NSAC's Blog

Release: FSA Financing Options Improving for Produce Farmers

July 22, 2015

Washington, DC, July 22, 2015 – For fruit and vegetable growers, especially operators of small and mid-scale family farms, packing and storage sheds serve as critical pieces of their farm operations, allowing fresh produce to be safely washed, sorted, graded, labeled, boxed up, and stored before it heads to market. In an effort to better serve producers like these, especially those selling to local and regional markets, the U.S. Department of Agriculture’s (USDA) Farm Service Agency (FSA), recently issued national guidance to increase coordination, outreach, and usage of Farm Storage Facility Loans (FSFLs) in conjunction with FSA Microloans.

In a notice sent to all state FSA offices on July 17th, Acting Deputy Administrator for Farm Loan Programs James Radintz directed all FSA state and local loan program staff to learn how to use FSFL and direct microloans in combined financing packages and to inform farmers, banks, and other farm lending institutions about the availability of FSFLs and microloans.

“We applaud the Farm Service Agency for taking steps to ensure that its staff are trained in and coordinate the use of farm storage facility loans and FSA microloans, in order to better serve farmers across the country, especially those selling to local and regional food markets,” said Juli Obudzinski, Senior Policy Specialist with NSAC. “This national guidance is a critical first step to make sure that state and local FSA staff are not only knowledgeable about both loan programs, but also understand how the two can work together to provide farmers the financing they need to build or expand on-farm storage and packing facilities.”

The directive not only helps to enhance these programs for local and regional food producers but especially helps beginning farmers looking to enter this expanding market. Over the past several months, NSAC has been urging the agency to take steps to better coordinate FSFLs with other FSA financing options like Microloans and other Direct Operating Loans.

The Farm Storage Facility Loan program, which was expanded to serve produce farmers and finance cold storage facilities for the first time in the 2008 Farm Bill, provides low-interest loans for farmers to build cold storage units or to upgrade and expand existing storage facilities.

Changes introduced by FSA in 2014 extended the program to also finance many aspects of produce packing sheds. The National Sustainable Agriculture Coalition (NSAC) worked closely with NSAC member group the National Young Farmers Coalition to help create the changes to the FSFLs. 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 FSFLs to finance the construction of a 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 can be found in NSAC’s Grassroots Guide to Federal Farm and Food Programs.

The Microloan program was launched in early 2013 to provide small farms with loans of up to $50,000 to cover purchases such as seeds, animals, and small equipment. Featuring a simplified and streamlined application process, the microloan program better meets the credit needs of small farms of all types, including beginning farmers and those serving local and regional food markets, including urban farmers. NSAC worked with NSAC member groups the National Young Farmers Coalition and California Farmlink to help develop the program and get it authorized as part of the 2014 Farm Bill. In FY 2014 there was a 45 percent jump in microloans over its inaugural year. FSA recently made its 13,000th microloan in the program’s brief history.

FSA’s farm loan programs, including microloans, operate separately from FSFLs and are often administered by different FSA staff. FSFLs are part of the commodity program division of FSA, while operating loans are within the agency’s loan making division.

“Combining the two low-interest loan programs will allow farmers to finance the full array of buildings and equipment they may require for cooling, packing, and transport,” said Obudzinski. “Ideally, 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 FSA loan programs fills an important gap.”

As Food Safety Modernization Act (FSMA) regulations become finalized in the coming months, FSFL and microloans will become especially important as farmers take steps toward compliance, upgrading or even replacing or purchasing new packing and cold storage facilities. Coordination between USDA and the Food and Drug Administration (FDA) will be essential to making sure that farmers know not only about the new FSMA regulations but about their financing options for these facilities.

“From access to credit to compliance with food safety regulations, produce farmers, in particular operators of smaller scale farms, face many challenges. But with these recent improvements to farm loan programs, NSAC looks forward to seeing some of those challenges addressed and will work hard to get the word out about these opportunities,” said Obudzinski.



Categories: Beginning and Minority Farmers, Commodity, Crop Insurance & Credit Programs, Local & Regional Food Systems

Comments are closed.