Beginning Farmers: Additional Steps Needed to Demonstrate the Effectiveness of USDA Assistance
Published: 2007-09-18T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: U.S. Department of Agriculture (USDA) programs have long supported beginning farmers. USDA generally defines a beginning farmer or rancher as one who has operated a farm or ranch for 10 years or less--without regard for age--and who materially and substantially participates in its operation. USDA's Farm Service Agency (FSA) makes and guarantees loans for farmers who cannot obtain commercial credit, including beginning farmers. FSA also reserves funds for beginning farmers within its loan programs. USDA's Natural Resources Conservation Service (NRCS) provides higher conservation payments for beginning farmers through two of its conservation programs. GAO reviewed the key steps USDA has taken to help beginning farmers and assessed the department's actions to measure the effectiveness of these steps..
section_title: What GAO Found
paragraphs: USDA's lending and conservation assistance to beginning farmers has been substantial and is growing. USDA supports beginning farmers primarily through its lending assistance. From fiscal years 2000 through 2006, FSA's lending to beginning farmers rose from $716 million to $1.1 billion annually--totaling more than $6 billion. In addition, from fiscal years 2004 through 2006, the most recent years for which data are available, NRCS's annual financial assistance for beginning farmers through two key conservation programs nearly doubled from over $47 million to nearly $92 million, for a total of $233 million. However, USDA cannot demonstrate the effectiveness of its support for beginning farmers, because it has not developed a crosscutting, departmental strategic goal for its beginning farmer efforts and has only recently begun to analyze the characteristics of this group. Specifically, USDA has not developed a crosscutting, departmental strategic beginning farmer goal that demonstrates the outcomes it expects its beginning farmer efforts to achieve. Such a goal might address, for example, promoting demographic change, such as by decreasing the average age of farmers or changes to the structure of agriculture, such as by increasing the number of small and middle-sized farms. USDA has incorporated beginning farmers into its existing policy for maintaining the viability of small farms. Although this provides added recognition of the need to assist beginning farmers, USDA's policy does not establish a crosscutting, departmental strategic goal that provides a management and accountability focus for the department's several efforts. Furthermore, USDA tracks the numbers of farmers it assists and the dollars they receive, rather than its progress toward achieving a particular beginning farmer outcome. Having a crosscutting, departmental strategic goal could provide better insight into the desired outcomes and impact of USDA's beginning farmer efforts. USDA is just beginning to develop data about the characteristics of beginning farmers to supplement its existing analyses about the age of farmers and changes in the number of farms. For example, one recent analysis shows that beginning farmers are younger than established farmers, operate smaller farms, and are slightly more ethnically diverse and female than other farmers. Another indicates that roughly one-third of beginning farms in 2005 had no agricultural output and were likely operated by individuals interested in a rural residential lifestyle. Continued analysis of such characteristics and trends could provide better insight into who beginning farmers are, which ones USDA assists, and how beginning farmer operations change over time.

section_title: Letter
paragraphs: Since the 1990s, the U.S. Department of Agriculture’s (USDA) assistance to  beginning farmers and ranchers has responded to concerns that the  average age of farmers and ranchers is increasing. USDA estimated that in  2004 about 27 percent of principal farm operators were 65 years of age or  older, while only about 4 percent were under 35. Collectively, landowners  over age 65 owned over one-third of farmland—land that will ultimately  either be passed on to heirs or sold. USDA generally defines a beginning  farmer or rancher as one who has operated a farm or ranch for 10 years or  less, regardless of age, and will materially and substantially participate in  its operation. USDA economists have estimated that beginning farmers  operate about 485,000 farms, or about 25 percent of the nation’s nearly 2  million family farms. Beginning farmers start a wide range of operations,  such as livestock, organic crops, or traditional commodities. Also, their  population is diverse: traditional family farmers, former farm managers,  individuals in career transition, retirees, “hobby” farmers, immigrants, and  the socially disadvantaged. Many beginning farmers face multiple  challenges, including obtaining capital to purchase farmland and fund  their operating costs. Because beginning farmers tend to operate smaller  farms and have more limited resources than more experienced farmers,  they may find it difficult to obtain conventional credit. In addition, the  rising cost of farmland, driven in part by farm subsidies and increasing  competition for farmland from urban development and for producing  energy crops, may also make it difficult for beginning farmers to obtain  land. Moreover, beginning farmers may not be as knowledgeable as more  experienced farmers about effective farming practices, financial and risk  management practices, marketing opportunities, and available assistance  programs.
USDA supports beginning farmers primarily through its lending assistance.  USDA’s Farm Service Agency (FSA) is a lender of last resort—FSA  provides loans to farmers who have cash flow or collateral shortcomings  that keep them from qualifying for commercial loans. Since the mid-1990s,  USDA has reserved portions of its loan funds for beginning farmers, as  required by the Agricultural Credit Improvement Act of 1992. In addition,  USDA’s Natural Resources Conservation Service (NRCS) provides  financial and technical assistance to beginning farmers for conservation  practices. The 2002 Farm Security and Rural Investment Act authorized  the Secretary of Agriculture to provide beginning farmers with up to 90  percent of the cost of implementing conservation practices under two key  NRCS programs—the Environmental Quality Incentives Program (EQIP)  and the Conservation Security Program (CSP), while more established  farmers are limited to receiving up to 75 percent of their costs. Beginning  farmers are also eligible for other USDA programs, such as the Crop  Insurance Program, and may benefit from grant programs that provide  assistance for production, marketing, and financial risk management.
In addition to USDA’s assistance, beginning farmers also obtain loans  through the Farm Credit System, commercial banks, life insurance  companies, and individuals. The Farm Credit System is a government- sponsored enterprise with a nationwide network of lenders that Congress  created to provide a dependable source of credit and related services to  the agricultural community. Since the 1980s, the Farm Credit System has  had a special congressional mission to serve young, beginning, and small  farmers. As of December 2006, the Farm Credit System had in its portfolio  over 189,000 loans to beginning farmers valued at $25.4 billion.
For the 2007 Farm Bill, USDA and others have proposed that Congress  take additional steps to build up USDA’s programs to help beginning  farmers. For example, USDA proposed raising direct loan limits for farm  ownership and operating loans to a combined limit of $500,000, up from  $200,000 for each type of loan. USDA also proposed setting aside 10  percent of conservation funds for beginning and socially disadvantaged  farmers. Additionally, stakeholder groups have suggested, among other  things, providing tax incentives for selling land to beginning farmers and  ranchers and making research on beginning farmers and farm transfer a  priority.
GAO has issued multiple reports that address USDA support to beginning  farmers. For example, in 1982, GAO reported that little data were available  to demonstrate the effect of existing farm programs on beginning farmers.  More broadly, in 2006, we concluded that better oversight of farm program  funds is necessary to ensure they are spent as economically, efficiently,  and effectively as possible. Because USDA provides billions in beginning  farmer assistance, it is important that the department be able to  demonstrate the effectiveness of these programs.
You asked us to (1) identify the key steps USDA has taken to help  beginning farmers and (2) assess USDA’s actions to measure the  effectiveness of these steps.
To determine the key steps USDA has taken to help beginning farmers, we  reviewed USDA and agency documents on loan and conservation  programs and spoke with officials who administer these and other  relevant programs. In addition, we interviewed agricultural stakeholders  from universities, organizations that work with beginning and small  farmers, farm advocacy groups, and some states with targeted beginning  farmer loan programs. To identify USDA’s actions to assess the  effectiveness of its programs in addressing beginning farmer challenges,  we reviewed USDA reports, strategic plans, and program performance  data. A more detailed description of our scope and methodology is  presented in appendix I. We performed our work between September 2006  and August 2007 in accordance with generally accepted government  auditing standards.
subsections: section_title: Background
paragraphs: The Food, Agriculture, Conservation, and Trade Act of 1990 (the 1990  Farm Bill) required, among other things, that the Secretary give priority to  beginning farmers in purchasing inventory farmland—properties that have  come into government ownership through voluntary conveyance or  foreclosure. It also expressed the sense of Congress that USDA maintain  statistics on, among other things, the number of loans made, insured, or  guaranteed, and inventory farmland sold or leased to beginning farmers,  and that USDA establish innovative programs of finance and assistance for  land transfer between generations and the establishment of new farms.  Currently, FSA’s limits on direct loans for farm ownership and operations  are each set at $200,000, while the guaranteed farm ownership and  operating loan amounts are each set at $899,000. FSA allocates money to  the states for its loan programs on the basis of the number of farmers in  each state, the value of farm assets, and net farm income. For this  allocation, the loan volumes of previous years may be considered as well.
The Agricultural Credit Improvement Act of 1992 required the Secretary of  Agriculture to reserve a portion of its direct and guaranteed farm  ownership and operating loan funds for beginning farmers and ranchers.  It also authorized the establishment of the Down Payment Farm  Ownership Loan Program, administered by FSA. This program allows a  beginning farmer to purchase a farm or ranch of up to $250,000 in value.  To participate in this loan program, an applicant must make a cash down  payment of at least 10 percent of the purchase price. FSA may provide up  to 40 percent of the purchase or appraisal price over 15 or fewer years at a  fixed interest rate of 4 percent. The balance may be obtained from another  lender, with FSA providing up to a 95 percent guarantee. In addition, in  accordance with the act, FSA has entered into memorandums of  understanding with 21 states to provide joint financing to beginning  farmers.
The 1992 act also directed that the Secretary establish an Advisory  Committee on Beginning Farmers and Ranchers to advise the Secretary on  methods of creating new farming and ranching opportunities, among other  things. The advisory committee includes representatives from the farming,  ranching, and banking industries; extension education; nonprofit agencies;  and federal and state staff who work directly with beginning farmers.  Since it was established in 1998, the committee has met eight times,  submitting recommendations to the Secretary to improve and increase  opportunities for beginning farmers in starting and maintaining viable  farming operations. Recently, these proposals have ranged from  recommendations to develop a pilot program for providing matched  savings accounts for beginning farmers to encouraging those with expiring  Conservation Reserve Program easements to transfer their land to  beginning farmers. Previously implemented recommendations have led to  the 2006 addition of beginning farmers to USDA’s small farms policy,  which led to the establishment of the Small Farms and Beginning Farmers  and Ranchers Council.
The Farm Security and Rural Investment Act of 2002 (the 2002 Farm Bill)  authorized higher payments in two key conservation programs geared  toward working lands—EQIP and CSP. EQIP provides farmers with  financial and technical assistance to address soil, air, water, and related  natural resource concerns on eligible land, while CSP supports ongoing  stewardship of farmland by providing payments to producers for  maintaining and enhancing conservation efforts that benefit natural  resources. For both programs, the 2002 Farm Bill authorized the Secretary  to provide a higher cost-share for beginning farmers—up to 90 percent of  the cost of implementing a conservation practice—compared to 75 percent  for other producers. For EQIP, the act also authorized higher cost-share  payments for limited resource producers. In 2006, on average, NRCS  provided a cost-share rate of almost 80 percent for beginning farmers  through EQIP, compared with an average of 59 percent for non-limited- resource, established farmers. For CSP, the 2006 sign-up reduced the cost- share rate for new practice payments to not more than 65 percent for  limited resource and beginning farmers and to not more than 50 percent  for other producers.
Furthermore, the 2002 Farm Bill authorized the Secretary to create a pilot  program to provide guarantees of loans made by private sellers of a farm  or ranch to beginning farmers on a contract sale basis. It also authorized  the Secretary to reserve at least 15 percent of funds in its interest rate  reduction program—a program to subsidize the interest rate on a  guaranteed operating loan—for beginning farmers. Finally, the 2002 Farm  Bill also authorized a Beginning Farmer and Rancher Development  Program to provide training, education, outreach, and technical assistance  initiatives, but no funding has been allocated to this program.
section_title: USDA’s Lending and Conservation Assistance for Beginning Farmers Has Increased
paragraphs: USDA’s lending and conservation assistance to beginning farmers has  been substantial and is growing. From fiscal year 2000 through 2006, FSA  increased its lending to beginning farmers from $716 million to $1.1 billion  annually, for a total of more than $6 billion during the period. Also, from  fiscal years 2004 through 2006 (the most recent years for which data are  available), NRCS’s assistance to beginning farmers through two key  conservation programs nearly doubled, from over $47 million to about $92  million.
subsections: section_title: Lending to Beginning Farmers Exceeds $1 Billion per Year
paragraphs: From fiscal years 2000 through 2006, FSA increased the value of its loans  to beginning farmers from $716 million to $1.1 billion annually, for a total  of more than $6 billion over the period. In addition, beginning farmers  received an increasing share of FSA’s loan dollars, from a 20 percent share  in fiscal year 2000 to 35 percent by fiscal year 2006—or 27 percent of the  amount FSA loaned all farmers over this period. At the end of fiscal year  2006, FSA had 25,064 beginning farmer borrowers in its loan portfolio. Of  these borrowers, 16,828 had obtained 28,022 direct loans as of October 4,  2006, and 8,236 had obtained 11,735 guaranteed loans as of September 30,  2006.  FSA also provided interest assistance on 2,409 of the guaranteed  operating loans it made to beginning farmers between fiscal year 2000 and  2006. Through these loans, it obligated approximately $358 million—12  percent of guaranteed operating loan dollars with interest assistance  obligated to all farmers. Table 1 provides more detailed information about  FSA’s direct and guaranteed loans to beginning farmers. Appendix II  provides information on fiscal year 2006 loans to beginning farmers by  state.
Beginning farmers can also take advantage of FSA’s joint financing plans  and Down Payment Farm Ownership Loan Program. FSA’s joint financing  plans have been more popular than the down payment loan program, in  part because they have longer loan terms and do not require a down  payment. They allow a borrower to receive up to 50 percent of the amount  financed through FSA at a reduced interest rate, with another lender  providing 50 percent or more of the loan. Through joint financing  arrangements, FSA has made 2,395 loans to beginning farmers that  provided over $287 million in direct loan assistance between fiscal years  2000 and 2006. Through the Down Payment Farm Ownership Loan  Program, FSA made 777 loans to beginning farmers, providing over $42  million in direct loan assistance over the same period. In addition to  providing loans, FSA sells properties to beginning farmers from its  inventory of farmland properties. From fiscal years 2000 through 2006, it  sold 48 properties to beginning farmers, or 4 percent of the 1,136 sold to  all farmers over this time period. This form of assistance has been used  infrequently in recent years because FSA’s farm inventory has been  declining.
section_title: Conservation Assistance for Beginning Farmers Nearly Doubled between Fiscal Years 2004 and 2006
paragraphs: NRCS conservation financial assistance for beginning farmers through  EQIP and CSP increased from over $47 million in fiscal year 2004 to about  $92 million in fiscal year 2006. In total, NRCS approved about $233  million in financial assistance for beginning farmers through these two  programs from fiscal years 2004 through 2006—about 9 percent of the  amount for all farmers. Table 2 shows EQIP and CSP assistance for  beginning farmers over this period. Appendix III provides information on  EQIP financial assistance approved for beginning farmers in fiscal year  2006 by state.
section_title: Other USDA Programs Assist Beginning Farmers
paragraphs: Programs administered by USDA’s Risk Management Agency (RMA) and  Cooperative State Research, Education, and Extension Service (CSREES)  have funded organizations assisting farmers with risk management and  other challenges. For example, RMA administers several partnership  programs—in conjunction with state departments of agriculture,  universities, nonprofit agricultural organizations, and other public or  private organizations—to deliver training and information on production,  marketing, and financial risk management to farmers.  Some proposals  funded through these programs have addressed beginning farmer needs.   Additionally, the Community Outreach and Assistance Partnership  Program provides higher scores to applicants that partner with  organizations that can meet the needs of beginning farmers and other  underserved producers.  In addition, the Cooperative State Research,  Education, and Extension Service provides grants to universities, colleges,  and nonprofit organizations to deliver outreach and assistance to socially  disadvantaged farmers and ranchers, including farm, management, and  marketing assistance. Table 3 describes some of the projects these two  agencies have funded that have a focus on beginning farmers.
In addition, the Agricultural Marketing Service has programs such as the  Farmers Market Promotion Program to help farmers directly market their  products, which may indirectly assist beginning farmers. This grant  program targets funds to agricultural cooperatives; local governments;  nonprofit, public health, and economic development corporations;  regional farmers’ market authorities; and tribal governments to work  toward expanding direct producer-to-consumer marketing opportunities.  These include farmers’ markets, roadside stands, community-supported  agriculture programs, and others.
section_title: USDA Has Not Demonstrated the Effectiveness of Its Assistance for Beginning Farmers
paragraphs: USDA has several efforts under way through multiple agencies that assist  beginning farmers. However, it is unable to demonstrate the effectiveness  of its assistance to this group because (1) it does not have a crosscutting,  departmental strategic goal to guide its beginning farmer efforts and  because (2) it has only recently begun to develop information on the  characteristics of beginning farmers, which will supplement its existing  research on the age of farmers and changes in the number of farms.
subsections: section_title: USDA Lacks a Crosscutting, Departmental Strategic Goal for Its Beginning Farmer Efforts
paragraphs: Although many reasons exist for helping beginning farmers, USDA has not  transformed these reasons into a crosscutting, departmental strategic goal  that demonstrates the outcomes it expects its beginning farmer efforts to  achieve. Without such a goal, USDA runs the risk that its several efforts  are not mutually reinforcing or coordinated. Such a goal could address the  reasons for beginning farmer assistance cited in Congress and by  stakeholders and others. For example, relevant congressional committee  reports cite the importance of encouraging young people to enter farming  in order to address concerns about the nation’s aging farmer population.  Stakeholders cite additional reasons for beginning farmer assistance, such  as promoting social change by increasing the number of immigrant and  minority farmers and changes to the structure of agriculture by increasing  the number of small and middle-sized farms.
In 2006, USDA incorporated beginning farmers into its small farms policy  to better recognize the importance of assisting beginning farmers. The  Small Farms and Beginning Farmers and Ranchers Policy is designed to  provide a framework for maintaining the viability of small and beginning  farmer operations. It highlights numerous priorities as shown in table 4— from supporting the special needs of beginning farmers to emphasizing  socially desirable strategies for this group. It also calls for agencies and  mission areas to reflect the small and beginning farmer policy in their  strategic plans, performance plans, and other documents. However, the  policy does not provide a management and accountability focus for  USDA’s efforts. (See app. IV for a complete copy of USDA’s policy).  Furthermore, USDA strategic planning documents contain a beginning  farmer performance goal specific to the FSA loan programs, but they do  not integrate USDA’s and its multiple agencies’ several efforts to assist  beginning farmers.
A crosscutting, departmental strategic beginning farmer goal could  provide needed direction for USDA agencies and help ensure their efforts  to assist beginning farmers work toward a common purpose and serve  similar clients. For example, such a crosscutting goal could help address  concerns about whether FSA’s loans and NRCS’s conservation assistance  are directed toward similar groups of beginning farmers. FSA’s loan  programs are geared toward beginning farmers with limited economic  resources—those who cannot access credit from another source.  However, NRCS’s definition of a beginning farmer does not contain any  income limitations. Not only are these programs serving different groups  of farmers, there are unintended consequences as well. According to an  NRCS document, the agency’s higher cost-share rates for beginning  farmers have the potential to attract wealthy, retired, and absentee  landowners. For example, an NRCS official told us of a case where a  beginning farmer receiving NRCS assistance reported having an income of  about $1 million, and another said his state did not offer a higher EQIP  cost-share rate for beginning farmers because of concerns that wealthy  beginning farmers would benefit. Appendix V contains information about  NRCS’s and FSA’s beginning farmer definitions.
While USDA has not established a crosscutting, departmental strategic  goal for beginning farmers, two USDA agencies—FSA and RMA—have  each developed their own beginning farmer performance goals. These  goals set targets for the volume of their beginning farmer activities—the  number of farmers assisted and the dollars they receive—rather than  outcomes. Specifically, FSA annually tracks the volume of its lending to a  combined grouping of its borrowers—including beginning farmers and  socially disadvantaged farmers (racial and ethnic minority farmers and  women farmers). FSA measures its performance by the increase in lending  to these combined groups. For example, as shown in table 5, FSA reported  that in 2006, 39 percent of its loan funds were obligated to these groups.  Starting in fiscal year 2006, FSA adopted a related performance goal that  tracks increases in the number of beginning farmers, racial and ethnic  minority farmers, and women farmers in its portfolio as a percentage of  individuals in this category with at least $10,000 in sales. FSA reported  having 42,495 beginning and socially disadvantaged borrowers in its  portfolio in fiscal year 2006—15.5 percent of its estimate of the 273,349  beginning and socially disadvantaged farmers who have at least $10,000 in  sales. In effect, FSA measures its volume in providing loans to these  groups, rather than measuring progress toward achieving a particular  beginning farmer outcome, such as improving the financial well-being of  beginning farmers or ensuring they continue to farm after leaving the loan  program. Goals related to outcomes could provide additional insight into  program effectiveness and allow FSA to evaluate the extent to which its  loan programs contribute to a crosscutting, departmental goal.
In addition to its specific beginning farmer goals, FSA also has broad  performance goals related to its loan program. For example, one goal  addresses the frequency with which farmers graduate from FSA’s direct  loan program to its guaranteed loan program. Other goals address the  efficiency of FSA’s lending as shown in table 5.
In addition to the information FSA tracks on the number and types of  borrowers served, a 2005 University of Arkansas study provides insight  into the effectiveness of USDA’s direct loan program for beginning farmers  that could provide one basis for developing FSA performance goals that  feed into a departmental, crosscutting goal. The study focused on  borrowers, including beginning farmers, originating FSA direct loans  between fiscal year 1994 and 1996. Among other things, the study found  that beginning farmer borrowers had positive average annual change in  their net worth, potentially indicating financial progress. It also found that  about 82 percent of those who received beginning farmer direct farm  ownership loans who had left the loan program by 2004 had graduated to  another form of credit, such as FSA guaranteed loans or commercial loans,  or no longer needed credit. The remainder left farming voluntarily  (approximately 13 percent); involuntarily, such as due to financial stress  (approximately 3 percent); or died (approximately 3 percent).
Like FSA, RMA has performance goals related to beginning farmers and  tracks actions, as table 6 shows. However, tracking actions provides  limited performance information and does not indicate the level of  improvement.
Other agencies we spoke with—NRCS, the Agricultural Marketing Service,  and the Cooperative State Research, Education, and Extension Service— do not have beginning farmer performance goals. NRCS officials told us  their performance goals are driven by their natural resource and  environmental goals and do not directly target beginning farmers.  Cooperative State Research, Education, and Extension Service and  Agricultural Marketing Service officials said they have not developed  beginning farmer performance goals because their programs benefit  farmers broadly, rather than providing targeted assistance to this group.
Nevertheless, achieving a common goal of importance often requires  collaborative efforts among agencies. In 2005, GAO reported that  collaborative efforts require agencies to define and articulate the common  purpose or outcome they are seeking to achieve. In addition, GAO  reported that agencies’ collaborative efforts can be enhanced and  sustained by, among other things, establishing mutually reinforcing or  joint strategies; identifying and addressing needs by leveraging resources;  establishing compatible policies and procedures; and developing  mechanisms to monitor, evaluate, and report on results.
section_title: USDA Has Begun to Develop Information on Beginning Farmers That Could Help Better Target Its Efforts
paragraphs: USDA has recently begun to develop baseline information about beginning  farmer characteristics, which should help the department evaluate and  better target its beginning farmer efforts. Among other things, recently  developed analysis of existing data shows that beginning farmers are  younger than established farmers (about 7 in 10 beginning farmers are  under 55 years of age), operate smaller farms, and are slightly more  ethnically diverse and female than other farmers. Table 7 provides some  recent data on beginning farmers that was developed by economists from  USDA’s Economic Research Service (ERS). These data estimate there  were 484,981 beginning farmers with less than 10 years of experience  operating farms from which $1,000 or more of agricultural products were  produced and sold or normally would have been sold during the year.
ERS economists told us they are supplementing this work with additional  analysis to provide insight into the characteristics of beginning farmers.  This information will include the location of beginning farmers across the  United States, the types of production they engage in, the size of their  operations, their level of participation in government programs, as well as  whether they rent or own land. They are also analyzing differences  between beginning farmers actively engaged in farming and those who are  “hobby” farmers. For example, ERS economists found that roughly one- third of beginning farms in 2005 had no agricultural output and were likely  operated by individuals interested in a rural residential lifestyle.
In addition to ERS’s efforts, FSA has recently begun to analyze the  financial characteristics and types of production of beginning farmers with  FSA loans, as table 8 illustrates. This information shows, for example, that  most beginning farmers with FSA direct loans are involved in livestock,  corn, or soybean production.
This type of information should help FSA determine the extent to which  the characteristics of its beginning farmer borrowers reflect those of  beginning farmers as a whole. Furthermore, FSA officials we spoke with  said that as additional data are entered into the agency’s new centralized  system for monitoring borrowers, it will be possible to conduct long-term  analyses about these borrowers, including beginning farmers. This  information will be valuable for understanding how farming operations  change as a result of FSA assistance, including whether they expand and  survive.
Finally, USDA’s analysis of beginning farmer characteristics supplements  its work relating to changes in the age of farmers and the number of  farms. In 2007, USDA economists reported that the number of older  farmers is increasing and the number of young farmers is declining.  Younger farmers enter the business at a very slow rate, a fact that tends to  increase the average age of farmers as a whole. Agricultural census data  show that the average of age of principal farm operators in 2002 was 55, an  increase from 50 years of age in 1978. Nevertheless, the number of farms  has been relatively stable in recent years according to USDA because of a  near balance in the overall rate of farm entry and exit. Moreover, USDA  maintains that changes in the age composition of the farm population and  its overall size will not likely impair the nation’s food security, since  increases in labor productivity have been rapid enough to maintain farm  output.
section_title: Conclusions
paragraphs: Over the past two decades, heightened focus on beginning farmers by  Congress and the agricultural community has led to USDA programs and  incentives that provide much financial assistance to this group. However,  despite the billions of dollars provided to beginning farmers through loans  and conservation assistance, USDA has not yet demonstrated the  effectiveness of its assistance to beginning farmers by showing what its  expenditures are accomplishing. Although there are many reasons for  helping beginning farmers, USDA has not developed a crosscutting,  departmental strategic goal for its beginning farmer efforts to describe its  expected accomplishments. FSA provides information about the dollars it  directs to beginning farmers, but this information does not provide  adequate direction for the department’s efforts or speak to the outcomes  of its beginning farmer assistance. Without a crosscutting, departmental  strategic performance goal, USDA will be unable to determine the  effectiveness of its current beginning farmer efforts and the need for  changes in this assistance. Furthermore, the department’s recent work to  develop information about the characteristics of beginning farmers should  help it define the outcomes it wants to achieve and develop a related  crosscutting, departmental strategic goal. Additional baseline data about  beginning farmer characteristics that provide insight into who beginning  farmers are, which ones USDA assists, and how beginning farmer  operations in agriculture change over time should (1) help USDA track the  changes within this group, (2) provide a basis for more in-depth analyses  about the effects of existing programs on beginning farmers, and (3) help  identify the need for new forms of assistance. Furthermore, continued  analysis of how beginning farmer policies affect farm entry and the age of  farmers could provide insight into program effectiveness.
section_title: Recommendations for Executive Action
paragraphs: To better ensure USDA can provide Congress and the public with  information on the effectiveness of assistance to beginning farmers, we  are recommending that the Secretary of Agriculture develop a  crosscutting, departmental strategic beginning farmer performance goal  that identifies the desired outcomes of USDA’s beginning farmer  assistance and that links to related agency goals. We also recommend that  USDA track progress toward achieving these goals.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided USDA with a draft of this report for review and comment. In  a letter dated September 12, 2007, we received formal comments from the  Secretary of Agriculture. These comments are reprinted in appendix VI.  We also received oral technical comments, which we incorporated into the  report, as appropriate.
USDA stated that it generally agreed with our report and  recommendations.  In particular, USDA explained that it would be able to  develop more focused performance measures once the 2007 Farm Bill is  complete.  However, USDA did not specifically state whether it would  develop a crosscutting, departmental strategic goal as we recommended.
In addition, USDA stated that its departmental and agency strategic plans,  taken together, provide a comprehensive strategy to ensure that its  programs to assist beginning farmers are achieving stated objectives and  goals.  We disagree, since the goals in USDA’s plans do not provide  adequate direction and focus for the department’s multiple beginning  farmer efforts.  For example, the departmental goal in USDA’s Strategic  Plan to “Enhance the Competitiveness and Sustainability of Rural and  Farm Economies” is related to agricultural producers and rural  communities broadly; it is not specific to beginning farmers.  A  performance goal within that plan to increase the percentage of loans  made to beginning farmers, racial and ethnic minority farmers, and women  farmers is not crosscutting in nature and relates only to FSA’s loan  programs.
Moreover, USDA’s comments do not indicate a full appreciation of the  efforts needed to implement our recommendation.  For example, USDA  did not discuss the need for further analysis of (1) beginning farmer  characteristics, (2) gaps in beginning farmer assistance, and (3) the effects  of beginning farmer policies on farm entry and the age of farmers.  Such  analysis could help USDA define the outcomes it expects its beginning  farmer assistance to achieve and develop a crosscutting, departmental  strategic goal to measure success.  Furthermore, USDA did not directly  respond to our conclusion that it has not demonstrated what has been  accomplished by the billions of dollars of assistance to beginning farmers.   In light of the federal government’s large and growing structural deficits,  GAO has stated that agencies must link resources and activities to results.  While USDA has taken the first steps in tracking the numbers of farmers it  assists, a crosscutting strategic goal can help ensure its programs are  mutually reinforcing in their support of beginning farmers.
USDA also stated that FSA has virtually no discretion in setting the  definition of a qualified beginning farmer and rancher. However, we  believe that if USDA determines that consistency between FSA’s and  NRCS’s programmatic definitions would better ensure that beginning  farmer dollars work toward a common purpose, it should consider what  changes are needed and how best to effect those changes. If USDA finds  the changes in definitions require legislative action to achieve consistency  across programs or focus efforts on particular outcomes, it should provide  its analysis to Congress for consideration.
Finally, USDA provided examples of RMA partnership programs that  provided higher scores to applicants partnering with organizations that  help beginning farmers and other underserved producers.  Although the  partnership programs direct risk management assistance to a broad class  of producers rather than specifically to beginning farmers, we clarified the  language in our report to acknowledge how the application scoring  process can benefit beginning farmers. Our report also identifies examples  of projects designed to help beginning farmers and other underserved  producers.
As agreed with your staff, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date.  At that time, we will send copies of this report to interested  congressional committees and the Secretary of Agriculture. We will also  make copies available to others upon request. In addition, this report will  be available at no charge on the GAO Web site at http://www.gao.gov.
If you or your staff have any questions about this report or need additional  information, please contact me at (202) 512-3841 or shamesl@gao.gov.  Contact points for our Offices of Congressional Relations and of Public  Affairs may be found on the last page of this report. Key contributors to  this report are listed in appendix VII.
section_title: Appendix I: Scope and Methodology
paragraphs: At the request of the Chairman of the Senate Committee on Agriculture,  Nutrition, and Forestry, we examined U.S. Department of Agriculture  (USDA)  support to beginning farmers and ranchers. Our objectives were  to (1) identify the key steps USDA has taken to help beginning farmers and  (2) assess USDA’s actions to measure the effectiveness of these steps.
To identify USDA’s key steps to assist beginning farmers, we reviewed  documentation describing the purpose and extent of USDA assistance to  this group. We focused on departmental efforts to assist beginning  farmers, as well as efforts by individual agencies such as the Farm Service  Agency (FSA) and Natural Resources Conservation Service (NRCS). We  also reviewed legislation authorizing assistance to beginning farmers, such  as the Food, Agriculture, Conservation, and Trade Act of 1990; the  Agricultural Credit Improvement Act of 1992; and the Farm Security and  Rural Investment Act of 2002. To refine our understanding of the amount  of assistance provided through beginning farmer programs, we also spoke  with FSA and NRCS officials who manage programs that assist beginning  farmers. Specifically, we spoke with officials from FSA’s loan making and  servicing divisions, as well as the agency’s Economic and Policy Analysis  staff. We spoke with NRCS officials who administer the Environmental  Quality Incentives Program (EQIP) and Conservation Security Program  (CSP), as well as a representative from the Resource Conservation and  Development and Rural Lands Division. In addition, to identify other  programs that may assist beginning farmers either directly or indirectly,  we spoke with officials representing the Cooperative State Research,  Education, and Extension Service (CSREES); Risk Management Agency  (RMA); and the Agricultural Marketing Service (AMS). We reviewed data  these agencies provided about the level of assistance to beginning farmers,  including the number of loans and conservation dollars approved. We also  contacted small and beginning farmer coordinators and the Co-Executive  Directors of the Small Farms and Beginning Farmers and Ranchers  Council to discuss the strengths and limitations of departmental assistance  to beginning farmers.
To assess USDA’s actions to measure the effectiveness of steps taken to  assist beginning farmers, we reviewed USDA’s and agency strategic plans  and USDA’s Performance and Accountability Report. We also reviewed  reports on farm entry and exit, the characteristics of beginning farmers,  and the effectiveness of credit programs. In addition, we spoke with  agency officials from FSA’s Farm Loan Program and an official from  NRCS’s Strategic and Performance Planning Division. These officials  described agency efforts taken to measure the effectiveness of USDA’s  efforts to serve beginning farmers and data used to monitor program  performance. Last, we spoke with Economic Research Service (ERS) and  National Agricultural Statistics Service (NASS) officials about data  available regarding the characteristics of beginning farmers and future  directions for their research.
To understand the challenges beginning farmers face, we spoke with  representatives from the Advisory Committee on Beginning Farmers and  Ranchers. The Advisory Committee was established by USDA in 1998 to  provide advice to the Secretary of Agriculture about methods of creating  new farming and ranching opportunities, among other things. Members  interviewed included those representing academia, cooperative extension  programs, state government, and advocacy groups. On the basis of  discussions with members of the Advisory Committee, we identified and  interviewed other stakeholders, also representing academia, cooperative  extension programs, state government, and advocacy groups. These  interviews provided insight into USDA assistance to beginning farmers and  potential areas for change and included such groups as the American Farm  Bureau Federation, California FarmLink, Cornell Cooperative Extension,  Iowa State University’s Beginning Farmer Center, and the Montana  Department of Agriculture, among others. We also reviewed relevant  policy papers and spoke with representatives from such organizations as  the Center for Rural Affairs and the Sustainable Agriculture Coalition to  familiarize ourselves with their recommendations for beginning farmer  policy changes.
Our work was performed between September 2006 and August 2007 in  accordance with generally accepted government auditing standards.
section_title: Appendix II: FSA Loans to Beginning Farmers by State and Loan Type, Fiscal Year 2006
section_title: Appendix III: EQIP Financial Assistance Approved for Beginning Farmers by State, Fiscal Year 2006
section_title: Appendix IV: USDA Small Farms and Beginning Farmers and Ranchers Policy
section_title: Appendix V: FSA and NRCS Beginning Farmer Definitions
paragraphs: FSA and NRCS have different beginning farmer definitions in place. While  both definitions generally define a beginning farmer and rancher as one  who has operated a farm or ranch for 10 years or less who will materially  and substantially participate in its operation, only FSA’s definition  considers an applicant’s available resources as part of its program  eligibility requirements. FSA’s definition also establishes other  requirements that relate to its loan programs. For example, beginning  farmers must agree to participate in borrower training. Table 9 presents a  comparison of both FSA and NRCS beginning farmer definitions. has not operated a farm or ranch or  has operated a farm or ranch for not  more than 10 years  has not operated a farm or ranch, or  who has operated a farm or ranch for  not more than 10 consecutive years will materially and substantially will materially and substantially  participate in the operation of the farm  or ranch  participate in the operation of the farm  or ranch meets the loan eligibility requirements  of the program to which he/she is  applying  agrees to participate in such loan  assessment, borrower training, and  financial management programs as  the Secretary requires  demonstrates insufficient resources to  continue farming or ranching on a  viable scale  does not own a farm greater than 30  percent of the average size farm in  the county (farm ownership loans  only)
section_title: Appendix VI: Comments from the Department of Agriculture
section_title: Appendix VII: GAO Contact and Staff Acknowledgments
subsections: section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Charles Adams, Assistant  Director; Kevin Bray; Barbara El Osta; Paige Gilbreath; Lynn Musser; Carol  Herrnstadt Shulman; and Tracy Williams made key contributions to this  report.