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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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) 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.

Summary: 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.. 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.