The United States Department of Agriculture (“USDA”) has created several incentive programs for landowners and beginning farmers to help move land ownership and farming operations from today’s farmer to tomorrow’s.
Beginning Farmer or Rancher Land Contract Guarantee
The USDA Beginning Farmer or Rancher Land Contract Guarantee Program encourages shifting land to beginning farmers through installment land contracts. This program is administered by the Farm Service Agency (“FSA”) and offers two types of guarantees. First, the “prompt payment guarantee” assures payment will be covered up to the amount of three amortized annual installments or three annual installments plus the cost of any related real estate taxes and insurance. Second, the “standard guarantee plan” covers an amount equal to 90 percent of the outstanding principal of the loan. This program provides incentive for the government to take a more active roll in ensuring the beginning farmer’s ability to make payments. The program requires an acceptable credit history, as well as a down payment of at least five percent of the purchase price.
Transition Incentives Program
The USDA’s Transition Incentives Program (“TIP”) provides two years of additional payments to retired farmers with land exiting the Conservation Reserve Program (“CRP”), if they sell or rent the land to a beginning farmer. This program is available to landowners who sell land to a beginning farmer or enter into a lease of at least five years. While there is no maximum lease term under this program, it should be noted that this can conflict with state law limits on lease terms. The beginning farmer must (1) have been a farmer or rancher for less than 10 years; (2) obtain a conservation plan and implement the plan; and (3) not be a family member of the landowner. There are also a number of requirements placed on the landowner in order to qualify for the program.
USDA Loan Programs
USDA also offer loan programs available through the FSA to help beginning farmers purchase land (farm ownership loans) as well as pay operating expenses (operating loans). The USDA offers direct loans up to $300,000 and guaranteed loans up to $1,119,000.
The state and federal programs don’t remove the hurdles beginning farmers and ranchers face when starting their operations. However, the programs may lower those hurdles enough to incentivize current operators and beginning operators to shift agricultural production to the next generation.
Authored by: Katie French
Katie French
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