U.S. Senate Committee Hearings Get New Farmer Perspectives
A startling 70% of agricultural land will change hands over the next two decades. The combination of an aging farmer population and the difficulty of securing capital for new operations means that much of this land could be absorbed by large corporations unless Farm Bill legislation lowers the barrier of entry for new farm families. Base land government funding has been a way for the next generation of farmers to get their foot in the door, but it has also changed land prices raising questions about how effective the policy has been at creating opportunity.
Opportunities and Obstacles for New Farmers
Currently, large corporations drive market pricing on most aspects of agriculture from the price per pound of beef to the fertilizers used on crops. The dynamic is tough for existing small and medium sized farms as they work to stay afloat, but even more difficult for new farmers wanting to break into the industry. The capital needed to get a farm up and running is usually the cost of a new home, though it rarely does come with a home. More often than not, land is sold separately from other assets leaving the new buyer paying a monthly farm loan payment as well as a mortgage payment.
Farmers just starting out typically work other jobs as they attempt to secure funds for land purchases. They lease what they can and often share ground with other farming operations. They cannot build infrastructure to support their work on rented land and they typically have to wait months to secure loans since they have little experience to prove they can build a successful operation.
Yet, in the grand scheme, securing a loan for $350,000 or more, if they want to match pace with existing farms, is the easy part. Producing efficiently so that it's possible to generate a stable income solely from the farm to repay the loan is the real trick. The majority of existing farms are not generating a yearly gross farm income of $350,000, yet that is what it takes for a new farmer to get up and running. It means the new farmer must borrow enough to grow bigger than existing farms in terms of gross income.
And, like all other farmers, they enter the industry knowing the risk is high. Storms, drought, wildfires, and insects are regular variables for all farmers. The initial loan doesn’t always account for crop insurance or other risk management tools, and it certainly doesn’t include personal health insurance or individual circumstances that draw on financial resources. New farmers take the outside job to get health insurance and benefits, while also attempting to work the farm at a scale that produces income. It must feel a bit like building a house of cards.
Base Land Funding at Work
The base land concept has long favored established farms who can prove a harvest history or have the capacity to reallocate harvestable land to alternative crops or purposes, who, in turn, receive funding from the Farm Service Agency. New farmers either do not have the land to participate or have difficulty purchasing land that comes with base acreage because it is priced higher. While it gives existing farmers a safety net as markets go up and down, it works against new farmers who, without the safety net of base land funding, could be ruined during a volatile year. Many new farmers who have purchased land say that crop insurance is a daunting expense for a beginner to take on with little to no farm income generated yet. In some cases, the current Farm Bill parameters have increased land prices and even land rental prices because owners know there is a set government payment on its way.
Solution Oriented Farmers
New farmers trying to secure their own land argue that new Farm Bill legislation should confront this dynamic in a way that allows beginners a competitive chance. One day many younger generation farmers would love to qualify for base land grants and loans. That dream could be realized if step one of the process, securing capital for land, was more attainable. Senate hearing testimonies on the topic revealed that they hope for a diversified approach where cooperatives are rewarded, pre-qualified farm loans exist, and current base land funding is capped to prevent it playing a role in rising land prices.
A study aiming to capture the impact of less funding flowing into existing farms shows that established operations could collectively take a $2 billion hit. In theory, that money would be reallocated into loan opportunities for new farmers. The generation of farmers coming in with no existing ties to land have a single goal; create a profitable business growing food. Existing farmers may have more goals that prioritize keeping land in a family over producing food. Supporting new farmers could also be a proactive step in securing food supplies in the future. It could also serve as a means of rebalancing the scales between corporately and privately owned farms and preserve land for small operations.
Other studies have proven that new farm families generate high percentages of crop yields which is worth paying attention to. Investing in the new tends to be an investment in growth and stability. Where corporations are consolidated, small farms cover more regions. Where existing farms are conserving land, new farm purchases are producing crops. What’s become obvious is that the economics of existing farms is quite different from the economics for new farms. Reassessing base crop land qualifications and even capping these specialty payments has the potential to reallocate resources and provide needed support for new farmers.
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