Conservation Loans

Program Basics

The 2008 Farm Bill creates a newly revised loan authority for USDA’s Farm Service Agency to provide direct or guaranteed conservation loans to qualified borrowers. Eligible farmers or ranchers, including farmer cooperatives, private corporations, partnerships, or limited liability companies, can apply for a loan to cover the costs of:

“Qualified conservation projects” such as:

Conservation buffer practices such as:

A conservation project is “qualified” for a loan if it is included in a conservation plan that is approved by the Natural Resources Conservation Service.

The 2008 Farm Bill also establishes a priority for the conservation loan program for qualified beginning or socially disadvantaged farmers and ranchers, owners or tenants that use the loans to convert to sustainable or organic agricultural production systems, and producers who use the loans to build conservation structures or establish conservation practices to comply with highly erodible land “compliance” regulations. In addition, USDA is to give strong consideration to applicants who are on waiting lists to receive farm bill conservation program financial assistance.

Direct and guaranteed conservation loans operate under the same rules and loan limitations as regular direct and guaranteed FSA farm ownership loans with two exceptions. First, for guaranteed loans the Farm Service Agency can guarantee no more than 75 percent of the principal amount of the loan, a lower rate than normal. Second, for both direct and guaranteed loans, the borrower does not have to be a family-sized farm, does not have to demonstrate an inability to secure credit from private, commercial sources at reasonable terms, and does not have to apply for commercial credit during the term of the loan should it become available at reasonable terms.

2008 Farm Bill Changes

The previous conservation loan program had many of the same features as the new program in the 2008 Farm Bill, except that guaranteed loans were not limited to 75 percent guarantees and borrowers had to operate not larger than family-sized farms and demonstrate an inability to get credit elsewhere. In addition, the new farm bill has added the priorities for beginning, socially disadvantaged, and organic and sustainable farmers and ranchers. Finally, the new farm bill eliminates an outdated $50,000 limit on direct conservation loans.

Legislative Authority

Section 5002 of the Food, Conservation, and Energy Act (FCEA) of 2008 amends Section 304 of the Consolidated Farm and Rural Development Act of 1972, to be codified at 7 U.S.C. Section 1924.

Funding

The 2008 Farm Bill authorizes an appropriation for the Conservation Loan program for each year between 2008 and 2012. However, it has been about 15 years since Congress last appropriated funds to the Conservation Loan program directly, and neither the pending House nor Senate appropriations bills for FY 2009 include any such funding. However, in the intervening years, FSA has still made loans for conservation purposes under its regular direct and guaranteed farm ownership loan authority but in accordance with the conservation loan authority. Presumably this will continue to be the case under the new revised Conservation Loan program, until such time as Congress may appropriate separate funding for conservation loans. In recent years, Congress has appropriated over $200 million for direct farm ownership loans and over $1.2 billion in guaranteed farm ownership loans.

Implementation Basics

The Conservation Loan program will be part of rulemaking that the Farm Service Agency is expected to undertake in 2009.  In the meantime, and even after the new conservation loan rules are finalized, qualified farmers and ranchers will continue to be able to access loans for conservation purposes, including those enumerated in the new conservation loan program, under the regular farm ownership programs. In that instance, however, the regular farm ownership rules will apply, including the not larger than family-sized farm test.  As explained above, funding levels for farm ownership loans are determined through the annual appropriations process.  At some point in the future, Congress may also decide to once again appropriate funding for the conservation loan program in addition to general farm ownership loans.

USDA Contact Information

The Conservation Loans program is administered by the Farm Service Agency of USDA. Information about the program will be posted on the FSA website: www.fsa.usda.gov

Mike Hinton, Direct Loan Branch Chief, Farm Service Agency, mike.hinton@usda.gov, 202-720-1472

Bob Bonnet, Guaranteed Loan Branch Chief, Farm Service Agency, bob.bonnet@usda.gov, 202- 720-3889

For information and applications, go to your FSA regional Service Centers or to your state FSA office. You can locate all of the contact information by clicking on your state at http://offices.sc.egov.usda.gov/locator/app?state=us&agency=fsa .