Understanding Beginning Farmer and Rancher Credit Usage by Socially Disadvantaged Status
As farms become larger and more complex, it has become more difficult for aspiring farmers with fewer resources to establish their business and operations. A recent Arkansas study looked at interest paid on agricultural loans to gauge potential gaps in serving beginning farmers and ranchers. Researchers found that while white male-operated farms remained the largest demographic segment of established and beginning farmers — and the largest user of agricultural credit — there was a growing number of minority farmers who used federal credit programs. These results provide a better understanding of how socially disadvantaged beginning farmer and rancher groups are using federal credit programs and can assist policy makers in promoting beginning farmer and rancher success.
The Problem
Against a backdrop of an overall decrease in the number of farm operations in the U.S. between 2012 and 2017, beginning farmers and ranchers have a difficult time getting established, especially as farming operations have become more industrialized. With fewer financial resources, beginning farmers and ranchers are expected to face greater challenges, and those coming from historically underserved groups like women and racial or ethnic minorities are expected to face greater challenges still.
Understanding the importance of debt as a capital source and the U.S. Department of Agriculture’s role in farm credit markets is key to developing policies that support farm production in the U.S. Research is needed to gauge lender success and find gaps in serving beginning farmers and ranchers — especially those from historically underserved groups.
The Work
Researchers with the University of Arkansas System Division of Agriculture and the U.S. Department of Agriculture analyzed and interpreted USDA Census of Agriculture and Farm Service Agency administrative data on direct and guaranteed loan programs to estimate the number of beginning farmer and rancher operations. In this case, The USDA defines a “beginning farmer or rancher” as someone with no more than 10 cumulative years of experience as an operator on any farm. The study’s lead author was Bruce Ahrendsen, professor of agricultural economics and agribusiness for the Arkansas Agricultural Experiment Station, the research arm of the Division of Agriculture. Collaborating researchers included Charles B. Dodson and Gianna Short of the U.S. Department of Agriculture, along with Ronald L. Rainey and Heather A. Snell of the Division of Agriculture.
The Results
While the share of farms using agricultural credit had a slight drop between 2012 and 2017, the USDA’s Farm Service Agency federal loan programs “appeared to be crucial in enabling beginning farmers and ranchers, and especially beginning socially disadvantaged farmer and rancher groups, to access loans,” the study states.
The nation’s total number of farm operations decreased 3.2 percent between 2012 and 2017, but the Division of Agriculture study showed the number of socially disadvantaged beginning farmers and ranchers who were counted as “primary producers” went up by 10.7 percent. Average farm size did not increase as much as might be expected, researchers noted, since some farmland went for use for other purposes, such as urban development.
The Value
The study concluded that the United States might be making some progress toward the goal of making it easier for farmers to get started, especially among historically underserved groups. Without the federal credit sources, beginning farmers and ranchers could be restricted in growing their operations, the study added. The results are timely and of keen interest to researchers, industry and policymakers, the researchers noted. The results are expected to assist in developing and adjusting policies to effectively promote and improve beginning farmer and rancher success in general and for beginning socially disadvantaged beginning farmer and rancher groups.
Read the Research
Beginning farmer and rancher credit usage by socially disadvantaged status
Agricultural Finance Review
Volume 82, Issue 3 (2022)
https://doi.org/10.1108/AFR-05-2021-0060
Supported in part by
The USDA National Institute of Food and Agriculture, Hatch/Multistate project, accession number 1021035 and The Farm Credit Council.
About the Researcher
Read the Research
Beginning farmer and rancher credit usage by socially disadvantaged status
Agricultural Finance Review
Volume 82, Issue 3 (2022)
https://doi.org/10.1108/AFR-05-2021-0060
Supported in part by
The USDA National Institute of Food and Agriculture, Hatch/Multistate project, accession number 1021035 and The Farm Credit Council.
Bruce Ahrendsen
Professor
Ph.D., Economics, North Carolina State University
M.S., Economics, North Carolina State University
B.S. Agricultural Business, Iowa State University
Ronald L. Rainey
Professor and Assistant Vice President, University of Arkansas System Division of Agriculture
Ph.D., Economics, University of Arkansas, Fayetteville
M.S., Agricultural Economics, University of Arkansas, Fayetteville
B.S., Agricultural Business, University of Arkansas, Fayetteville