As of Jan. 3, 2012, the Beginning and Socially Disadvantaged Farmer and Rancher Land Contract Guarantee Program is available nationwide. USDA’s Farm Service Agency (FSA) issued the final rule for this farm bill program in December 2011.
“The Land Contract Guarantee Program offers a good option for retiring farmers looking to work with new farmers directly, and helps beginners access the land they need to grow a viable farm,” says Juli Obudzinski, policy associate with the National Sustainable Agriculture Coalition (NSAC). “We applaud Secretary Vilsack for his support of this program and FSA for helping to get the word out to the farm community.”
NSAC developed the policy proposal for this program, and fought for its inclusion in the 2002 and again in the 2008 Farm Bill. To read more about the program, visit NSAC’s Grassroots Guide. “We want to especially thank Sen. Tom Harkin and Rep. Tim Walz, along with all of their co-sponsors, for working for the program’s inclusion and expansion in the last farm bill,” says Obudzinski. “We are very hopeful that additional provisions to assist beginning farmers, including those in the recently introduced Beginning Farmer and Rancher Opportunity Act (S.1850, H.R.3236), will be incorporated into the upcoming farm bill.”
FSA also announced implementation of a new rule to provide additional flexibility in determining whether a new farmer has sufficient experience to receive an FSA loan, providing a greater recognition of on-the-job training.
“The number of young people starting new farm businesses is exploding, often starting through apprenticeships and on-the-job training programs” according to Lindsey Lusher Shute, Director of the National Young Farmers' Coalition, an NSAC member organization. “As a result of the rule change, the FSA will be better able to work with this important new constituency, provided the loan officers in the county offices are properly trained. With good implementation, new farmers will be better able to access the credit they need to purchase land and operate their farms.”
Land Contract Program
Two primary barriers for beginning farmers and ranchers are access to land and capital with which to begin farming. This program, initially launched in 2002 as a pilot program in nine states, is intended to help. It reduces the financial risk for retiring farmers who sell their farmland to a beginning or socially disadvantaged farmer or rancher by providing a federal guarantee of three years of “prompt payments” in case the beginning farmer runs into trouble making their payments.
There is also a second option of a standard 90% guarantee of the outstanding principal on the land contract. The retiring farmer has the option of choosing the prompt payment guarantee or the regular guarantee on the value of the asset.
In order to be eligible for this program, the seller needs to self-finance the sale of their land, and sell to either a beginning or socially disadvantaged farmer. The buyer of the farm or ranch must a) be a beginning or socially disadvantaged farmer or rancher, b) be not larger than a family farm (in which most of the management and labor is provided by family members), c) be the owner or operator of the farm when the contract is complete and d) have an acceptable credit history and be unable to obtain sufficient credit elsewhere.
Interested parties should contact theirlocal FSA office.