USDA Farm and Ranch Loans
Physics and Natural Sciences
Conduct Research to see how farmers and ranchers qualify to receive loans from the United States Department of Agriculture (USDA). Why do the USDA choose those candidates and what are ways they can help farmers/ranchers better their production with the help of these loans. What is the problem of farmers/ranchers being eligible to receive the loans? What are options that the USDA could change in order to be able to help more farmers/ranchers? State the main issues of the services and propose solutions.
Try to have different type of sources.
USDA Farm and Ranch Loans
Introduction
Agriculture practice has become more challenging for most individuals that are in the industry and those considering joining the industry. The challenge that is mostly experienced in agricultural practice is the lack of funds or enough funds to facilitate a variety of resources to achieve better product production. Farmers and ranchers in the United States are provided by loans for the startup, for expanding their practice, sustaining, or making changes to their business. The Farm Service Agency (FSA) under the United States Department of Agriculture (USDA) provides funding Helpance through loans to farmers or ranchers. The loans provided by the FSA’s Farm Loan Programs are temporary that aims at helping farmers or ranchers graduate to commercial credit. This paper evaluates the required qualifications for farmers or ranchers to receive loans from the USDA; the reasons of USDA choosing its loan candidates and the how the loans help farmers or ranchers to better their production; problems faced by farmers or ranchers to qualify for loans; and the options that could be implemented by USDA to help more ranchers or farmers.
Qualification to Receive Loans from the United States Department of Agriculture (USDA)
Eligibility requirements for receiving USDA loans by farmers and ranchers in the United States depend on the type of loan one requires. The general qualifications considered by USDA for a farmer or rancher to qualify for a loan include proof of United States citizenship, non-citizen national, or a qualified alien of the United States. The applicant should possess the legal capacity, not able to obtain credit at reasonable terms or rates elsewhere, not received debt forgiveness from another direct or guaranteed loan, and proof of good credit history. The USDA loan eligibility also includes the applicant operations to be a family ranch or farm, and most physical and management labor is provided either by the owner or their family members. Lastly, the applicant should not be delinquent on any Federal debt, not including the IRS tax debt.
The eligibility requirements used by FSA for direct loans, including farm ownership loans, operating loans, and emergency loans, include the management ability of the farmer or rancher. To qualify for the direct loan, USDA considers the applicant possession of enough education, training, or experience required for effectively managing the farm or ranch. The farm ownership loan eligibility requires an applicant to have taken part for at least three years in the last ten years in farm or ranch business operations. The target fund loans provided for beginning farmer or rancher have the eligibility that requires the applicant to have operated a farm or ranch for at least ten years or less. Another qualification requirement for guaranteed funds is that the farmer or rancher should be the owner of a farm or ranch, which is 30% of the medium farm size in the United States. For one to be eligible for down payment loans, they should have the capability of at least 5% cash down payment of the purchase price that is less than $500,000 purchase price for the ranch or farm. The qualify for emergency loans, the applicant must prove that they suffered from production loss of at least 30% or physical loss from a designated disaster within eight months since its declaration.
Guaranteed loans offer conventional lenders in agriculture up to a 95% guarantee against a loss. The guaranteed loans are provided by credit unions, banks, and the farm credit System under the supervision of the FSA. The types of guaranteed loans include operating loans, farm ownership loans, and conservation loans (FSA, 2012). FSA guaranteed loan eligibility criteria used by USDA include the farmer or rancher proving that the lender cannot approve their loan applications without an FSA guarantee. A farmer or rancher can also be eligible for a guaranteed loan for land purchase if the owner of the land is only willing to enter into a land contract with an FSA guarantee.
Ways the USDA Help Farmers and Ranchers better their Production using the Loans Offered
There are varies reasons that USDA base on choosing the candidates to receive farmers and ranchers loans. The target candidates for the loans include youths, minority and women farmers and ranchers, and beginning farmers and ranchers. The youths are chosen as candidates to enhance their project funding and to enable them to acquire experience and education regarding agriculture skills. Availing such an opportunity for young people encourages them to venture more in agriculture, which secures the future of the United States agriculture sector (USDA, 2020). The underserved and women farmers and ranchers are target candidates for USDA since supporting the development of such candidates will increase the balance in the agriculture sector, thus increasing productivity and food security. Supporting beginning farmers and ranchers is a priority of USDA, which aims at developing the United States’ next farmers and ranchers’ generation. Other reasons for supporting beginning farmers and ranchers are to help them access land and capital, enhancing their competitive ability, and helping them become prosperous within current and new markets.
The USDA has several ways in which it helps farmers and ranchers better their production using the loans they are offered. Some of the ways include conducting year-end analyses with the farmer or rancher that received a loan. The year-end analyses are conducted by an FSA loan officer who Helps the framer or the rancher in reviewing their records, business plan, and helping them plan for the next year’s operations. Another way of helping farmers and ranchers better their productivity is through the “chattel checks” or periodic reviews. The chattel checks provide an opportunity for the USDA officer to look at the equipment, crops, livestock, and after that, suggest measures that can be implemented to increase productivity (FSA, 2012). In the process that the FSA loan provided to the farmer or rancher cannot accommodate the expected functions to ensure better productivity, the USDA helps the farmer or rancher to graduate to commercial credit. The farmer or rancher can be able to receive additional funding through the temporary credit, which will enhance productivity.
Loans Eligibility Problems that Farmers and Ranchers Face
Most farmers and ranchers encounter problems related to the qualification requirements for receiving USDA loans. Some of the common eligibility problems include the lack of personal characteristic data on a large percentage of agriculture loan applicants. Personal characteristic data is used by lenders and the FSA to evaluate potential risks associated with the applicant, which reduces the transparency that most loan officers consider before providing a loan (GAO, 2019). To be eligible for USDA loans as beginning farmers or ranchers, individuals are required to have owned a farm or ranch that is 30% the medium size of the United States farm or ranch. However, it has become difficult for most beginning farmers and ranchers to achieve the requirement due to difficulties experienced in obtaining the land. According to Ahearn, 2011, two major problems regarding land ownership include less market opportunity for suitable land and high prices for suitable land.
Another lone eligibility problem that farmers and ranchers face is the lack of knowledge, experience, education, and understanding required for managing the funds availed. For one to be provided with the USDA loan, the loan officer must ensure that the applicant has an understanding of the terms and has enough reasons for applying for the loan. The applicant is also required to provide evidence regarding their ability to manage the funds provided and apply them to improving productivity. However, most farmers and ranchers find it difficult to obtain loans, especially socially disadvantaged ones as they lack enough knowledge, experience, or education that is part of the requirement for effective management of the loans towards better productivity (Martinez-Feria, 2011). Financial records and business plans are also essential as eligibility for receiving loans. Most family-scale farmers and ranchers do not have business plans and inappropriately keep the cash flows of their operations, which makes it hard for them to develop a financial statement that is required to apply for USDA loans.
Optional Changes for USDA to Help More Farmers and Ranchers
Several recommendations exist that can be applied by the USDA to help more farmers and ranchers, both financially and increasing better productivity. The recommend changes for USDA include increasing lending to the beginning and socially disadvantaged farmers and ranchers by developing targeting mechanisms that incorporate the availability of both direct and guaranteed loan funds to these groups. The loans should also be flexibly availed with reduced eligibility to cover as many farmers and ranchers from the groups (USDA, 2016). The USDA is also recommended to improve its loan serving and processing by decreasing the processing time to ensure farmers receive the funding in time. USDA should also enhance the effectiveness of the outreach process to extensively cover women, minority, and beginning farmers and ranchers. The outreach efforts can be extended by engaging other partners such within State, federal, tribal governments, local agencies, and private organizations that interact and serve the targeted populations. USDA can also partner with educational institutions to provide awareness regarding the management of funds and business management for farmers and ranchers in the targeted populations.
Another change that is recommended is for USDA to develop plans that would coordinate technical Helpance to farmers and ranchers to enable them to evade barriers concerning market entry, management, and productivity (USDA, 2019). USDA should develop mechanisms capable of supporting farmers and ranchers, such as information, training, and curriculum tools that would help them access lands, loans and to attain growth (Census of Agriculture, 2017). Other changes that are recommended include reducing the number of years for loan eligibility, increasing additional years of payments upon the loan expiratory, and incorporating more minority ethnic groups as targeted populations for farm loans.
Conclusion
Agriculture is considered one of the most important aspects that human existence depends on. Ensuring high productivity is the main purpose for USDA farm loans that ensure small scale farmers and begging farmers and ranchers are able to obtain the funding for their operations. However, the USDA has requirements in place that are used to define the farmers and ranchers that can receive the loans to ensure individuals accessing the loans have the capability of archiving the USDA objective of increased agricultural productivity. USDA has also put in place mechanisms of helping the farmers and ranchers better their production using the farm loans. Despite the availability of farm loans provided by USDA, some farmers and ranchers still face eligibility problems denying them the opportunity to profit from the farm loans. Several recommendations have been provided that USDA can apply to help more farmers and ranchers.
References
Ahearn, M. (2011). Potential Challenges for Beginning Farmers and Ranchers. Choices. Retrieved from http://www.choicesmagazine.org/choices-magazine/theme-articles/innovations-to-support-beginning-farmers-and-ranchers/potential-challenges-for-beginning-farmers-and-ranchers
Census of Agriculture. (2017). USDA at Work on the Issue. Retrieved from https://newfarmers.usda.gov/usda-work-issue
FSA. (2012). Your Guide to FSA Farm Loans. Retrieved from https://www.fsa.usda.gov/Internet/FSA_File/fsa_br_01_web_booklet.pdf
Martinez-Feria, R. (2011). Barriers, Challenges and Limitations that Hispanic and Latino Farmers and Ranchers Face to Start, Develop and Sustain Farming and Ranching Businesses in the State of Nebraska. Center for Rural Affairs. Retrieved from http://files.cfra.org/pdf/barriers-hispanic-latino-farmer-rancher-report.pdf
United States Government Accountability Office. (2019). Information on Credit and Outreach to Socially Disadvantaged Farmers and Ranchers Is Limited. Retrieved from https://www.gao.gov/assets/710/700218.pdf
USDA. (2020). Programs and Services. Retrieved from https://www.fsa.usda.gov/programs-and-services/farm-loan-programs/beginning-farmers-and-ranchers-loans/index
USDA. (2019). Agriculture Improvement Act of 2018: Highlights and Implications. Retrieved from https://www.ers.usda.gov/agriculture-improvement-act-of-2018-highlights-and-implications/beginning-socially-disadvantaged-and-veteran-farmers-and-ranchers/
USDA. (2016). FSA Strategic Plan 2012-2016. Retrieved from https://www.fsa.usda.gov/Internet/FSA_File/fsa-strategic_plan_12-16.pdf
