Conservation Loans


Program Basics

The 2008 Farm Bill creates a newly revised loan authority for USDA’s Farm Service Agency (FSA) to provide direct or guaranteed conservation loans to qualified borrowers.  The program is pending a rulemaking, expected to be issued in 2010.

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:

  • Installation of conservation structures or water conservation systems;
  • Establishment of forest cover;
  • Establishment of permanent pasture;
  • Conservation practices needed to comply with highly erodible land “compliance” requirements, and

Conservation buffer practices such as:

  • Grassed waterways
  • Shelterbelts
  • Windbreaks
  • Riparian buffers and filterstrips
  • Living snow fences, and other similar vegetative practices.

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 FSA can guarantee no more than 75 percent of the principal amount of the loan, lower than the normal rate.  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.

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.  Congress provided an appropriation of $75 million each for conservation direct loans and conservation guaranteed loans in FY 2010, and is likely to continue that appropriation into future years.

Implementation Basics

The Conservation Loan program will be part of rulemaking the FSA is expected to issue in 2010.  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.

Additional Resources

The Conservation Loans program is administered by the Farm Service Agency. Information about the program will be posted on the FSA website under Farm Loan Programs.

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 this website.