NSAC's Blog

Improved Financing Options Available for Produce Farmers!

July 22, 2015

Most produce farmers rely on some combination of cold-storage, washing, and packing equipment to keep food fresh and safe prior to marketing. Whether selling to a regional wholesaler or trucking down to the weekend farmers’ market, the ability to safely wash, package, and store any commodity produced on-farm is a critical component of nearly every fruit and vegetable farm.

That’s why NSAC is excited about a recent announcement made this week by the U.S. Department of Agriculture to improve federal financing options available for cold storage and handling facilities and equipment. With new food safety regulations coming down the pike later this year, farmers across the country are bracing themselves for key changes they will be required to make to their farms, especially if they grow fruit and vegetables.

An apple packing shed in Maine. Credit: NSAC

An apple packing shed in Maine. Credit: NSAC

What Are Farm Storage Facility Loans?

The Farm Service Agency’s (FSA) Farm Storage Facility Loan (FSFL) program provides low-interest loans for farmers to build or upgrade permanent facilities to store commodities, primarily grains and oilseeds, but also including fruit and vegetable cold-storage, washing, packing, and handling buildings and equipment. For a complete list of eligible commodities and uses, check out our Grassroots Guide.

Last year, NSAC applauded when USDA announced several changes to the program to provide the flexibility necessary to allow diversified fruit and vegetable producers to more fully take advantage of this program. These changes included a process for waiving the acreage reporting and crop insurance requirements for highly diversified operations, like Community Supported Agriculture (CSAs), and expanding the program to also cover packing sheds and non-movable handling equipment. Check out our blog post from last year that highlights these changes in more detail.

And while these changes have made it easier for diversified farmers — especially those serving local and regional markets — to secure low-interest financing for their cold storage and packing needs, the announcement made this week will ensure that produce farmers have improved access to all of USDA’s loan programs and are better able to finance equipment that is not covered under the FSFL program.

For example, a farmer can obtain a FSFL to finance the construction of a new cold storage building or a pre-fabricated cooler, but cannot use the loan to purchase a refrigerated truck needed to transport produce to market. Likewise, a farmer can obtain a FSFL to purchase boxing equipment, tanks, conveyers, washers, and weight graders, but cannot use the loan to purchase portable equipment, scales, or used equipment, or to supply the packaging and shipping containers. For a complete list of allowed equipment under the FSFL program, check out our Grassroots Guide.

Washing and packing is a critical step for produce farmers. Photo Credit: USDA

Washing and packing is a critical step for produce farmers. Photo Credit: USDA

Improving Coordination and Outreach

In addition to Farm Storage Facility Loans, FSA offers a suite of farm loan options that may be better suited to meet some of the storage, packing and handling needs of diversified growers. FSA’s Microloan program, for example, provides small loans up to $50,000 to help farmers cover annual operating costs associated with their farms, including many items related to storage, packing and shipping. FSA can also offer larger Direct Operating Loans up to $300,000. While microloans, in combination with FSFLs, should be sufficient for most needs, there may be cases such as refrigerated vehicles, that require the large operating loan option.

NSAC has been urging the agency to take steps to better coordinate FSFL with other FSA financing options like Microloans and other Direct Operating Loans, which have similar low interest rates and loans terms. Ideally, the FSFL rules should be expanded to better cover the full array of cold storage, packing shed, and mobile equipment needs of fruit and vegetable operations, but until such time, the coordination between the two different FSA loan programs fills an important gap.

A recent notice delivered to all FSA state and local offices directs FSA offices to:

“leverage all resources, knowledge, skills, and experiences of farm program and farm loan staff to promote FSFL’s and direct microloans to assist local producers with meeting their needs in commodity storage and equipment.” FSA Farm Loan Program Notice – 721, June 17, 2015

FSFL is run as a separate program and is often administered by different FSA agents than the loan officers that manage FSA’s other farm loans. This national guidance is a critical first step to make sure that state and local FSA staff are aware of the possibilities of using both programs in tandem and promoting both to farmers who are looking for financing for their farm storage and packing needs.

For example:

“To assist a grower to enhance their capability to store and market produce, a FSFL can be used for a cold storage facility and a vegetable packing line can be financed with a microloan.” FSA Farm Loan Program Notice – 721, June 17, 2015

The Notice goes on to say that while there may be a tendency within the FSA farm loan programs to not involve FSFL’s for simplicity’s sake,

“FSFL’s have unique features and benefits that can be advantageous in certain situations. FSA staff should always be aware of how program features benefit producers and ensure that producers are fully informed of ways that FSA programs can be used together to obtain the capital they need.” FSA Farm Loan Program Notice – 721, June 17, 2015

NSAC appreciates FSA’s enhanced efforts to make these programs work for local and regional food producers and we will be working with our national network of grassroots organizations to get the word out to farmers about this opportunity to take advantage of the variety of loan programs that FSA offers.

Categories: Commodity, Crop Insurance & Credit Programs, Local & Regional Food Systems

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