U.S. farm bank regulators tour Minnesota, tout plan to increase credit for emerging farmers

Breaking into farming often requires credit, tenacity and a little bit of luck. A proposed federal rule aims to stimulate more of the first.

While on a tour of southern Minnesota last week, the head of the U.S. Farm Credit Administration (FCA), Glen Smith, touted a proposed requirement that banks in the Farm Credit System (FCS) be scored on extending credit to new and beginning farmers.

The requirement would update an existing rule that dates back to the 1980s when Congress first required FCS banks do business with farmers who are young (under 35), beginning (fewer than 10 years), or small (less than $250,000 in gross sales).

FCA, which regulates the FCS, wants to take the rule a step further by evaluating institutions based on how well they're lending to young, beginning and small farmers.

"I'm going to say probably what this proposed reg[ulation] does is it would put teeth into [the existing rule]," Smith told the Star Tribune on a stop at the Hmong American Farm Association (HAFA) farm southeast of Rosemount.

The FCA, founded during the Great Depression, regulates 70 financial institutions nationwide that handle over $350 billion in loan volume.

"The system has done a good job of telling the story of young, beginning producers out there," said Smith, CEO and chair of FCA. "The thing is, just telling the story isn't good enough."

By most accounts, the farm industry has an aging population. The average age of a farmer is 57.5 years old, according to the U.S. Department of Agriculture. Meanwhile, younger farmers face barriers to entry, from funding that new tractor to finding and affording land.

At Big River Farms, a farming incubator near Marine on St. Croix, 18 teams are working the land this year. Few, however, are ever able to branch out with their own operation.

"We certainly have folks who've done it," said Sophia Lenarz-Coy, executive director of the Food Group, which operates Big River Farms. "But it's a heavy lift."

Smith and FCA colleagues traveled on May 17 from HAFA to an agricultural interpretive center outside Waseca, then on to a seed store in Amboy and a clinic in Fairmont.

The rule has only been adopted by the FCA board and must still go through a 60-day comment period.

Minnesota has tried to give new farmers a boost in its own ways.

In 2017, Gov. Mark Dayton signed into law the Beginning Farmer Tax Credit. Last year, nearly 640 beginning farmers statewide took advantage of the tax credit, according to the Minnesota Department of Agriculture.

Caitlin Keck farms on 160 acres with her husband, Jason, along the Steele County and Waseca County line in south-central Minnesota. They both grew up on farms, but when they moved home after college and working out of state, the family farms weren't ready to support an additional income.

So they rented land for a year. Eventually, they were able to buy land with assistance from the state tax credit and USDA.

"My husband and I got very lucky," said Keck. "Somebody could've come in and outbid us easily."

It's this leg up that other farmers, from conventional to organic, know can make a world of difference for getting started.

One lender, Mankato-based Compeer Financial, worked with HAFA Farm to get the operation running, including installing fencing around the vegetable acres to protect against nibbling deer. With its own property, HAFA is able to provide land to beginning Hmong farmers.

"I want to buy that tractor, I can do so now," said Janssen Hang, HAFA's executive director. "If I want to invest in perennial crops and asparagus, I can do so now. I know that I have long-term land access."

They can do that, Hang says, because they have access to credit.