May 15 - Beginning farms and ranches have been declining for at least two decades, according to a report released by the United States Department of Agriculture. In the 2013 edition of its report, “Beginning Farmers and Ranchers at a Glance,” the USDA found the percentage of principal operators (those responsible for most of the day-to-day farming decisions) with less than 10 years of experience farming their current farms has decreased from about 40 percent in 1982 to less than 30 percent in 2007.
Similarly, over time the share of younger operators has also been trending down — until 2011. According to the report, in 1982, 16 percent of all principal operators were under 35 years of age; by 2007, only 5 percent were under 35. That number rebounded, however, to 14 percent in 2011. Even so, the USDA found the average age of principal operators of beginning farms in 2011 was 49, not 35 or younger.
Part of the declining number of new farms by young farmers may be attributable to the challenges of acquiring capital and land, according to the report.
“Beginning farmers often report that their biggest challenge in getting started in farming is access to enough capital and farmland to operate at a size capable of earning a sufficient profit,” the report says.
The average beginning farm was 200 acres in 2011 compared to 434 acres for established farms. The report states that the majority of beginning farms include some owned land, but a higher share of beginning farms have only rented land.
The land problem is exacerbated by the rising cost of farm real estate values. The per-acre value of farm land in 2012 averaged $2,650, up 10.9 percent from 2011, according to the USDA.
Borrowing from a lender for purchases such as land is more difficult as well for a beginning farmer. Households of beginning farm operators have lower farm and nonfarm net worth than households of established farms. And the USDA found that 23 percent of beginning farms had a debt repayment capacity exceeding 100 percent in 2011, which means they would have to draw from additional sources to make their payments. On average, however, the USDA found the repayment capacity of beginning farms in 2011 to be about 50 percent.
Although beginning farmers do have access to government programs to help alleviate some of these challenges, it appears they are less likely than established farmers to take advantage of some of them. Only 14 percent of beginning farms received government payments in 2011, according to the USDA. These beginning farmers are also less likely to participate in federal crop insurance programs, the USDA found — beginning farmers operated only 7 percent of the acres enrolled in crop insurance in 2011.
Beginning farmers do, however, use other programs. In the fiscal year 2012, the USDA Farm Service Agency made 13,384 direct loans to beginning farmers for a total of $1.1 billion in obligations. FSA guaranteed another 2,659 loans to beginning farmers for a total of $639 million. According to the report, these two programs combined made 50 percent of their loans in the fiscal year 2011 and 42 percent of the loan obligations to beginning farmers.
Beginning farmers are also using the Farm Credit System. In 2011, the Farm Credit System made 61,995 loans to beginning farmers totaling $9.6 billion. These loans represented 19 percent of total FCS farm loans made and 14 percent of total new FCS farm loan volume in 2011, the USDA report states.
Click here for the full report.