program is available at http://www.californiafarmlink.org/#IDA.

State Tax Credits

Some states, such as Nebraska and Iowa, offer tax credits to landowners who lease land to beginning farmers. Under Nebraska's Beginner Farmer Tax Credit, an eligible owner rents a farm to an eligible beginning farmer or rancher for three years. The owner receives a state income tax credit at the end of the tax year equal to 10% of the cash rent or 15% of the share crop rent received for up to three years. The beginning farmer receives a tax credit of up to $500 to reimburse the cost of a financial management class. More information on the Nebraska program is available at http://www.agr.state.ne.us/division/med/beg_farmer.htm.

Iowa's tax credit is 5% of the rental income or 15% of the value owner's share under a share agreement. The lease term must be between two and five years. More information about Iowa's program can be found at http://iada.state.ia.us.

NON-GOVERNMENTAL ASSISTANCE

Center for Rural Affairs

This Nebraska-based nonprofit works to strengthen small businesses, family farms and ranches, and rural communities. It offers policy recommendations and strategies for beginning farmers at its website: http://www.cfra.org/resources/beginning_farmer.

Farm Beginnings

This is an initiative of the Land Stewardship Project, a private, nonprofit organization whose goal is to promote sustainable agriculture. Farm Beginnings combines classroom instruction and on-farm mentoring in Minnesota. Classes begin each fall and meet throughout the winter. Class participants learn goal setting, financial planning, business plan creation, alternative marketing, and low-cost sustainable farming techniques. When classes end, participants take part in a series of on-farm field days during the spring and summer. More than 6,000 acres of land is owned, rented, or otherwise farmed by program graduates. The Farm Beginnings program has received a grant to set up pilot programs in Illinois and Nebraska. More information about this program can be found at www.farmbeginnings.org.

New England Small Farms Institute

The institute is a non-profit organization founded 30 years ago to encourage sustainable regional agriculture. It promotes small farm development by providing information and training to aspiring, beginning, and transitioning farmers. Located in Belchertown, Massachusetts, the institute maintains extensive resources, seeks partnership with service providers throughout the northeast, and offers the Exploring the Small Farm Dream program to people considering farming. The program helps people decide if farming is right for them, and helps them plan how to proceed. We have attached more information about this program.

In 2000 the institute, in collaboration with Pennsylvania Farm Link, Cornell University, the University of Massachusetts and others, obtained a $1.7 million USDA grant to create the Growing New Farmers project. The goal of Growing New Farmers is to provide new farmers with the tools they need to succeed. More information on Growing New Farmers is available at the program's website, http://www.growingnewfarmers.org/.

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