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Challenges Facing Beginning Farmers
The dynamic winds of agriculture drive producers in divergent directions in a single-minded pursuit of growing opportunities. New crops – industrial hemp, low-linolenic oil soybeans, vineyards, and wind energy – beckon from the horizon. Old crops – corn and soybeans – test new geographic boundaries, and many farmers experiment with double-crop field peas and cover crops. Yet, the greatest challenge for agriculture today may be nurturing its fragile crop of beginning farmers.
Between 2007 and 2012, the number of beginning farmers identifying themselves as primary operators grew by about 1,000. Of principal operators on family operations, 18% started in the last 10 years, based on the 2012 Ag Census.
Barriers to entry are predictable. Access to capital for operating equipment and crop inputs poses significant headwinds. The average U.S. farm acre sells for over $4,100; it’s double that amount in Midwest states. Although record commodity prices have declined, elevated land values, cash rents, and crop inputs contribute to balance-sheet turbulence.
“Younger and beginning cash grain farmers are very vulnerable to the current downturn in the ag economy,” says Michael Boehlje, Purdue University ag economist. “If they’ve been aggressive in cash-renting land, they may run out of cash and liquidity, and confront debt service problems.”
Frayne Olson, North Dakota State University, is working with Ryan Larsen to run the financial numbers of a cross-section of North Dakota farmers. They’re using the results to update financial stress test models this fall for ag bankers.
“The impact is most heavy on those least able to weather the storm,” Olson says. “Those who are younger and have entered agriculture in the last several years have had to compete for land, and they tend to have a higher cost structure. They have less equity and financial reserves. They’re canaries in a coal mine.”
Buffeted by high-pressure zones
Only 7.8% of farmers are under 35 years old; 5.4% of primary operators fall into that category. Virtually all of today’s young farmers are closely tied to established producers. Yet, they often suffer losses or earn only small profits as they launch their businesses. Most rely on off-farm jobs or custom work to supplement their on-farm incomes.
A 2011 National Young Farmers Coalition (NYFC) survey reinforced that lack of capital remains a real barrier. Those who start farming without help from family are even more vulnerable to economic downdrafts. High-value crops or direct-marketed products are a good fit, such as natural meats, certified organic produce and grains, or grass-based milk.
In 1964, only 4% of farmers had a college degree. By 2011, 25% had a four-year college degree (compared with 28% for nonfarmers). In 2014, an NYFC survey of 700 young farmers revealed another less obvious, but very real barrier, to entry: student loans. Respondents reported an average student loan debt of $35,000. A total of 53% were farming but admitted difficulty in making student loan payments. Another 30% weren’t pursuing farming because their earnings wouldn’t cover student loan payments.
Next page: Seeding the future crop
Seeding the future crop
Certainly many USDA efforts are in place to help beginning farmers. FSA targets direct and guaranteed loans to beginners. Its microloan program for small farmers, launched in 2013, features a streamlined application process for operating loans of less than $50,000. Its Transition Incentives Program provides two additional years of payments for retired farmers and ranchers who transition expiring CRP acres to socially disadvantaged, military veteran, or beginning producers who return the land to sustainable grazing or crop production.
In Iowa (and other states), landowners earn state tax credits for leasing land, depreciating machinery or equipment, breeding livestock, and buildings to young farmers. Sixteen states offer Aggie Bonds, which are tax-free bonds to help beginning farmers acquire land and equipment. Farm Credit Services of America has a Young & Beginning Program. The National Farmers Union’s Beginning Farmer Institute provides one year of hands-on training at no cost. Other initiatives reach out to women, Hispanic, Asian, and black farmers.
Is it enough? Efforts are under way to do more. The Young Farmer Success Act introduced in Congress this year would forgive federally subsidized student loans. Graduates in education, medicine, law enforcement, and government service already may qualify for the Public Service Loan Forgiveness Program created in 2007. After 10 years of repayments, the balance of their federal loan debt is forgiven.
Advocates argue that the profession of farming is a public service. “Our farmers generate vital economic activity in every state and also produce food and fiber and protect the rural landscape as true public servants,” says Rep. Chris Gibson (R-NY).
House Bill 2590 is part of the reauthorization of the Higher Education Act, which includes the Public Service Loan Forgiveness Program. It’s supported by 100 ag and food groups. Visit youngfarmers.org for more.
Not all nonfarmers agree. Some perceive farmers as rich, reliant on government subsidies. A recent op-ed in the Los Angeles Times by Liz Carlisle states that farmers contribute to “a number of public ‘bads.’ ” She argues that incentivizing practices requiring farmers of all ages to be good stewards of land and water is a better investment than loan forgiveness.
“You can’t have sustainable farming without farmers,” counters NYFC executive director Lindsey Lusher Shute’s op-ed letter.
Few disagree, however, that beginners face entry barriers and a risky economic terrain. “Many haven’t seen tough times, and they’ll need to adjust,” Olson says. “It’s a teachable moment to put risk-management strategies in place.”
Kelvin Leibold, farm and ag business management specialist at Iowa State University, says the threat is real. “With lower profit margins, they’ll struggle to build net worth to buy out the older generation,” he says. “All of my life, people have been saying we’d run out of farmers. The big issue today isn’t getting more people started. It’s keeping those who started in the last 10 years profitable enough to stay in ag.”