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Next Set of Farmers Eager to Take the Reins

March 9, 2013
By: Sara Schafer, Farm Journal Media Business and Crops Editor
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Today’s young farmers bring energy, special skills

Susan Hodges is excited about the future of agriculture, which is why she chose it as her profession and is employed by a family-owned cattle and grain operation in Valleyford, Wash. In the meantime, Susan, 24, is counting the days until she can return to her family’s farm, which produces several varieties of wheat and lentils.

"Right now there is not enough room for me to return to the family farm," Hodges says. "I’m waiting for the opportunity to buy or rent ground close to home. It is really important to keep the farm in my family."

Hodges is a classic example of today’s young and beginning farmers. She recognizes the challenges involved in farming, such as farm transitions and acquiring land, but also knows those obstacles can be overcome.

USDA recently released a comprehensive report about new farmers and ranchers, which it defines as those who have managed an operation for 10 years or less. In 2011, out of the 2.1 million farms, 22% (or 455,868) were classified as beginning farms.

Overall, the number of beginning farmers has been on the decline for at least two decades. In 1982, 38% of principal farm operators had less than 10 years of experience. In 2007, the most-recent Census of Agriculture, that number comes in at 26%. During this same time period, the average age of U.S. principal farm operators has increased from 50 to 58.

Mary Ahearn, USDA agricultural economist, says the financial requirements of starting a farm operation is typically the biggest barrier for young producers. "The challenge of acquiring land in today’s market has likely been exacerbated by the prolonged rise in farm real estate values," she says.

Around 30% of beginning farmers hold a four-year college degree, which is more than established producers. Also, slightly more beginning farmers are women, 12%, compared with established farmers, which is 10%.

The average size of beginning farms is 200 acres, which compares to 434 of established farms. Due to their smaller farm size, beginning farmers account for only 10% of the total value of U.S. agricultural production.

Only a small percentage of beginning farmers don’t own any land, but the majority rent land. In general, beginning farmers are more likely to purchase land from a non-relative, while established producers tend to inherit or purchase land from relatives.

Yet, even with these obstacles, young farmers are finding ways to be profitable. Off-farm income for the primary operator and spouse can assist with living expenses and expansion options.

Also, Ahearn says, these farms tend to include livestock and beef cattle, compared with row crops and dairy. "Beginning farms are experiencing success in a variety of ways, and no one path to success is dominant as beginning farms seek to find their niche."

Overcome the Land Challenge

Securing land for rent or purchase is commonly cited as the toughest hurdle for beginning farmers. USDA’s Farm Service Agency (FSA) has several loans and funding options specifically for beginning and young farmers.

Mark Mudd, FSA senior farm loan officer in Fulton, Mo., says FSA loans can provide a great foundation for a young farmer’s operation. "The problem for a lot of young farmers is coming up with a down payment on the farm," Mudd says. "The goal of these programs is to help overcome that big obstacle."

Beginning Farmer Down Payment Program

This loan program provides assistance to purchase a farm for those who meet FSA’s beginning farmer or socially disadvantage definitions. Details include:

  • The applicant makes a cash down payment of at least 5% of the purchase price, FSA finances 45% of the loan amount and a participating bank finances the remaining 50%.
  • There is no limit on the purchase price of farm or ranch real estate under this program, but the maximum FSA loan can be 45% of the purchase price, 45% the appraised value or $225,000 (whichever amount is the lowest).
  • Loan term is 20 years. The interest rate is 4% below the direct farm ownership rate, but not lower than 1.5%. At this time the interest rate for this loan is 1.5%.


Land Contract Guarantee Program

This program is focused on retiring farmers who want to self-finance the sale of their land to beginning farmers. FSA guarantees the loan for the seller, by either providing three years of loan payments and related expenses or providing 90% of the outstanding principal. Details include:

  • The loan is available on new land contracts where the purchase price is $500,000 or less and the buyer must provide a 5% down payment.
  • Guarantee is for 10 years but land contract must be amortized, or debt paid off in regular installments, for at least 20 years.
  • Interest rate is negotiated between buyer and seller but cannot exceed 3% above FSA’s announced farm ownership rate at the time the guarantee is issued.


To learn more about these funding options, contact your local FSA office. Also considering contacting your local lender or branch of the Farm Credit System, as they might offer additional beginning farmer loan programs.

Traits of Today’s Young Producers

The fifth annual Tomorrow’s Top Producer program, a Farm Journal Media event, was held on Jan. 29 in Chicago, Ill. The one-day event introduces young and beginning farmers under the age of 35 to the business of farming. Speakers discuss vital topics such as marketing, succession planning, technology and more. This year’s event hosted nearly 140 of the nation’s brightest young producers. Prior to the event, around half of the attendees, which hailed from 14 states, completed a survey about their operations. The results track closely with the recent USDA beginning farmer report. Here’s a snapshot of today’s young farmer.

What is the biggest challenge for your operation?

1 Securing land
2 Marketing and business planning
3 Succession planning
4 Access to capital, technology and input decisions
5 Health care

FJ Young Producers Chart p70

See the rest of the survey results and coverage from the 2013 Tomorrow’s Top Producer event at
www.TopProducerSeminar.com

You can e-mail Sara Schafer at sschafer@farmjournal.com.

 

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FEATURED IN: Farm Journal - March 2013

 
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