Agriculture Secretary Ann Veneman has named nine Sun Belt representatives to a new USDA Advisory Committee on Beginning Farmers and Ranchers. She also announced a new pilot program to help beginning farmers and ranchers purchase land.
“Creating new farming and ranching opportunities is vital to U.S. agriculture and rural America,” said Veneman. “These programs will help beginning farmers and ranchers with needed information and financing.”
The advisory committee advises the secretary of Agriculture on ways to encourage federal and state beginning farmers' programs to provide joint financing to qualified farmers and ranchers and look for methods to help create new farming or ranching opportunities.
The committee is required by the Agricultural Credit Improvement Act of 1992 and members serve for two years.
The Sun Belt members of the 20-member panel include:
Henry English of Pine Bluff, Ark.; Valerie Diller of Texline, Texas; Omar Garza of Santa Elena, Texas; Juan Guzman of Miami, Fla.; J. Latrice Hill-Moore of Jackson, Miss.; Trenton McKnight of Throckmorton, Texas; Ray Mobley of Tallahassee, Fla.; Linda Prentiss of Springville, Calif.; and Kenneth Stokes of Stephenville, Texas;
All members have experience in agriculture. The members were chosen from a diverse group of individuals recommended by members of Congress; state departments of agriculture; universities; lending institutions; nonprofit organizations; USDA's Farm Service Agency; USDA's Cooperative State Research, Education and Extension Service; and other interested parties.
USDA makes payment
The farmer and rancher pilot loan program, called the Beginning Farmer and Rancher Land Contract Guarantee Pilot Program, guarantees sellers that if a USDA-approved buyer misses payments, USDA will make them.
The pilot program, created by the 2002 farm bill, will be tested in Indiana, North Dakota, Oregon, Pennsylvania, Wisconsin and Iowa during fiscal years 2003-2007. Every year, up to five land contracts in each of the six pilot states may be guaranteed.
The pilot program provides the seller of the land a 10-year “prompt payment” guarantee of the sale to the beginning farmer or rancher (buyer). In the event that the buyer does not pay an annual installment due on the contract, or pays only part of an installment, USDA's Farm Service Agency (FSA) will provide the scheduled payment or the unpaid portion to the seller through an escrow agent.
The defaulted amount then becomes a federal debt for which the buyer is liable. If the debt is not restructured into a repayment plan or otherwise satisfied, FSA will use other means to collect the debt from the buyer. The guarantee is limited to the total monetary amount of two installments. The guarantee will also cover the amount of two years' worth of unpaid taxes and insurance.
The following are some of the eligibility requirements prospective buyers must meet:
Be a beginning farmer or rancher and the owner of a family farm after the contract is completed.
Have participated in the business operations of a farm or ranch for at least three years.
Have an acceptable credit history demonstrated by satisfactory debt repayment.
Be unable to obtain sufficient credit elsewhere without a guarantee to finance actual needs at reasonable rates and terms.
The purchase price of the farm or ranch, or its current market value as determined by FSA, cannot exceed $500,000. The interest rate charged to the buyer for the 10-year term of the guarantee cannot exceed FSA's direct farm ownership loan interest rate in effect at the time the guarantee is issued, plus 3 percentage points.
For instance, the Direct Farm Ownership interest rate is currently 5.25 percent. Rates change monthly and can be found at http://www.fsa.usda.gov under Farm Loans, Direct Loans & Rates. Contract payments must be amortized for a minimum of 20 years. During the term of the guarantee, balloon payments are prohibited and payments on the contract must be of equal amounts.
FSA offers direct and guaranteed loans to producers' to buy farms, equipment, feed and other farming essentials. Special loan programs exist for beginning farmers and ranchers, socially disadvantaged persons and rural youth. Each year, FSA makes thousands of loans to farmers and ranchers who cannot obtain private, commercial credit. You can obtain more information about this and other FSA programs by visiting a local USDA Service Center or via the Internet at http://www.fsa.usda.gov.