USDA Expands Program for Beginning Farmers, Ranchers

Ag Secretary Mike Johanns announces expanded program at Husker Harvest Days. Willie Vogt

Published on: Sep 16, 2005

Getting a start in farming, or keeping young folks on farms and ranches across the country is a significant concern that's been raised at every Farm Bill Forum USDA has held across the country. Thursday, Secretary of Agriculture Mike Johanns announced the expansion of a pilot program that's part of the 2002 Farm Bill that aims to encourage sellers to work with beginning farmers and ranchers.

During Husker Harvest Days near Grand Island, Neb., Ag Secretary Mike Johanns announced expansion of the Beginning Farmer and Rancher Land Contract Guarantee Pilot Program to three more states - including Nebraska.

The Beginning Farmer and Rancher Land Contract Guarantee Pilot Program is designed to offer a land seller a guarantee of payment if the young buyer has a hiccup in income during the life of the land contract. Johanns, who told a Nebraska crowd that he didn't get input into which states would be added to the mix, announced that the program will expand into California, Minnesota and Nebraska.

Since 2003 the pilot program has been tested in Indiana, North Dakota, Oregon, Pennsylvania, Wisconsin and Iowa. Each year up to five land contracts in each of the nine pilot states may be guaranteed.

Here's how it works. The program provides the land seller a 10-year "prompt payment" guarantee of the sale to the beginning farmer or rancher. If the buyer does not pay an annual installment due on the contract, or pays only part of an installment, USDA's Farm Service Agency provides the scheduled payment or the unpaid portion to the seller. The defaulted amount then becomes a federal debt to the buyer.

If the buyer does not restructure the debt into a repayment plan or other FSA-approved plan, FSA may use other means to collect the buyer's debt. The guarantee is limited to the total of two annual installments and also covers the amount of unpaid taxes and insurance for a period of two years.

To be eligible for the Beginning Farmer and Rancher Land Contract Guarantee Pilot Program, the prospective buyer must: 

  • Be a beginning farmer or rancher and the owner and operator of a family farm after the contract is completed.

 

  • Have participation in the business operations of a farm or ranch for at least three years

 

  • Be able to obtain sufficient credit elsewhere without a guarantee to finance actual needs at reasonable rats and terms

 

  • Have an acceptable credit history demonstrated by satisfactory debt repayment

 

  • Meet other requirements of the program.

Under the pilot program, the purchase price of the farm, ranch or other agricultural operation cannot exceed the lesser of $500,000 or its current market value as determined by FSA. The interest rate charged to the buyer for the 10-year term of the guarantee can't exceet FSA's direct farm ownership loan interest rate in effect at the time the guarantee was issued. Learn more about those rates at www.fsa.usda.gov/dafl/rates.htm. Check out the pilot program at www.fsa.usda.gov.