Individual Development Accounts


Helping beginning farmers and ranchers finance their agricultural endeavors

For most farmers, turning a farm dream into a farm reality requires a lot of up-front cash. And for farmers of limited means who have little access to savings or credit, it may seem impossible to find ways to afford a down payment on a piece of land, or purchase a used tractor to till their fields, or initial breeding stock to grow their livestock herd. The Beginning Farmer and Rancher Individual Development Account (IDA) program was designed to help these farmers of limited means finance their agricultural dreams through business and financial training and matched savings accounts.

Learn More About beginning farmer IDAs!

 

Program Basics
The Beginning Farmer and Rancher Individual Development Accounts (IDA) Pilot Program is designed to help beginning farmers and ranchers of limited means finance their agricultural endeavors through business and financial education and matched savings accounts. In a matched savings account program, for every contribution the farmer makes, the federal government (through a local partner) ‘matches’ that amount, effectively doubling (or tripling) its value. See “How to Apply” below for more details.

The 2014 Farm Bill reauthorizes this program and directs USDA to establish pilot projects in at least 15 states. Selection of the IDA organization or agency within a state will be chosen on a competitive basis. The program must receive a congressional appropriation before it can launch. Once that happens, the pilot project states will be selected.

Although the program has not yet received any federal funding, once it is up and running, this new credit program will promote a new generation of farmers and ranchers by helping those of modest means to establish the cash savings needed to start a farm. Ultimately, the savings earned through an IDA can be used as part of a down payment on farmland or to purchase breeding stock, farm equipment, or other productive assets.

Eligibility

Eligible beginning farmers or ranchers are those who do not have significant financial resources or assets and have an income less than 80 percent of the median income of the state in which they live, or 200 percent of the most recent annual Federal Poverty Income guidelines. An eligible beginning farmer or rancher must also agree to complete a financial training program. Once the IDA program receives federal funding, farmers in states selected for the pilot program will be eligible to apply to participate through a local organization (see below).

Any non-profit organization or tribal, local, or state government or collaborations thereof can submit an application to USDA to receive a grant once this program receives funding. The selected groups will establish and administer the IDAs and are also responsible for providing access to business and financial education for farmer participants.

The Program in Action

Although the Beginning Farmer and Rancher IDA program has not yet received federal funding, there are several organizations across the country who have already established pilot projects, and who have served as a model for the scaled-up federal initiative.

In California, California FarmLink has administered an agriculture IDA program since the early 2000s and has helped many farmers across the state improve their financial and business knowledge and purchase much needed assets for their farm. One farmer who participated in the IDA program used the $4,800 in matched savings to purchase a better tractor, a huge improvement over his former antique tractor, helping lead to a period of sustained growth on his farm. The tractor made his operations more efficient, and he credits the IDA program with helping him get to the point where he could hire more labor for his farm and integrate additional direct marketing channels into his business plan.

In Vermont, the University of Vermont Extension has raised sufficient funding from the state and local community to start an agricultural IDA program targeted at young farmers under the age of 21. One farmer who participated in the program grew up on a family farm, and had already established his own beef and hog operation by the time he reached his early teens. In order to gain some more business management education, as well as a way to access much needed capital, he entered into the Vermont Youth Ag IDA Program. Since completing the program, this young farmer has a completed business plan in hand and is ready to purchase a hay bale wrapper, which will enhance his farm’s long-term viability. Keeping his family farmland in use, he is well on his way to joining the next generation of Vermont farmers.

Read more about how IDA programs have helped grow new farmers:

How to Apply and Program Resources

Once funded, USDA’s Farm Service Agency will likely issue a Request for Applications (RFA) soliciting project proposals from non-profit organizations interested in establishing or expanding upon an existing IDA program. FSA will then review the applications and choose a number of projects in a variety of regions across the country to receive federal support for their IDA programs.

The organization or collaborations chosen to receive funding would then establish a reserve fund made up of the total amount of the IDA grant awarded to them (up to $250,000) and a non-federal match of 50 percent of that total amount awarded. The grantees can use up to 10 percent of the federal grant amount (up to $25,000) to support business assistance, financial education, account management, and general program operation costs. The local, non-federal match may be used for program expenses without limit. Interest accrued on the federal grant award can be used for matched savings or for program costs.

Once a participating organization establishes an IDA project, an eligible beginning farmer or rancher can contact that organization to set up a savings account with the participating organization and deposit a certain amount that is “matched” by that organization at a rate of at least 100 percent and up to 200 percent. For instance, if a farmer participant deposits $100 a month into the IDA, the program will match them up to $200 a month. After the two-year program period, up to $7,200 would be available for the farmer to put toward the assets he or she has been saving for. Up to $3,000 of an individual’s savings can be matched per year, so at the 2:1 rate that means there can be a total of $9,000 in annual leveraged savings.

Additional Resources:

List of Existing Agricultural IDA Programs:

Read about the latest news on beginning farmers on our blog!

Program History, Funding, and Farm Bill Changes

The beginning farmer IDA program was first authorized as a pilot program in the 2008 Farm Bill but has not yet received any funding to date through the annual appropriations process. The 2014 Farm Bill, passed in February 2014, reauthorizes the IDA program, but does not provide any direct mandatory funding to jump start the program. The 2014 Farm Bill authorizes appropriations of up to $5 million a year, but the program will commence only when Congress designates discretionary funding for it in the annual agriculture appropriations bill. USDA has requested funding for the program as part of their proposed budget sent to Congress.

IDA Authorizing Language: Section 5301 of the Agricultural Act of 2014 amends Subtitle D of the Consolidated Farm and Rural Development Act of 1972 by adding a new Section 333b, to be codified at 7 U.S.C. Section 1983b.