By JOHN LOVETT | University of Arkansas System Division of Agriculture
FAYETTEVILLE, Ark. — An economic analysis of agricultural credit usage and census data conducted by the University of Arkansas System Division of Agriculture can’t tell the whole story of the changing landscape of America’s farms, but a few things stand out.
More minorities and women became primary operators of farms and ranches in the past decade as the total number of farms and ranches across the nation decreased by about 3 percent. Meanwhile, the number of white male-operated farms decreased by nearly 15 percent between 2012 and 2017, and proportionately fewer non-Hispanic white males are starting farms and ranches.
White male-operated farms remained the largest demographic segment of established and beginning farmers, and largest user of agricultural credit.
The Division of Agriculture’s study looked at interest paid on agricultural loans and USDA Census of Agriculture data from 2012 and 2017. Researchers also used USDA’s Census of Agriculture, Agricultural Resource Management Survey and Farm Service Agency data to gauge lender success and potential gaps in serving beginning farmers/ranchers. The USDA Census of Agriculture is taken every five years, and 2022 data will be released in 2024.
“A large share of Farm Service Agency funds is going out to beginning farmers,” said Bruce Ahrendsen, the study’s lead author and professor of agricultural economics and agribusiness for the Arkansas Agricultural Experiment Station, the research arm of the Division of Agriculture. “Part of it is targeted funds required by Congress, but the FSA is exceeding those targets in most years for direct loans and serving an important role for U.S. agriculture.”
Beginning mid-sized family farms with annual sales between $350,000 and $1 million had the largest share of farms using Farm Service Agency loans.
“About one in four mid-size beginning family farm operations have either a direct or a guaranteed loan from the Farm Service Agency,” Ahrendsen said. “So, FSA loans are being used much more than expected. FSA is an important source of credit, particularly for beginning farmers.”
In 20 states, more than 50 percent of indebted minority beginning farmers and ranchers were Farm Service Agency borrowers over the course of the study period. So, federal credit programs appeared to have had some success in increasing socially disadvantaged farmer and rancher access to credit, allowing for easier entry into farming. Still, the programs “may not be as effective at correcting historical inequities,” the study added.
Data collected for the study consistently showed that greater shares of socially disadvantaged farmers and ranchers were “beginning” operations compared with non-Hispanic white men.
Getting a hand up
Published in 2022, the Division of Agriculture study titled “Beginning farmer and rancher credit usage by socially disadvantaged status” was conducted to examine credit usage, or interest paid, by beginning farmers and ranchers and assist in developing or adjusting policies amid the shifting demographics of beginning farmers and ranchers, especially as it relates to “socially disadvantaged farmers and ranchers.”
The USDA defines a “beginning farmer or rancher” as someone with no more than 10 cumulative years of experience as an operator on any farm. “Socially disadvantaged farmers and ranchers” include women; individuals with Hispanic, Latino or Spanish origin; and individuals who identify as American Indian or Alaskan Native, Black or African American, Asian, Native Hawaiian or other Pacific Islander. “Non-socially disadvantaged farmers/ranchers” are defined in the study as non-Hispanic white males.
While the share of farms using agricultural credit had a slight drop, the U.S. Department of Agriculture’s Farm Service Agency federal loan programs “appeared to be crucial in enabling beginning farmers and ranchers, and especially beginning socially disadvantaged farmer and rancher groups, to access loans,” the study states.
The nation’s total number of farm operations decreased 3.2 percent between 2012 and 2017, but the Division of Agriculture study showed the number of “socially disadvantaged beginning farmers/ranchers” counted as “primary producers” went up by 10.7 percent. Average farm size did not increase as much as might be expected, Ahrendsen said, since some farmland went for use for other purposes, such as urban development. The average farm size increased 1.8 percent from 433 acres in 2012 to 441 acres in 2017, while the total land in farms decreased 1.6 percent.
The study concluded that the United States might be making some progress toward the goal of making it easier for farmers to get started, especially among historically underserved groups. Without the federal credit sources, beginning farmers and ranchers could be restricted in growing their operations, the study added.
The Farm Service Agency’s 2023 budget included an increase of $5.5 million for outreach to historically underserved producers in support of a presidential priority to promote racial and economic equity. The budget also includes $1.6 million for the Urban Agriculture Initiative, which would support county committees to facilitate urban agricultural production and help address climate change, the USDA budget summary states.
FSA loan programs
The Farm Service Agency offers several loan programs intended to be temporary in nature to help farm operations expand, sustain or recover from a natural disaster.
“Guaranteed” loans are made and served by commercial lenders, such as banks, the Farm Credit System, or credit unions. The Farm Service Agency guarantees the lender’s loan against loss up to 95 percent and is responsible for approving all eligible loan guarantees and providing oversight of the lenders’ activities. “Direct” loans are made and served by the Farm Service Agency using government money.
A USDA fact sheet states the Farm Service Agency, “provides credit to agricultural producers who are unable to receive private, commercial credit, including special emphasis on beginning, minority and women farmers and ranchers, and purchases and delivers commodities for use in international humanitarian food programs.”
Federal law requires the USDA to reserve portions of their “direct” and “guaranteed” loans for use by beginning farmers and socially disadvantaged farmers/ranchers. Over the past 20 years, targeting has resulted in a large share of direct and guaranteed lending going to beginning farmers and ranchers and “socially disadvantaged” groups, the study noted.
Most socially disadvantaged farmer and rancher borrowers using “direct” Farm Service Agency loans were “beginning farmers/ranchers.” And about half of socially disadvantaged farmer and rancher borrowers from the “guaranteed” loan program were “beginning farmers/ranchers.”
Evolving American farms
A 2020 Agricultural & Applied Economics Association article that served as a source in the experiment station study explains the complicated nature of comparing 2012 and 2017 statistics. The 2017 census allowed demographic data to be collected on up to four persons instead of three, as in the 2012 census. However, the Agricultural & Applied Economics Association article noted the method used to determine the “primary producer” for the 2017 Census is comparable to the determination of the “principal operator” in the 2012 Census, and the experiment station economists took that approach.
Based on the USDA’s 2017 Census of Agriculture alone, however, women make up a significant portion — about 30 percent — of beginning farmers or ranchers. Relatively large shares of farms where women were the “primary producer” of a beginning farm or ranch are in Southern states. However, among female “beginning farmers/ranchers” the highest shares of farms reporting interest paid are in the Midwest and Northern Plains, along with Arkansas, Kentucky, Oklahoma and Nevada.
The largest increase between 2012 and 2017 in beginning farms or ranches among minority “primary producers” was with Native Hawaiian and Pacific Islanders at a 44.7 percent increase to 933 farms. Total farms operated by the group increased from 2,190 to 2,921 over that time.
American Indian and Native Alaskan “beginning” farms and ranches increased by 22 percent to 11,704. Total farms in that group increased by about 5 percent to 48,507 in 2017.
Hispanic-operated “beginning” farms and ranches were up by 9.3 percent to 21,969 in 2017. But total Hispanic farm numbers were down 0.4 percent, to 66,727, in 2017.
Asian-operated “beginning” farms and ranches were down 6.8 percent, dropping to 4,969 from 5,333 with a total number of 13,693 Asian-operated farms in 2017.
“Beginning” farms and ranches operated by who identified as Black or African American were up 12.8 percent, from 7,518 in 2012 to 8,483 farms in 2017. But total farms in this group were down 4.3 percent to 33,088 in 2017.
Access, trust key for socially disadvantaged producers
Ron Rainey, assistant vice president for the Division of Agriculture and a professor and extension economist, co-authored the division’s study. In a 2022 presentation to the U.S. House of Representatives Agriculture Committee, Rainey said the Census of Agriculture reveals that, on average, most socially disadvantaged farmers and ranchers operate relatively smaller farms and leverage smaller operating loans to produce their crops each year.
Historically, equity and access issues have “played a role in limiting opportunities for socially disadvantaged beginning farmers to gain economies of scale — increasing farm size and investing in innovative or new machinery and technology,” Rainey said.
Another issue among socially disadvantaged beginning farmers and ranchers, Rainey said, is “real and perceived trust issues.”
“There are a number of producers who refuse to enter a USDA office even in 2022 because of fear, based on experiences, of disparate treatment, losing their land or being foreclosed on a loan under less than fair conditions,” Rainey said. “Therefore, the ability to build and restore trust and relationships is a critical hurdle to effectively reach marginalized producers and their communities with USDA programs and resources.”
In 2017, nearly three-fourths of all socially disadvantaged farmers and ranchers did not use credit, which raised the question of whether those farmers may still be underserved, the economic study stated.
“Interest-paid is an indicator of who is using agricultural credit,” Ahrendsen said. “It’s difficult to know access. We don’t know who is being denied credit. But we are seeing that non-Hispanic white males have the highest share of beginning operations with interest paid, followed by Asian farmers. The least likely to be reporting interest paid are Black or African American farmers.”
Closer examination of why debt use varies across the country and why non-socially disadvantaged farmers and ranchers utilize more than socially disadvantaged farmers/ranchers is an important topic for future research, the study stated.
The study was supported, in part, by the USDA National Institute of Food and Agriculture, Hatch/Multistate project, and The Farm Credit Council. Opinions, findings, conclusions, or recommendations are those of the authors and do not necessarily reflect the view of the USDA, the Farm Credit Council or the University of Arkansas System.