Executive Summary

July 2015

Term limits, which impose a statutory maximum on the number of years a farmer may receive a 

Farm Service Agency (FSA) direct operating loan (DOL), do not appear to have had a major 

impact on FSA borrowers in the past two decades. A vibrant farm economy, together with ample 

credit availability, has combined to enable farmers to be more reliant on commercial credit 

sources and less reliant on FSA. Some groups, however, are more likely to be adversely affected 

by term limits. Given current farm income expectations, crop farms using 1-year DOLs, midsize family farms, and those in more economically depressed regions appeared to be more 

vulnerable to term limits. 

FSA may obligate DOL funds to an eligible farmer in 6 calendar years before the term limit is 

reached. The years need not be consecutive, and multiple loans received during a year count 

only against 1 year of eligibility. The enforcement of term limits is waived for beginning

farmers through their 10th year of farming. Waivers for 2 years are also provided, on a case-bycase basis, provided borrowers continue to meet all other eligibility criteria. Youth loans and 

microloans to beginning farmers and veterans are exempt and do not count against the limitation.

Key findings include, as follows:

Less than 1 Percent of DOL Borrowers Reach Term Limits Each Year—On average, about 

400 borrowers reach term limits each year, representing less than 1 percent of all borrowers with 

outstanding DOL indebtedness. Since legislation mandating term limits was passed in 1992, the 

total number of borrowers who had reached term limits through December 31, 2014, was 5,639. 

Most borrowers have received DOL loan funds in only 1 or 2 years, likely reflecting the strength 

of the farm economy and the ample availability of commercial credit at reasonable rates and 

terms. 

Changing Farm Economic Conditions Likely to Influence DOL Demand—Given projections 

for a weaker farm economy, the number of farmers reaching term limits is likely to increase in 

upcoming years. Expectations for tighter farm profit margins and lower farmland values will 

likely cause lenders to exercise more discretion, which would reduce credit availability and raise

the demand for DOLs. Meanwhile, working capital constraints could lead farmers to rely more 

heavily on credit to finance annual production expenditures. These factors, when taken together, 

could reduce existing DOL borrowers’ ability to improve their financial status and graduate to 

private lending. 

Relative to Other Direct Borrowers, Farms Reaching Term Limits Are Not Necessarily Less 

Financially Sound—Borrowers reaching term limits through 2012 were less solvent than other 

direct borrowers, but that has not been true in more recent years. Also, there has been little 

discernable difference in profitability and debt coverage capacity between term-limited and other 

direct borrowers. Farms reaching term limits have tended to be larger in terms of annual sales 

than the average DOL borrower and are located in the Northeast, Lake States, or Northern Plains. 

There is no indication that borrowers either were forced into liquidation or reduced their scale of 

operation subsequent to reaching term limits.
2

Most Term-Limited Borrowers Would Have Difficulty Obtaining Commercial Credit— Most 

DOL borrowers who reached term limits since 2005 do not appear to be sufficiently creditworthy 

to meet commercial lender underwriting standards. It is estimated that fewer than 15 percent of 

term-limited borrowers would likely meet commercial underwriting criteria as defined by an 

FSA classification of commercial. While some term-limited borrowers could qualify for FSA 

guarantees, such an outcome is unlikely for most term-limited borrowers, given their marginal 

creditworthiness

Term Limits Are More Likely to Affect Crop Producers—Term limits are calculated based on 

the years in which loan funds are received rather than years over which the borrower maintains

an outstanding balance. Consequently, crop farmers—who often rely on annual loans to cover

expenses necessary to plant a crop—would more likely be adversely affected by term limits than

livestock producers, who more commonly use intermediate-term OLs with 7-year terms. Crop 

producers represented 36 percent of all DOL borrowers since 2005, but crop producers also 

represented 50 percent of those who have reached term limits. Among this group, grain, oilseed, 

and fiber producers represented one-fourth of all borrowers and 45 percent of those reaching 

term limits.

Most Term-Limited Borrowers Remain Active FSA Credit Customers—Farm borrowers who 

reach their term limit can still maintain an outstanding DOL balance and participate in other FSA 

credit programs. Most term-limited borrowers maintain a loan balance for several years with 

over half of those reaching term limits since enactment in 1992 still being active borrowers at 

year-end 2014. On average, only 15 percent of term-limited borrowers have managed to 

completely pay off their outstanding direct indebtedness each year. Over 8 percent received a 

direct farm ownership or emergency loan after reaching the term limit, and over 15 percent 

received an FSA-guaranteed loan. Seventeen percent had loans that were later restructured. 

Eight percent of term-limited borrowers had liquidated their operations and resolved the 

remaining FSA debt through debt settlement. Of those remaining, over 90 percent still had an 

active interest in a farm or ranch as indicated by their eligibility to vote in elections for the 2015

FSA county committee. 

Term Limits Have Limited Impacts on Targeted Groups—Over three-fourths of all DOL

obligations are targeted to beginning or socially disadvantaged (SDA) farmers. Nearly

75 percent of term-limited borrowers used their 6 years of eligibility as beginning farmers.

Because beginning farmers receive a term-limit waiver, they may continue to receive DOLs,

provided they are still deemed to be beginning farmers. And, non-beginning SDA farmers have 

represented only 10 percent of term-limited borrowers 
3

Introduction

Term limits impose a statutory limit on the number of years that a farm borrower may receive 

loan funds through programs administered by the U.S. Department of Agriculture (USDA).

Direct operating loans (DOLs) were established under Section 311(c)(2) of the Consolidated 

Farm and Rural Development Act (ConAct) for qualified farmers. Term limits of 6 years were 

initially enacted for both direct and guaranteed farm ownership (FO) and OL programs by the 

Agricultural Credit Improvement Act of 1992.

1

 Term limits have never applied to emergency 

loan (EM) borrowers. Subsequent legislation exempted direct FO and all guaranteed loan 

programs from any term-limit provisions. Microloans made to veterans and beginning farmers 

are also exempt from term limits. Also, the limitation does not apply if the borrower’s farm is 

subject to the jurisdiction of an Indian tribe. Waivers are granted in some circumstances,

enabling FSA to obligate DOL loans to borrowers for 7 or more years. Waivers are granted to 

qualified beginning farmers through their 10th year of farming. Non-beginning farmers may 

receive a 2-year waiver, provided the operation is viable, the borrower has or will complete 

financial training, and commercial credit is unavailable. 

By limiting the number of years a farmer may receive loan funds, term limits ensure FSA’s role 

as a temporary credit source. Term limits also encourage creditworthy borrowers to pursue 

commercial credit in an effort to preserve years of direct loan eligibility for use in case of a 

financial setback. As greater numbers of farm borrowers reach their term limits, there is an 

increasing concern about possible adverse impacts: Are there creditworthy, but term-limited,

borrowers who will confront less reasonable rates and credit terms, or who may be forced into

partial liquidation? Are there regions and/or production types where a notable share of termlimited borrowers may have an adverse impact? Do term limits adversely affect the 

Government’s ability to serve as a safety net to agricultural credit markets?

Borrowers are expected to transition, or graduate, to private sources of credit over time 

(Section 345 of the ConAct; 7 CFR 765.101). Farmers considered viable for commercial credit 

may be required to refinance their direct loans with a commercial lender.2Eligibility to receive 

additional direct loans requires borrowers to develop a feasible plan, which is defined as a 

business plan projecting a positive margin after debt service and a positive overall cash flow.

Borrowers unable to develop a feasible plan are ineligible for any new direct loans. 

Section 5104 of the Agricultural Act of 2014 amended Section 311 of the ConAct to require an 

annual report on term limits for direct operating loans (see Appendix 1). This study estimates

the number and location of current and past direct borrowers who have reached term limits, and 

their structural, demographic, and financial characteristics. Economic impacts on farm

borrowers who have thus far reached term limits are also examined, as well as impacts on future 

 

1

The ConAct states that an applicant is eligible for a direct operating loan if they received a DOL in 6 or fewer 

years. The regulations (7 CFR 764.252) state that an applicant is not eligible if they have closed a DOL in 7 or more 

years. In effect, a borrower has 6 full years of eligibility. Upon receipt of a loan at any time during the 7th year, they 

become ineligible for any further assistance. This report uses the terminology of 6 full years of eligibility in defining 

the duration of the term limit. 

2

 The process for evaluating a borrowers potential for graduation to commercial credit is described in Section 4 of 

4-FLP Direct Loan Servicing (http://fsaintranet.sc.egov.usda.gov/dps/services/downloadhandler.ashx?fileid=17989).
4

borrowers. The study also addresses how expected farm economic conditions may affect the 

future demand and role of FSA direct loan programs.

Status of Direct OL Program

FSA administers direct and guaranteed loan programs through 2,117 service centers. Guaranteed 

loans are made and serviced by commercial lenders, but are guaranteed by USDA. Supplying 

only 2.3 percent of overall farm debt in 2014, direct loans do not represent a major source of 

credit to agriculture (Figure 1). However, this understates their role as a safety net, as reflected 

in higher market shares during the farm financial crisis of the 1980s when FSA’s share peaked at

24.3 percent.

Also, aggregate market shares can under-represent the importance of FSA credit to targeted 

groups and economically depressed regions. In many areas of the Northeast, Appalachia, 

Southeast, and Mountain West, over 20 percent of indebted farmers have turned to FSA for 

credit since 2011 (Figure 2). FSA credit also tends to be important among targeted groups, such 

as SDAs and beginning farmers. From 1994 through 2014, the share of DOL funds going to

these targeted groups increased from 25 to 75 percent. In many southern states, a majority of 

indebted racial minority family farms have received an FSA loan in the past 5 years.

As aggregate FSA market share has declined from peaks reached during the 1980s, defaults and 

loan write-offs have likewise declined, reflecting the strength of the farm economy and changes 

in Federal credit policies and procedures. Since the mid-1990s, the share of DOL borrowers who 

were 30 days or more in default has declined from over 25 percent to 12.3 percent in 2014 

(Figure 3). Likewise, the share of DOL borrowers receiving write-offs on any direct loan has 

fallen from nearly 5 percent to less than 1.5 percent.

Despite declining aggregate market share, FSA credit programs continue to play an important

role in farm credit markets. Since 2008, both the amount of dollars lent and number of

borrowers receiving DOLs have increased. In real terms, the amount of DOL obligations in 

fiscal year 2014 was the highest since 1989 (Figure 4). While mostly due to greater loan size 

limitations and the increasing capital needs among farm businesses, this may also reflect

increasing risk in the farm sector, as well as increased marketing efforts and eased eligibility 

criteria. Also, FSA is seldom the sole credit provider and works closely with commercial lenders 

in providing joint financing to family farm operations.

DOLs have tended to be more heavily used by livestock producers, who comprised over 

60 percent of new borrowers since 2005, rather than crop producers (Figure 5). Among 

production specialties, beef farms represent the largest share, comprising 46 percent of all 

borrowers, followed by corn-soybean and dairy operations, at 12 percent each.

Farm Economic Outlook

In sharp contrast to the record farm incomes and increasing farmland values that benefited 

farmers through 2012, the current outlook is less optimistic. Net farm income in 2015 is 

expected to decline for the third consecutive year, falling 43 percent from the record level 

achieved in 2012 (USDA, ERS, 2015 Farm Sector Income Forecast). Despite recent reductions 

in farm income, the financial health of the farm sector remained strong through 2014. Farmers’
5

median household income—including non-farm income—remains at historic highs and above 

that of non-farm households (USDA ERS, 2015 Farm Sector Income Forecast). Through 2014, 

farmland values remained strong, thereby embellishing farmers’ balance sheets. From 2009 

through 2014, USDA reported farm real estate gains exceeding 20 percent in 20 States (including

the largest agricultural producing regions) (USDA NASS). Aggregate debt-asset ratios remain at 

historic lows, while U.S. farm equity is at record highs. 

In the first quarter of 2015, loan repayment rates slowed significantly, with lenders’ expectations 

for loan repayments at 10-year lows (Federal Reserve Bank of Kansas City, Ag Credit Survey). 

Likewise, requests for renewals and extensions of agricultural loans increased dramatically in the 

first quarter of 2015. In the Kansas City Federal Reserve district, lender expectations indicate 

that demand for non-real estate farm loans in 2015 will be the highest since 1980. Even so, pastdue loans at Farm Credit System and commercial banks declined to 7-year lows in 2014 (Federal 

Reserve Bank of Kansas City, Agricultural Finance Databook; Federal Farm Credit Banks 

Funding Corporation). There is no immediate indication that worsening credit conditions are 

causing lenders to curtail lending, but lenders are expressing increasing concern regarding farm 

incomes and future repayment ability. Through the first quarter of 2015, bankers were still 

indicating they were positioned to meet credit demand but were anticipating higher defaults and 

more renewals and extensions than in the past year (Federal Reserve Bank of Kansas City

Agricultural Credit Survey, Federal Reserve Bank of Chicago Agletter, and Federal Reserve 

Bank of St. Louis Agricultural Finance Monitor).

With corn and soybean prices at 5-year lows, crop farms experienced sharply lower incomes in 

2014 and are expected to continue to face tight profit margins in 2015, thereby draining available 

working capital. Dairy farms experienced relatively high incomes in 2014, but increased 

production and growing worldwide competition for dairy products have resulted in a 34-percent 

decline in milk prices since 2014. Income prospects for livestock and poultry producers remain 

strong, but higher costs for non-feed items, especially purchased livestock, will likely result in a 

greater need for working capital. All of these factors point to an increased aggregate demand for 

operating credit.

Even though farmers’ balance sheets indicate sufficient equity to fund increased working capital 

requirements, 80 percent of this equity is in real estate. Historically, farm businesses have used 

credit to access the equity in real estate to cover unexpected shortfalls. Lenders’ ability to meet 

this demand will likely be influenced by land values. Since the first quarter of 2014, lender 

surveys conducted by the Federal Reserve Banks of Kansas City, St. Louis, and Chicago have all 

reflected steady to decreasing farmland values. In corn-soybean producing regions, bankers 

reported declining land values through the first quarter of 2015. Tight margins and lower land 

values may cause lenders to exercise more discretion in dispensing credit in upcoming years, 

thereby reducing future credit availability.

Farm Business Financial Conditions

Increasing farm asset values until recently, combined with high farm incomes experienced 

through 2012, have provided farms with a high degree of financial resilience. Farm income per 

farm business in 2013 was $98,976, generating a return on assets of 3.4 percent (USDA, 

Agricultural Resource Management Survey (ARMS)). The share of farms considered financially 

vulnerable, defined as those with a debt-asset ratio greater than 40 percent and having a negative 
6

farm income, was 2.8 percent at the end of 2013. Solvency was also high, with debt-asset ratios 

at 10.6 percent and average net worth of $992,782. This net worth provides a strong cushion 

against losses. Among farms experiencing a loss in 2013, 90 percent could have withstood these 

losses for 5 or more years before equity was depleted.

Regardless of their solvency, most farms are constrained by working capital due to the mismatch 

in timing of income and expenses. In 2013, farm businesses had working capital sufficient to 

meet only half of their farm expenses (USDA, ARMS). Also, outstanding farm debt has become 

more concentrated among fewer farms that tend to be more financially stressed. While only 

2.8 percent of farms were financially vulnerable, these farms held 15 percent of total farm debt

(USDA, ARMS). Even though the average debt-asset ratio for all farms has declined, the 

average debt-asset ratio for indebted farms remains relatively high. At the end of 2013, the 

average debt-asset ratio for indebted farms was 28.6 percent, compared to 10.6 percent for all 

farms (USDA, ARMS).

Aggregate statistics also ignore the complex nature of many intergenerational farms. Over onefourth of all farm businesses have a beginning farmer present as either a primary, secondary, or 

tertiary operator. These young/beginning farmers may face significant capital constraints, 

despite the financial resilience of the overall farm business. For example, farm assets (and 

resultant net worth) may be controlled by parents or grandparents, or ownership shares may be 

diluted among numerous heirs.

Despite the overall strong financial resiliency of U.S. farm businesses, several factors—including

asset illiquidity, working capital constraints, concentration of debt among more financially

stressed farms, and the financing of intergenerational transfers—suggest farm businesses will be 

increasingly reliant on lender-supplied credit. Increased credit demand, combined with greater 

discretion by lenders, will likely increase the demand for DOLs. Likewise, these same factors 

will likely reduce farmers’ ability to improve their financial status and graduate to private 

lenders. Consequently, the number of farmers reaching term limits is likely to increase. 

Impacts of Term Limits on FSA Loan Portfolios

Since the implementation of term limits, 5,639 borrowers had hit the term limit as of December 

31, 2014.

3

 On average, about 400 borrowers reach term limits each year, comprising less than 

1 percent of all DOL borrowers (Figure 6). Most of the farmers who reach term limits remain 

active in FSA programs. Even though they are unable to utilize DOLs, term-limited borrowers 

may still use other FSA credit programs and maintain outstanding direct loan balances. Of the 

5,639 borrowers who have hit term limits, 2,931 had an outstanding direct loan balance at yearend 2014 (Table 1). This includes borrowers with an outstanding direct farm ownership (FO), 

emergency (EM), and/or DOL loan. About 6 percent of the 5,639 term-limited borrowers had 

received an FO or EM loan after reaching the OL term limit. Another 15 percent received FSA

guaranteed loans. Over 15 percent of term-limited borrowers benefited from primary loan 

servicing.

4 About 8 percent of term-limited borrowers appeared to have exited farming as 

 

3 The number of borrowers reaching term limits is based on the total number of years DOL funds were received as 

of December 31, 2014. Beginning farmers who started farming after 2004 were excluded from the total of 5,639 

term-limited borrowers.

4 Direct program borrowers who are 90 or more days in default and financially distressed are eligible to receive 

primary loan servicing under 7 CFR 766.101. Under this provision, an eligible borrower is eligible to receive loan 
7

indicated by debt settlements. Reflecting the high level of targeting, 75 percent of those reaching 

term limits were beginning farmers in the last year in which they received a DOL.5 Over 

90 percent of term-limited borrowers still had an interest in a farm or ranch as indicated by 

eligibility to vote in the elections for the 2015 FSA county committee (COC).

6

 

While there are some term-limited borrowers in all states, their presence tends to be regionally 

concentrated (Figure 7). In fact, about half were in 25 congressional districts (see Appendix 3). 

The distribution of term-limited borrowers largely reflects historical DOL usage, which has been 

greatest in the Northern Plains, Lake States, and western Corn Belt. Nearly a third of borrowers 

reaching term limits have been in the Northern Plains and Corn Belt (Table 2). Borrowers in the

upper Midwest and Northeast are relatively more likely to be close to reaching term limits than 

borrowers in other regions. For example, Northeast borrowers represent only 6.9 percent of all 

DOL borrowers, but over 10 percent of borrowers with 2 or fewer years of remaining eligibility

(Table 2). 

In 2014, half of all borrowers reaching their term-limits were beef or dairy farms (Figure 8), 

reflecting the importance of DOLs to these operator types. For example, since 2012, dairy’s 

share of borrowers reaching their term-limits has been 1.5 to 2 times their share in the total DOL 

portfolio. Livestock producers typically use DOLs with 7-year terms to cover intermediate 

expenditures such as purchases of breeding stock. Crop farmers, in contrast, often require annual 

loans to cover operating expenses. Producers of grain, oilseeds, and fiber only represented onefourth of all DOL borrowers, but 45 percent of those reaching term limits since 2005. 

Since 1993, more than two-thirds of farms have utilized FSA DOLs for 2 or fewer years (Table 

3). Nearly 45 percent of DOL recipients since 1993 have not borrowed from FSA since before 

2005. Of all 97,447 borrowers who received DOL loans since 1993, less than 5 percent had 

reached term limits by the end of 2014. Some borrowers had used over 6 full years of eligibility,

reflecting exceptions granted to beginning farmers and to microloan borrowers, and the issuance 

of waivers.

7

Characteristics of Borrowers Who Have Reached Term Limits

Most DOL borrowers who reached term limits since 2005 do not appear to be sufficiently 

creditworthy to meet commercial lender underwriting standards. Only 15 percent of termlimited borrowers had an FSA score indicating a potential for graduation to commercial lending. 

In addition, term-limited borrowers have been more highly indebted than other FSA borrowers. 

FSA’s Farm Business Plan data indicate that the average debt-asset ratios for term-limited 

 

consolidation, rescheduling, re-amortization, interest rate reduction, deferral, write-down, or any combination of 

these actions. A borrower qualifying for primary loan servicing is entitled to receive these restructuring provisions 

on all outstanding direct FO, OL, and EM loans.

5 Term limits do not apply to youth loans or DOL microloans made to beginning farmers and/or veterans. While 

term limits apply to all other regular DOLs, beginning farmers receive a waiver on their enforcement. Thus, 

beginning farmers may continue to receive a DOL past the 6-year limit as long as they continue to meet the 

eligibility criteria for beginning farmers.

6

 Eligible voters in FSA county committee elections include individuals of legal voting age who have an interest in 

a farming operation that participates or cooperates in any FSA program. 

7 A borrower may receive a one-time waiver of term limits for up to 2 years provided the borrower has completed 

borrower financial training and has a feasible plan. The borrower must also be unable to obtain credit from a 

commercial lender.
8

borrowers exceeded 50 percent, and a third had debt-asset ratios exceeding 70 percent. The 

aggregate debt-asset ratio for all U.S. farms was 11 percent.

8

 Farm Business Plan data also

indicate that less than a third had positive working capital at the time they reached their term 

limits. 

It was not readily apparent in recent years, however, that term-limited borrowers were any less 

creditworthy than all other direct borrowers. While the debt-asset ratio for term-limited 

borrowers was noticeably greater from 2005 to 2010, the difference in solvency had diminished

in succeeding years (Table 4). By 2014, the debt-to-asset ratio of term-limited borrowers was 

actually lower than that for other FSA borrowers. Also, the overall FSA score, which reflects 

debt coverage and liquidity in addition to solvency, indicated that term-limited borrowers since 

2007 were, overall, more financially sound than all other borrowers (Table 5).

9

Likewise,

profitability—as reflected in return on assets—has been greater for term-limited borrowers,

while debt coverage capacity has been comparable to all other direct borrowers. 

Term-limited borrowers tend to operate larger farms with larger dollar amounts of total assets 

and production. Since 2011, term-limited borrowers have averaged about $300,000 in gross 

revenue compared to under $200,000 for all direct borrowers (Table 5). This suggests that farm 

size may be a key determinant of whether a farm is more likely to rely on FSA as a regular credit 

source. A farm that meets FSA farm eligibility criteria and averages $300,000 in gross revenue 

would likely be considered a mid-size family farm. While these mid-size family farms may be 

more profitable than the average FSA direct borrower, they also require more labor and 

management, leaving less time for off-farm income. This is reflected in a lower average nonfarm income for term-limited borrowers relative to all other borrowers since 2006 (Table 5). 

Non-farm expenses also tended to be higher, resulting in the household putting an additional 

drain on farm working capital.

Despite these obstacles, there is no indication that those who reached term limits were forced to 

downsize their operations. Among those who remained in FSA’s portfolio for up to 6 years after 

reaching term limits, there was little change in their annual sales, after adjusting for commodity 

price changes (Table 6). Among dairies, herd size did not change for those borrowers who 

reached term limits. Also, the average FSA score for term-limited borrowers remaining in FSA’s 

portfolio after reaching term limits did not indicate any notable change in financial condition. 

For term-limited borrowers remaining in the portfolio for 6 years after reaching the term limit, 

the average FSA score only increased slightly, from 2.2 to 2.3.

 

8

The Farm Business Plan is a Web-based application used by FSA to assist borrowers with obtaining loans and 

improving their farming business. A completed Farm Business Plan provides the business’s financial condition, 

operating plans, and financial summaries. 

9

The FSA score is a borrower account classification used to determine borrowers’ eligibility for graduation. The 

score is completed using the most current balance sheet and income/expense statements available. It is a weighted 

index of the current ratio, debt-asset ratio, return on assets, and term debt coverage ratio. The score can range from 

1 to 4, with 1 being most creditworthy and 4 being the least creditworthy (see paragraph 252 of FSA Handbook 1-

FLP).

.
9

Characteristics of Active Borrowers by Remaining Years of DOL Eligibility

Active borrowers, defined as those with outstanding FSA direct loan indebtedness, are by 

definition the most vulnerable to term limits. For example, 4,081 active borrowers (2,529 + 

1,552)—about 9 percent of current OL borrowers—had either reached term limits or had only 

1 more year remaining (Table 7). Over one-fourth are located in just 4 States: Kentucky, 

Nebraska, Texas, and Iowa. Regions that are most dependent on FSA direct programs, such as 

New England, the Mountain States, and West Virginia, do not represent a large share of all termlimited borrowers. But, term-limited borrowers in these States may represent a large share of

direct borrowers. For example, 18 percent of all DOL borrowers in Maine have 1 or no years of 

eligibility remaining.

As a group, SDAs are slightly less represented among active term-limited borrowers. Racial 

minorities comprised 11 percent of all DOL borrowers, but only 8.2 percent of current DOL 

borrowers with 1 or fewer years of eligibility (Table 8). Hispanics represented 4.6 percent of all 

borrowers, but only 2.5 percent of all borrowers with 1 or fewer years of eligibility. Women 

represented 17.1 percent of all borrowers, but only 6.1 percent of those with 1 or fewer years of 

eligibility remaining. 

Many active borrowers facing term limits have credit shortfalls that could hamper their ability to 

obtain commercial credit. Default rates were greater than average for those borrowers with less 

than 1 year of DOL eligibility remaining. The default rate for active borrowers with less than 1 

year of eligibility was 15.9 percent compared to 13.6 percent for all active DOL borrowers

(Table 9—see “Amount Delinquent” section). Over 16 percent of active borrowers with less 

than 1 year of eligibility remaining had FSA scores less than 2 (standard), which would suggests

the presence of a credit shortcoming restricting their ability to obtain loans through a 

commercial lender (Table 9—see “FSA Classification Score” section) .

Borrowers with greater amounts of DOL indebtedness are more likely to reach term limits. 

While borrowers with less than $100,000 in outstanding DOL loans represent 60 percent of all 

borrowers, they are less than one-third of borrowers who have either reached or will reach term 

limits the next year they receive a DOL (Table 9—see “Total Indebtedness” section). In 

contrast, borrowers with over $100,000 in indebtedness represented two-thirds of borrowers 

either reaching or near term limits. This outcome is consistent with historical trends, which 

indicate that mid-size family farm operations are more likely to reach term limits.

Given current farm income expectations, a large share of the 4,081 active borrowers with 1 or 

fewer years of eligibility remaining will likely be adversely impacted by term limits. FSA 

classification scores would suggest that 15 percent could obtain credit on their own merits. 

While some could qualify for FSA guarantees, such an outcome is unlikely for those borrowers 

with FSA classifications of acceptable or marginal, which represent half of those facing term 

limits.

Recommendations

While term limits do not currently appear to be having any notable impacts on the DOL 

portfolio, there are concerns for future years. Expectations for lower farm incomes and a greater 

probability of falling land values are likely to result in greater dependence on DOLs as a credit 
10

source. In turn, the number of borrowers affected by term limits is likely to increase. Given that 

term-limited borrowers have historically not met commercial lenders’ credit standards, any 

borrowers reaching their term limits will likely be adversely impacted. Thus, it would be 

prudent to continue to monitor the number and characteristics of DOL borrowers by years of 

eligibility used.

List of References and Suggested Readings

Bosworth, B.P., A.S. Carron, and E.H. Rhyne. The Economics of Federal Credit Programs, 

Washington, D.C.: The Brookings Institute (1987).

Collender, R. N. and S. R. Koenig. “The Role of Federal Credit Programs” in Financing 

Agriculture into the Twenty-first Century, Duncan, M. and Stam, J., editors, Westview Press, 

Boulder CO (1998), pp. 135-162.

Executive Office of the President, Office of Management and Budget. Analytical Perspectives, 

Budget of the United States Government, Fiscal 2015 (February 2014).

Federal Farm Credit Banks Funding Corporation, 2014 Annual Information Statement of the 

Farm Credit System, (March 24, 2015) (accessed May 21, 2015).

Federal Reserve Bank of Chicago, Agletter, Number 1968, May 2015,

(https://www.chicagofed.org/publications/agletter/index), accessed May 18, 2015.

Federal Reserve Bank of Kansas City, Ag Credit Survey: 1st Quarter 2015,

(https://www.kansascityfed.org/en/research/indicatorsdata/agcreditsurvey/articles/2015/05-15-

2015/ag-credit-conditions-weaken), accessed May 18, 2015.

Federal Reserve Bank of Kansas City, Agricultural Finance Databook 1st Quarter 2015, 

(https://www.kansascityfed.org/research/indicatorsdata/agfinancedatabook/articles/2015/04-23-

2015/ag-finance-dbk-04-23-2015), accessed May 18, 2015.

Federal Reserve Bank of St. Louis, Agricultural Finance Monitor, 1

st Quarter 2015,

(http://research.stlouisfed.org/publications/afm/), accessed May 18, 2015.

Nwoha, J., et al. Farm Service Agency Direct Loan Program Effectiveness Study, Arkansas 

Agricultural Experiment Station Research Report No. 977, Division of Agriculture, University of 

Arkansas System, Fayetteville (December 2005).

U.S. Department of Agriculture. FSA Handbook: Farm Loan Program General Program 

Administration. 1-FLP, Farm Service Agency, Washington, D.C. (2014).

U.S. Department of Agriculture. Land Values and Cash Rents, 2014 Summary, National 

Agricultural Statistics Service, Sp (04), (August 2014).

U.S. Department of Agriculture, Economic Research Service and National Agricultural Statistics 

Service. Agricultural Resource Management Study (ARMS), 2013, Version 1.
11

U.S. Department of Agriculture, Economic Research Service, Credit in Rural America, AER749, (1997).

U.S. Department of Agriculture, Economic Research Service, 2015 Farm Sector Income 

Forecast, (http://www.ers.usda.gov/topics/farm-economy/farm-sector-income-finances/2015-

farm-sector-income-forecast.aspx), accessed May 18, 2015.

U.S. Department of Agriculture, Farm Service Agency, Economic and Policy 

Staff, Report to Congress: Evaluating the Relative Cost Effectiveness of the Farm Service 

Agency’s Farm Loan Programs, August 2006.

U.S. Department of Agriculture, National Agricultural Statistics Service (NASS). 2012 Census 

of Agriculture, United States Summary and State Data, Vol.1, Geographic Area Series, June 

2014.
12

Table 1. Number of Direct OL Borrowers Reaching Term Limits

Item

With Outstanding 

Direct Loans 

(12/31/14)1

No Outstanding 

Direct Loans 

(12/31/14)

--- Number of Borrowers ---

Reaching DOL Term Limit 2,931 2,708

With Outstanding DOL Balance 2,529 0

Received FSA Loans After Term Limit 

Reached:2

 Direct FO 243 51

 Direct EM 151 86

 FSA Guaranteed 448 550

Received 51-S After Term Limit Reached 620 367

Loan Write-Off After Term Limit 

Reached

 Direct Debt Settlement 38 300

 Guaranteed Loss Claim Paid 13 45

Targeted Group3

 Beginning Farmer42,206 1,875

 Racial-Ethnic Minority 214 175

 Woman 144 115

 SDA 344 265

 Veteran 161 247

In Service Center Information 

Management System (SCIMS) as eligible 

voters5

2,707 2,134

1

Includes all outstanding direct loans (FO, OL, and EM).

2

Exclusive of waivers and exemptions for beginning farmers.

3Groups are not mutually exclusive. A beginning farmer may also be a racial-ethnic 

minority, woman, or veteran.

4Qualified beginning farmer at time of last direct OL obligation.

5Not all direct borrowers may be eligible voters resulting in the number of eligible 

voters being less than number of borrowers. A legal entity may be a borrower, but 

only the individual members would be listed as eligible COC voters.

Sources: FSA’s OBFN, OM3R, DSTH, GLS and R540 data files; and USDA SCIMS.
13

Table 2. Distribution of Borrowers by Current Years of Eligibility and USDA Production 

Region.1

USDA Production 

Region2

Borrowers receiving 

DOLs since 1993, by 

years of DOL eligibility 

remaining

Borrowers with outstanding 

DOLs by years of DOL 

eligibility remaining

All 

0 Years 1-2 Years 0 Years 1-2 Years borrowers

-- Percent --

Northeast 11.2 10.4 9.5 11.3 6.9

Lake States 11.3 14.6 11.4 13.6 10.8

Corn Belt 13.6 9.0 11.9 11.3 15.6

Northern Plains 17.5 12.6 17.6 16.1 14.2

Appalachia 13.1 15.6 16.8 13.7 12.5

Southeast 5.0 6.5 6.6 6.1 6.7

Delta 5.9 6.1 6.1 5.7 7.2

Southern Plains 11.0 10.5 9.9 9.7 12.1

Mountain 6.5 8.0 4.4 5.6 5.8

Pacific 4.8 5.6 4.3 4.7 3.5

AK+HI+Territories 0.1 1.1 1.5 2.2 4.7

1Columns add to 100%.

2

See USDA ERS Farm Production Regions.

Source: FSA OBFN Data Files.
14

Table 3. Total borrowers Receiving Direct OLs Since 1993, by Years of 

Eligibility Used.

Years of 

Eligibility 

Used

Year of Last Direct OL Obligation

Total 

2014 Borrowers

2011-

2013

2008-

2010

2005-

2007

Before 

2005

1 5,325 8,822 6,825 4,210 23,961 49,143

2 2,471 3,959 2,818 1,870 8,911 20,029

3 1,707 2,215 1,425 1,053 4,220 10,620

4 1,153 1,340 891 651 2,425 6,460

5 800 772 578 475 1,530 4,155

6 or more 970 1,260 1,227 980 2,603 7,040

Total 12,426 18,368 13,764 9,239 43,650 97,447

(6*) Term 

limited1

617 1,070 1,192 962 1,798 5,639

1Borrowers using all years of eligibility after adjusting for beginning farmers 

and the April 4, 1996 transition rule (Section 311(c) of the ConAct), which 

gave borrowers using 4 or more years of eligibility before 4/4/96 an 

additional 3 years of direct OL eligibility.

Source: FSA OBFN Database.
15

Table 4. Balance Sheet Characteristics for FSA Direct Borrowers for Last Business Plan 

Created During the Calendar Year.

Year 

Term 

Limit 

Reached

 Borrowers Reaching Term Limits1 All Other Borrowers

Total 

Assets

$

Total 

Debt

$

Net 

Worth

$

DebtAsset

%

Total 

Assets

$

Total 

Debt

$

Net 

Worth

$

DebtAsset

%

2005 423,881 259,933 163,948 61.3 460,420 220,223 240,197 47.8

2006 480,715 285,449 195,266 59.4 492,981 235,621 257,361 47.8

2007 552,205 319,440 232,765 57.8 559,738 262,335 297,402 46.9

2008 588,413 332,340 256,073 56.5 595,060 280,999 314,061 47.2

2009 699,420 384,463 314,957 55.0 636,211 313,890 322,321 49.3

2010 684,917 393,098 291,819 57.4 671,172 335,929 335,243 50.1

2011 771,469 396,326 375,144 51.4 690,729 342,152 348,576 49.5

2012 808,704 434,469 374,234 53.7 702,354 348,380 353,974 49.6

2013 689,910 372,871 317,039 54.0 642,027 320,609 321,418 49.9

2014 825,318 388,893 436,426 47.1 595,893 303,076 292,817 50.9

1

For Calendar year in which term limit was reached.

Source: FSA’s Farm Business Plan.
16

Table 5. Selected Income Statement Characteristics for FSA Direct Borrowers 

for Last Business Plan Created During the Calendar Year.

Year 

Term 

Limits

Gross 

Revenue

Net 

Income

Nonfarm 

Income

Non-farm 

Expenses Score1 ROA2 TDCR3

Borrowers Reaching Term Limits

2005 210,296 50,427 23,391 28,713 2.3 5.2 1.6

2006 223,779 48,909 24,317 29,250 2.3 5.9 1.4

2007 227,127 50,916 29,698 32,028 2.2 2.7 1.4

2008 262,605 64,151 26,612 33,740 2.1 4.4 1.6

2009 295,043 60,072 27,903 34,713 2.2 4.6 1.4

2010 285,128 59,564 32,199 33,586 2.2 4.7 1.4

2011 297,512 64,642 30,786 35,227 2.1 5.5 1.5

2012 345,408 74,613 30,979 37,565 2.1 5.0 1.5

2013 300,063 62,043 30,472 36,179 2.2 4.2 1.4

2014 341,879 58,449 39,237 37,000 2.1 4.0 1.4

All Other Borrowers

2005 153,946 32,650 23,529 22,599 2.2 3.1 1.3

2006 168,393 37,917 26,045 23,944 2.3 3.7 1.4

2007 168,614 32,578 29,953 26,583 2.3 3.3 1.3

2008 171,244 34,157 34,033 27,936 2.4 3.0 1.4

2009 222,227 37,205 35,576 29,298 2.4 3.5 1.3

2010 210,139 37,780 36,350 30,047 2.4 3.4 1.4

2011 185,743 33,479 36,981 30,107 2.3 3.3 1.4

2012 168,765 31,475 40,466 30,772 2.3 3.0 1.5

2013 130,955 26,182 40,427 30,940 2.3 3.3 1.6

2014 199,557 56,606 44,769 37,406 2.3 3.6 1.4

1

FSA score is a borrower account classification used to determine a borrower’s 

eligibility for graduation. The score may range from 1 to 4 with 1 representing the 

most creditworthy and 4 being the least creditworthy.

2Return on assets. 

3Term debt coverage ratio (includes non-farm income).

Source: FSA’s Farm Business Plan.
17

Table 6. Gross Revenue, FSA Score, and Debt-Asset Ratio, by Years 

After Reaching Term Limit

Years after 

Term Limit

Gross Revenue1FSA Score2 Debt-Asset Ratio

0 304,625 2.2 0.61

1 320,728 2.2 0.54

2 318,888 2.3 0.52

3 315,498 2.3 0.52

4 317,939 2.5 0.52

5 319,704 2.3 0.51

6 325,694 2.3 0.49

1Adjusted for inflation using NASS prices received index.

2

FSA borrower account classification score (see Table 4, note 1).

Source: FSA’s Farm Business Plan.
18

Table 7. Counts of Active Direct Operating Loan Borrowers by State or 

Territory and Years of Remaining Eligibility as of December 31, 2014.1

State/Territory Years of Remaining Eligibility

0 1 2 3 4 5 >5 Total

 ALABAMA 17 5 18 26 46 135 996 1,243

 ALASKA 2 1 3 3 5 14 21 49

 ARIZONA 3 2 6 11 26 48 160 256

 ARKANSAS 79 35 67 128 172 242 737 1,460

 CALIFORNIA 39 19 41 59 69 133 442 802

 COLORADO 28 15 29 34 51 92 239 488

 CONNECTICUT 4 1 1 4 4 8 28 50

 DELAWARE 0 0 0 0 0 2 12 14

 FLORIDA 6 11 17 28 51 88 365 566

 GEORGIA 79 37 59 75 106 180 699 1,235

 HAWAII 7 6 9 12 17 41 152 244

 IDAHO 33 21 36 39 64 103 379 675

 ILLINOIS 45 15 23 41 46 97 323 590

 INDIANA 12 10 8 15 10 28 118 201

 IOWA 147 81 145 177 229 295 846 1,920

 KANSAS 88 62 60 90 164 240 714 1,418

 KENTUCKY 209 88 125 196 275 447 1,711 3,051

 LOUISIANA 48 29 40 63 76 163 692 1,111

 MAINE 29 17 18 17 27 39 119 266

 MARYLAND 0 2 3 9 5 22 72 113

 MASSACHUSETTS 19 9 19 28 41 57 140 313

 MICHIGAN 73 57 72 81 130 188 404 1,005

 MINNESOTA 95 73 97 131 194 230 641 1,461

 MISSISSIPPI 45 16 32 59 99 197 1,235 1,683

 MISSOURI 37 28 45 51 78 168 679 1,086

 MONTANA 21 9 15 42 58 93 268 506

 NEBRASKA 171 86 137 137 190 287 802 1,810

 NEVADA 1 2 3 4 10 26 92 138

 NEW HAMPSHIRE 4 12 6 14 19 37 94 186

 NEW JERSEY 9 4 7 13 20 28 64 145

 NEW MEXICO 17 12 14 12 39 45 187 326

 NEW YORK 63 61 63 93 121 185 433 1,019

 NORTH CAROLINA 82 33 37 50 90 141 384 817

 NORTH DAKOTA 65 52 57 68 113 141 334 830

 OHIO 11 10 13 19 35 56 334 478

 OKLAHOMA 83 66 82 156 257 492 1,913 3,049

 OREGON 37 22 29 57 62 91 191 489

 PENNSYLVANIA 115 74 95 142 209 276 581 1,492

 PUERTO RICO 0 4 7 29 59 187 525 811

 RHODE ISLAND 1 3 7 5 6 7 28 57

 SOUTH CAROLINA 70 37 50 79 118 161 307 822

 SOUTH DAKOTA 70 47 71 111 175 248 819 1,541

 TENNESSEE 50 36 59 90 132 235 732 1,334

 TEXAS 173 92 121 170 224 404 1,815 2,999

 UTAH 44 49 53 75 101 175 653 1,150
19

Table 7. Counts of Active Direct Operating Loan Borrowers by State or 

Territory and Years of Remaining Eligibility as of December 31, 2014 

(continued)

State/Territory Years of Remaining Eligibility

0 1 2 3 4 5 >5 Total

 VERMONT 25 26 22 41 66 78 131 389

 VIRGIN ISLANDS 0 0 0 1 0 3 6 10

 VIRGINIA 33 24 39 45 91 144 440 816

 WASHINGTON 39 25 35 46 47 87 225 504

 WEST VIRGINIA 78 41 54 77 131 182 492 1,055

 WESTERN PACIFIC (WP) 0 0 0 0 3 6 20 29

 WISCONSIN 119 80 138 233 381 521 1,114 2,586

 WYOMING 4 5 5 12 16 16 69 127

 TOTAL 2,529 1,552 2,192 3,198 4,758 7,609 24,977 5,516

1

Youth Loans and Microloans to beginning farmers and veterans are exempt from DOL term 

limits.
20

Table 8. Counts of Active Direct Operating Loan Borrowers by (a) Race, (b) Ethnicity, and (c) 

Gender, and by Years of Remaining Eligibility as of December 31, 2014.1 2

Race/Ethnicity/Gender Years of Remaining Eligibility

0 1 2 3 4 5 > 5 Total

(a) Race

 American Indian/Alaskan 

Native 63 48 81 117 209 385 1,542 2,445

 Asian 15 7 13 20 27 53 197 332

 Black 138 59 67 104 153 305 1,131 1,957

 Hawaiian/Pacific Islander 1 3 1 5 13 31 100 154

 Unknown 1 0 2 8 11 37 108 167

 White 2,311 1,435 2,028 2,944 4,345 6,798 21,899 41,760

 Total 2,529 1,552 2,192 3,198 4,758 7,609 24,977 46,815

(b) Ethnicity

 Hispanic 62 41 65 90 165 369 1361 2153

 Not Hispanic 2,450 1,500 2,110 3,087 4,559 7,196 23,498 44,400

 Unknown 17 11 17 21 34 44 118 262

 Total 2,529 1,552 2,192 3,198 4,758 7,609 24,977 46,815

(c) Gender

 Female 134 98 132 249 407 818 5,724 7,562

 Female Organization 13 5 12 15 37 89 294 465

 Male 2,241 1,337 1,879 2,695 3,906 6,034 17,276 35,368

 Male Organization 71 62 94 144 241 428 1,095 2,135

 Other Organization 68 50 74 91 166 238 577 1,264

 Unknown 2 0 1 4 1 2 11 21

 Total 2,529 1,552 2,192 3,198 4,758 7,609 24,977 46,815

1

Each active DOL borrower is counted once under each of the three categories—race, ethnicity, 

and gender. Hence, the totals for each combination of race-ethnicity-gender and years of 

remaining eligibility are equivalent.

2

Youth Loans and Microloans to beginning farmers and veterans are exempt from DOL term 

limits.
21

Table 9. Counts of Active Direct Operating Loan Borrowers by (a) FSA Credit-Risk Classification

Score, (b) Total Indebtedness, and (c) Amount Delinquent, and by Years of Remaining 

Eligibility as of December 31, 2014.1 2

Financial Categorization

Years of Remaining Eligibility

0 1 2 3 4 5 > 5 Total

(a) FSA Classification Score

 1 Commercial 416 249 359 437 655 1,124 2,659 5,899

 2 Standard 781 456 621 945 1,407 2,243 5,250 11,703

 3 Acceptable 744 466 696 1,018 1,562 2,514 13,485 20,485

 4 Marginal 518 318 439 664 976 1,498 3,067 7,480

 5 Not Classified 67 63 77 134 156 227 489 1,213

 Unknown 3 0 0 0 2 3 27 35

 Total 2,529 1,552 2,192 3,198 4,758 7,609 24,977 46,815

(b) Total Indebtedness

 < $50,000 493 272 447 745 1,226 2,460 16,865 22,508

 $50,000 - $99,999 411 237 360 530 791 1,392 2,216 5,937

 $100,000 - $249,999 931 584 742 1,103 1,625 2,360 3,890 11,235

 $250,000 - $499,999 608 381 556 711 1,004 1,263 1,838 6,361

 $500,000 - $999,999 84 76 84 105 110 126 154 739

 $1,000,000 or more 2 2 3 4 2 8 14 35

 Total 2,529 1,552 2,192 3,198 4,758 7,609 24,977 46,815

 (c) Amount Delinquent3

 Current 2,136 1,297 1,845 2,668 3,956 6,389 22,176 40,467

 < $50,000 257 160 215 306 523 828 2,308 4,597

 $50,000 - $99,999 64 31 57 85 126 169 210 742

 $100,000 - $249,999 54 49 51 101 114 165 201 735

 $250,000 - $499,999 15 10 19 28 30 41 54 197

 $500,000 - $999,999 2 5 3 7 9 15 26 67

 $1,000,000 or more 1 0 2 3 0 2 2 10

 Total 2,529 1,552 2,192 3,198 4,758 7,609 24,977 46,815

1

Each active DOL borrower is counted once under each of the three financial categories. Hence, 

the totals for each combination of financial category and years of remaining eligibility are 

equivalent.

2

Youth Loans and Microloans to beginning farmers and veterans are exempt from DOL term 

limits.

3

At least $1 of outstanding DOL funds that are 30 days or more delinquent.
22

Figure 1. U.S. Farm Debt Market Shares, 1960-2014.

Figure 2. Share of Indebted Farmers Receiving an FSA Direct OL Loan since FY2011.

Gulf of Mexico

Atlantic Ocean

Pacific Ocean

Canada

Mexico

-70°

-80°

-80°

-90°

-90°

-100°

-100°

-110°

-110°

-120°

-130° -120° 50° 40° 40° 30° 30° -130°50°

Regional Variation in Reliance of Farmers on FSA Direct Loan Programs

% of Indebted Farmily-Size Farms

 Receiving Direct FLP Loans

Less than 5%

5.0% to 10.0%

10.1% to 20%

Over 20% Source: FSA OBFN Database, 2012 Census of Agriculture

FSA’s Market Share Greatest During 80’s 

Farm Financial Crisis

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100% % of US Farm Debt

Calendar Year

FCS Commercial Banks FSA (Direct Loans) All Other Lenders

Source: USDA Economic Research Service
23

Figure 3. Percent of Direct OL Borrowers in Default or Receiving a Debt Settlement, 

FY1997-FY2014.

Figure 4. Direct OL Obligations and Borrowers, by Fiscal Year through 2014.

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

0

200

400

600

800

1,000

1,200

1,400

1,600

Obligations ($Mi) Borrowers

Deflated (2013 $) Borrowers

Direct OL Real Obligations and Number of Borrowers

Have Risen Since 2008

Default and Loss Rates Have Declined

0

5

10

15

20

25

30 Percent of Direct All OL Borrowers

Fiscal Year

Default (30-day)

Default (90-day)

Write-Offs

Source: FSA R540 & DSTH Database at Fiscal Year-End,

Source: FSA OBFN Database, 12/31/2015
24

Figure 5. Distribution of Farm Borrowers Receiving Direct OL Loans by Fiscal Year and 

Farm Type.

Figure 6. Direct OL Borrowers Reaching Term Limits by Calendar Year.

New Direct OL Borrowers by Fiscal Year 

and Farm Type

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100% % of Total Borrowers

Fiscal Year of OL Obligation

Other Animal Production

Dairy

Beef

Miscellanous Crop

Fruits/Nuts/Veg

Cotton Farming

Other Grain & Oilseed

Corn-soybean

Wheat

Source: FSA OBFN Database & Farm Business Plan

About 400 Direct OL Borrowers

Reach Term Limits Each Year

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000 Borrower Caseload (12/31)

Calendar Year-End

Reached term limits in

current yr.

Reached term limit in

earlier yr

Non-term limited

Sources: USDA FSA R540 calendar year-end and 

OBFN databases ( 12/31/2014)
25

Figure 7. Geographic Location of All Borrowers Reaching Term Limits.

Figure 8. Distribution of Term-Limited Borrowers by Fiscal Year and Farm Type.

-70°

-80°

-80°

-90°

-90°

-100°

-100°

-110°

-110°

-120°

-130° -120° 40° 40° 30° 30°

^_

^_

^_

^_

^_

^_

^_

^_ ^_

^_ ^_

^_ ^_

^_

^_

-170°

-150°

-150°

-160°

170° -180° -160°

-140°

-140°

-130° -120° 80° 70° 60° 50°

-160° 20°

Alaska

Borrowers Using 6 or More Years of OL Eligibility

Term Limited Borrowers Through 12/31/14

Hawaii

Term Limited Borrowers by FY and 

Farm Type

0%

20%

40%

60%

80%

100%

Fiscal Year

All Other Animal Production

Dairy

Beef

All Other Miscellaneous Crop Farming

Fruits/Nuts/Veg

Cotton Farming

All Other Grain & Oilseed Farming

Corn-soybean Farming

Source: FSA OBFN Database & Farm Business Plan
26

Appendix 1. Text of Legislation from Section 5104 of the Agricultural Act of 2014.

5) ANNUAL REPORT ON TERM LIMITS ON DIRECT OPERATING

LOANS.—

(A) IN GENERAL.—The Secretary shall prepare a report

annually that describes—

(i) the status of the direct operating loan program

of the Department of Agriculture; and

(ii) the impact of term limits on direct loan borrowers.

(B) DEMOGRAPHIC INFORMATION.—

(i) IN GENERAL.—The report shall provide a demographic

breakdown, on a State-by-State basis, of—

(I) all direct loan borrowers; and

(II) borrowers that have reached the eligibility

limit for direct lending programs during the previous

calendar year.

(ii) DEMOGRAPHIC INFORMATION.—The available

demographic information shall include, to the maximum

extent practicable, a description of race or ethnicity,

gender, age, type of farm or ranch, financial

classification, number of years of indebtedness, veteran

status, and other similar information, as determined

by the Secretary.

(C) ADDITIONAL CONTENT.—In addition to information

described in subparagraph (B), the report shall provide—

(i) a demographic analysis of the borrowers impacted

by term limits;

(ii) information on the conditions impacting the direct

lending portfolio of the Department of Agriculture,

including impacts by region and agriculture

sector, and credit availability within those regions and

sectors;

information on the status of borrower operations impacted by

term limits; and

(iv) recommendations, if appropriate, to address

any identifiable unmet credit needs.

(D) SUBMISSION.—The Secretary shall—

(i) annually submit to the Committee on Agriculture

of the House of Representatives and the Committee

on Agriculture, Nutrition, and Forestry of the

Senate a copy of the report; and

(ii) make the report available to the public, including

posting the report on the website of the Department

of Agriculture.
27

Appendix 2. Past Mandated Studies of FSA Credit Programs

Over the past 20 years, the U.S. Congress and the Office of Management and Budget (OMB) 

authorized several reports to increase understanding of the role of USDA credit programs. 

Section 650 of the Federal Agriculture Improvement and Reform Act of 1996 (1996 Farm Bill)

required USDA to provide a report to Congress assessing the demand for and availability of 

credit in rural areas for agriculture, housing, and rural development (USDA ,1997). The report 

concluded that the system of commercial banks, Farm Credit System, other private lenders, and 

USDA functioned well in meeting the overall demand for credit in rural regions. Section 5301 

of the Farm Security and Rural Investment Act of 2002 (2002 Farm Bill) required USDA to 

provide an evaluation of direct and guaranteed loan programs. The study was driven by concern 

over the higher cost of direct relative to guaranteed lending and the possibility that cost savings 

could be realized by shifting lending resources from the direct to the guaranteed program (USDA

FSA, 2006). The analysis undertaken by USDA concluded that direct and guaranteed lending 

programs serve unique groups of borrowers and it would be difficult to serve the more 

economically disadvantaged direct borrowers solely through a guaranteed program. As part of 

the fiscal year 2005 budget, OMB requested an independent performance-focused review of the 

effectiveness of FSA direct farm loan programs. This analysis showed that direct programs 

primarily serve family-size farming operations, of which a majority tended to be only temporary 

borrowers (Nwoha, J., et al.).
28

Appendix 3. Twenty-five Congressional Districts with Largest Numbers of 

Borrowers Reaching DOL Term Limits

Member, 114th 

Congress State District Party

Number of 

Term 

Limited 

Borrowers 

(12/31/14)1

1 Smith, Adrian Nebraska 3 R 345

2 Peterson, Collin C. Minnesota 7 D 233

3 Noem, Kristi South Dakota 0 R 217

4 Neugebauer, Randy Texas 19 R 172

5 Cramer, Kevin North Dakota 0 R 172

6 King, Steve Iowa 4 R 121

7 Crawford, Rick Arkansas 1 R 111

8 Lucas, Frank Oklahoma 3 R 108

9 Graves, Sam Missouri 6 R 106

10 Whitfield, Ed Kentucky 1 R 100

11 Huelskamp, Tim Kansas 1 R 95

12 Thornberry, Mac Texas 13 R 91

13 Guthrie, S. Brett Kentucky 2 R 89

14 Blum, Rod Iowa 1 R 85

15 Loebsack, David Iowa 2 D 81

16 Fortenberry, Jeff Nebraska 1 R 73

17 Simpson, Mike Idaho 2 R 72

18 Young, David Iowa 3 R 69

19 Duffy, Sean P. Wisconsin 7 R 68

20 Massie, Thomas Kentucky 4 R 67

21 Poliquin, Bruce Maine 2 R 66

22 Barr, Andy Kentucky 6 R 63

23 Conaway, K. Michael Texas 11 R 62

24 Smith, Jason Missouri 8 R 60

25 Walz, Timothy J. Minnesota 1 D 59

1Total number of current and former direct borrowers reaching term limits 

through 2014.