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FSA, Farm Credit Administration refocus on younger farmers

TAGS: Policy
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Event solidified first of many steps FSA and ag lenders plan to take to improve financing opportunities for beginning farmers and ranchers.

In 1987, when Congress voted to keep the Farm Credit System going with an infusion of funds, a contingency was that each of the system institutions needed to have a young beginner and small farmer program. In late 2017, when Iowa farmer Glen Smith took over as the president and chief executive officer of the regulatory arm of the Farm Credit System -- the Farm Credit Administration (FCA) -- he was interested in seeing the program grow and expand those opportunities for young and beginning farmers.

The average age of all U.S. farmer producers is 57.5 years, according to the 2017 "Census of Agriculture." Young producers have unique financing needs as they strive to start, develop and grow their operations. The success of beginning farmers and ranchers is critical to ensuring the future viability of U.S. agriculture.

As Smith has traveled across the country and visited farm credit institutions and different farm operations, one common theme in successful young and beginning farmer programs was a good relationship with the Farm Service Agency (FSA), in particular access to the guaranteed loan programs for beginning farmers.

This led to a conversation with another Iowa farmer who also has landed himself in Washington, D.C.: Bill Northey, U.S. Department of Agriculture undersecretary for farm production and conservation. USDA's farm loan programs, direct loans and loan guarantee programs provide access to credit and needed capital for agricultural lenders to work with beginning farmers and ranchers.

“We started to discuss what we could do jointly between our agencies to further advance our young and beginning small farmer programs,” Smith said, which coincided with the 2018 farm bill that initiated a national director for young and beginning farmers within FSA and a system of sate directors.

Smith and Northey brought their two federal agencies together in an Oct. 27 event to facilitate a discussion on finding ways for agricultural lenders to better serve the credit needs of beginning producers. The event included staff from FSA, representatives of the agricultural lending community and beginning farmers and ranchers exploring ways to better serve these producers.

The goal of this event was to begin the process of more effectively leveraging these programs to benefit beginning farmers and ranchers. The event included representatives of the American Bankers Assn., the Independent Community Bankers Assn., the National Rural Lenders, the Farm Credit System, credit unions and FSA discussing how they could improve the way they work together. The groups agreed on establishing a process for agricultural lenders and FSA to communicate when challenges arise in financing beginning farmers and ranchers.

They plan to share best practices to extend credit and improve creditworthiness by developing workgroups between agricultural lenders and FSA to identify a consistent process to overcome challenges to financing beginning farmers and ranchers.

Smith himself recognizes the important role of both farm credit institutions and commercial lending, and this event brought them all to the table. “Getting competitors within the industry to sit down and listen to how we could all improve our relationship with the Farm Service Agency was an accomplishment within itself,” Smith explained. “Agriculture needs a number of alternatives when it comes to financing. It was a neat thing that all lenders were represented and sitting down at the table with FSA.”

The roundtable discussions with lenders from commercial banks, community banks and Farm Credit institutions revealed a common theme that resonated: the relationship between the loan officer and the beginning farmer or rancher. Those at the meeting agreed to engage agricultural lenders and FSA staff in loan-making training sessions and farm loan conferences.

Smith said this often requires a higher level of communication and expertise in helping these young farmers develop a business plan and helping them be successful. This often tales additional training within the lending financial institutions as well as FSA to increase the level of training and, thus, increase the effectiveness of the loan officer relationship, Smith said.

Smith said it’s also important to structure young beginning farmer programs, and particularly as FSA structures loan guarantees, it has to fit the individual area and individual operation. “Maximum flexibility is very important to advancing the YBS programs,” Smith said.

"With 58 as the average age of U.S. farmers and ranchers, it’s clear we need new entrants to agriculture to ensure that the industry continues to thrive. FCA is eager to work closely with USDA and other stakeholders to find ways to better meet the financing needs of beginning farmers," he concluded.

While there are many challenges, this event demonstrated that FSA and agricultural lenders are committed to finding ways to improve the opportunities for beginning farmers and ranchers — who are, after all, the future of U.S. agriculture.

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