New Farmer Challenges: Land and Capital

CLARINDA, Iowa (DTN) -- Listening to producers and community leaders in southwest Iowa, USDA's Farm Service Agency Administrator Zach Ducheneaux said Congress should look at ways to open the Conservation Reserve Program to livestock production as a way to open up more land for younger producers.

Ducheneaux spent last Thursday visiting Clarinda, talking to the owners of the local livestock auction, and touring the cattle operation of Seth Watkins, who took ground out of the Conservation Reserve Program (CRP), put the land into an easement that allows him to graze it, but avoids cropping the ground.

A lot of the conversation focused on the role of CRP as well as the improvements needed to FSA loan programs, especially for young and beginning producers.

Erin Ogle, who works with the Southern Iowa Land Use Conversion Project in Taylor County, helps producers weigh options on marginal land in the county. Ogle noted there is a place for CRP, but producers also see the benefits of programs that would allow them to integrate livestock as well.

"There is a lot of CRP in Iowa, especially in southern Iowa," Ogle said. "I'm not bashing CRP by any means. I know it has its place; but I think (we should be) listening to these producers making that decision on whether they want land in CRP or using that land to keep it productive as well."

Ducheneaux said policy needs to stop the mindset of separating conservation and production.

"That land is becoming more productive if we use it thoughtfully and it is a better reserve for the future if we use it thoughtfully," Ducheneaux said.

Right now, policy dictates landowners face a 25% rental-payment penalty for CRP ground that is hayed or grazed unless the ground is in a county that has a D2 "severe drought" or higher designation by the U.S. Drought Monitor.

"We've got CRP land sitting all over the country," Ducheneaux said. "If we think about incentivizing the proper use of that instead of penalizing the regular use of it, there's a place for you to put some cows. And it builds a relationship between you and the landowner that could turn into a transaction someday."

At the end of September, USDA reported just under 22 million acres in CRP involving 315,400 farms. CRP became a focus of debate after Russia invaded Ukraine over the need to increase crop production in the U.S. USDA allowed landowners with about 4 million acres whose contracts expired in October 2022 to take land out early if they wanted to plant crops on that ground.

Looking at CRP and USDA's loan programs for young and beginning farmers, Ducheneaux said young producers need to have their voices heard among the various farm and ranch organizations to improve the portfolio of programs at USDA for young and beginning producers. He also noted USDA doesn't lobby for changes in the farm bill, but that has to come from producer voices.

"We have an opportunity now to do some more meaningful things going into a farm bill for young, beginning farmers," Ducheneaux said. "This is the time to have that conversation."

LOAN PORTFOLIO

Right now, Ducheneaux added that paperwork and requirements for USDA beginning loans "is the same stack of paperwork" for other USDA loan programs. To get into USDA conservation programs, producers also have to find a way to be in production for at least a year before they can even apply.

Ducheneaux also criticized some local FSA loan officers whose mindset is to focus more on how to reject loan applicants rather than approve them. He pointed to a situation in Montana where hired hands are looking to buy land being offered by the landlord, but there have been problems getting loan work done by the FSA office.

"I have to drag the loan officer to the table instead of him falling over himself to make that happen," Ducheneaux said. "Quite to the contrary, we quite often get in the way of beginning farmers and ranchers. This is the time to have the conversation about what does a real beginning farmer loan program look like because we don't have one."

Gilbert Thomas, a regional president for Bank Iowa in Clarinda, brought up issues with lending he had heard within his bank. At least one banker at a different location had a loan that took six months to get approved from FSA.

"That's not very responsive," Thomas said, adding there should be some standards to get a loan approval when everything is done.

Thomas also said USDA has an "optics problem" when USDA and banks still are charging fees on new borrowers for guaranteed loans while covering the payments on producers who are distressed or behind on their payments. Ducheneaux replied, "To me, that's a better optics problem than having a few thousand farm portfolios gone next year."

The guaranteed loan fees are up for discussion, but Ducheneaux said those fees are how the program is paid for, and right now FSA makes money on its loan portfolio rather than spending taxpayer dollars.

"Our farm ownership loan portfolio makes the taxpayer money across the board, guaranteed and direct," Ducheneaux said.

Why doesn't FSA do more loans? Ducheneaux pointed to his conversations earlier in the week at the American Bankers Association agricultural meeting in Omaha.

"The conversation that came up at the ABA meeting is, 'You're competing with us,'" Ducheneaux said. "No, we're not. We're competing for the producer. And if you do what we'll do for the producer, we'll guarantee for the producer."

When it comes to operating loans, a producer brought up the need to factor in health insurance costs, which he said are a critical cost that drives a lot of farmers and ranchers to off-farm income. Ducheneaux said the FSA loans are set up in a way to force producers to seek commercial credit. Some of that comes from changing mindsets in the loan program. "That doesn't leave room for a living wage for the producer. We have the flexibility to give the terms to do that, but we typically don't."

GETTING GEN Z IN THE DOOR

Glenna Schantz, a project coordinator for the Southern Iowa Land Use Conversion Project in Page County, came up from Missouri to work on conservation practices in Page County. Schantz is interested in programs for farm ownership with livestock, but younger people in general do not have the assets to get those loans.

"As a young person, I don't feel like we are financially stable enough to have the backing to get that started," Schantz said.

Matt Russell, the FSA administrator for Iowa, pointed out the vast majority of producers in the state right now also work off the farm or have a spouse who works off the farm. He tied that into the need for FSA and NRCS office staff as well. USDA jobs can become a career path to begin looking at farm ownership as well, Russell said.

"We're hiring in our county offices," Russell said. "We hired 173 people in the last year at FSA. NRCS is hiring, Rural Development is hiring. We have jobs at our county offices. It isn't a fix-all, but it's a way to think about how you couple career opportunities with the farm-program opportunities. We're actually doing that across the state in our county offices. There's that one avenue. There's ag leadership in a community that is a career that gives you that strength to look at how you invest in a farming asset."

Russell added, "It's hard to get our jobs filled, but it's also a huge opportunity."

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

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