NSAC's Blog

High Demand for Farm Loans in 2015 with Even Greater Demand on Horizon for 2016

November 13, 2015

Just like any small business, starting and running a farm is no small feat, and can be quite expensive. Everything from purchasing or leasing land to farm, seeds, equipment, and breeding stock, add up. Often, the timing of farm expenses required at the beginning of a growing season don’t line up perfectly with when revenue or sales are generated, which typically occurs later in the growing season.

That’s why access to credit remains one of the most important resources for farmers of all kinds, especially those just starting out or early in their farming careers. However, starting a farm, just like any other small business, is a risky venture for anyone considering financing the operation, and many commercial lenders are hesitant to provide loans to new farmers.

Fortunately, USDA’s Farm Service Agency (FSA) has been providing crucial farm loans and resources to beginning farmers and ranchers that otherwise may find it difficult to secure lending through a private lender for decades.

With the close of fiscal year (FY) 2015, NSAC is taking a closer look at FSA loan programs and how well these programs are serving beginning farmers as well as farmers of color, veterans and female operators.


In total, FSA provided over 37,000 farm loans to farmers in FY 2015 (running from September of 2014 to September 2015) throughout the U.S. This total is slightly higher than last year, and includes operating, ownership (real estate), and emergency loans for both those loans made and/or guaranteed by FSA.

In FY 2015, FSA used the entire Direct Operating Loan (DOL) appropriation of $1.252 billion but fell short on the Direct Farm Ownership (DFO) Loan appropriation, using just over $1 billion of the $1.5 billion available. Even so, this represents a record high in the total dollar amount spent on DFO loans.

There was a significant increase in both the number and amount of Guaranteed Operating Loans (GOL) provided to farmers, which are loans made by private banks to finance a farmer’s annual operating expenses. From FY14 to FY15, the total dollar amount for GOL increased by 37 percent to over $1.3 billion, and the number of loans increased by 17 percent to 4,835 loans. The average GOL loan was $282,410, which is 17 percent higher than the average loan made last year.

Across the board, in FY15, FSA made more loans, provided and guaranteed more total financing, and made larger loans on average compared with 2014.

The top state making or guaranteeing the most number of total loans was Oklahoma with over 2,500 loans, followed by Texas, Iowa, Nebraska, Wisconsin, Kentucky, Minnesota, Kansas, Missouri, and South Dakota. In terms of total loan funding made available in FY15, Wisconsin leads the nation with nearly $400 million in loan capital provided to local farmers.

Loans to Beginning Farmers

In FY15, FSA invested more than $2.5 billion, or over 45 percent of total loan funding, to provide over 20,000 loans to beginning farmers and ranchers. This represents over 54 percent of the total number of loans that FSA made or guaranteed in FY15.

By law, 50 percent of DOL funds and 40 percent of GOL funds are targeted to beginning farmers. The target was well exceeded in the case of direct loans, at 64 percent of the total, but fell well short – as has been true historically – on the guaranteed loan target, coming in at only 27 percent.

The law for farm ownership loans targets 75 percent of DFO funds and 40 percent of GFO funds to beginning farmers. The agency came quite close to the target for DFOs at 71 percent of loan funds, but again fell considerably short on the guaranteed side at just 32 percent.

Nonetheless, guaranteed loans to beginning farmers saw an uptick in usage this year, with both operating and real estate loans rising. The most significant change between FY14 and FY15 was the 24 percent increase in the total dollar amount to GOLs provided to beginning farmers. There was less significant, but still noteworthy increase in GFO loans, with the average real estate loan coming in at $382,407, which is slightly lower than those made to more established farmers.

Beginning farmers continue to rely on direct loans significantly more than guaranteed loans, with direct loans to beginning farmers (both operating and farm ownership) totaling over $1.5 billion and guaranteed loans to beginning farmers totaling over $1 billion.

The states making the most loans to beginning farmers follow the same trends noted previously for all loans made or guaranteed by FSA in FY15. Oklahoma tops the list, making over 1,459 loans totaling over $161 million to support beginning farmers build their operations. Iowa, Nebraska, and Texas follow closely behind, each making over 1,000 beginning farmer loans last year.

Loans to Socially Disadvantaged Farmers

In total, FSA provided more than 9,000 loans totaling $827 million to socially disadvantaged farmers across the nation, which include loans made or guaranteed to minority, tribal, and women farmers.

The total dollar amount of loans provided to socially disadvantaged farmers and ranchers increased by $68 million between FY14 and FY15, representing 14 percent of the total funding made available through FSA farm loan programs. In particular, 23 percent more money was provided to socially disadvantaged farmers through GOL loans in FY15 than FY14 and 19 percent more through DFO loans.

The number of loans to these farmers also increased in FY15. FSA made or guaranteed 684 more loans to minority, tribal, and women farmers in FY15 compared with FY14.

Oklahoma, with its large population of tribal producers, made the most number of loans to socially disadvantaged farmers in FY15. This includes over 400 direct farm ownership loans to farmers and ranchers across the state to purchase land. Other top states include Texas, Kentucky, and Louisiana.

Similar to beginning farmers and ranchers, socially disadvantaged farmers and ranchers rely more heavily on FSA direct loans than guaranteed loans. The number of direct loans to socially disadvantaged farmers was nine times the number of guaranteed loans; in addition, over $100 million more was spent on direct loans than guaranteed loans.

Down Payment Loans

Down Payment loans, specialized DFOs designed to assist new and beginning farmers purchase farmland, are slated by law with a target rate of 75 percent of the 75 percent of DFO funds targeted to beginning farmers, or, in other words, 50 percent of total DFO funding. In 2015, FSA was able to provide over 50 percent of funding for beginning farmers to Down Payment loans, but that represented only 37 percent of total DFO funding. Since the beginning of the program, the Down Payment approach has assisted over 10,000 new farmers. We will do a more in depth look at Down Payment loans once we see additional data from the agency.


The 6,596 Microloans that FSA provided to farmers in FY15 totaled over $161 million, representing nearly 13 percent of total operating loans made by FSA for the year. The average microloan was $24,462, an increase of nearly $5,000 from FY14.

Microloans represent a larger percentage of all DOL loans this year than in FY14, from 22.5 percent to 29 percent.

The amount of microloan money going to beginning farmers increased by 59 percent, from $68 million in FY14 to $115 million in FY15. The percentage of microloan money going to beginning farmers remained the same at 71 percent.

As we noted in our analysis of the Microloan program in FY14, the states with the most microloan activity—both in terms of the number of microloans and the total dollar amount—are located in Appalachia and the Delta region and other southern locations. Kentucky remains the number one state making the most number of microloans and Texas, again, is a close second.

What’s Next?  Will Congress Provide Sufficient Loan Funds in Time for 2016 Season?

As this year’s growing season comes to a close, farmers across the country are beginning to start planning for next year’s crop, and budgeting for next year’s expenses. Ensuring that farmers continue to have access to the loan funds they need to sustain and build their farm operations is absolutely critical.

Without a final budget deal that will determine funding levels for next year, the future of FSA loan funding is uncertain. We are hopeful that Congress will be able to come to an agreement over total government spending for FY 2016, and that additional funds will become available for FSA farm loan programs that witnesses an especially high demand in recent years. Demand for ownership loans will remain high, and demand for operating loans, both direct and guaranteed, will rise as crop, livestock, and dairy prices remain soft.

Stay tuned to our blog for more updates on any future budget deal and what that means of for sustainable agriculture.

Categories: Beginning and Minority Farmers, Commodity, Crop Insurance & Credit Programs

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