Later this summer, the Delaware Valley Regional Planning Commission (DVRPC) will host a meeting on Beginning Farmers’ access to land and financing and publish an overview of financial and technical assistance resources. This meeting and summary document follow-up recommendations identified in DVRPC’s 2011 Eating Here: Greater Philadelphia’s Food System Plan and DVRPC’s new Long Range Plan Connections to preserve farmland and working landscapes and strengthen local agricultural industry to improve access to food. This short blog post highlights some of the major findings and recommendations in the larger forthcoming report.
Why focus on beginning farmers?
Although demand for food and especially fresh, sustainably-produced, local food has increased, there are fewer farmers. A recent United States Department of Agriculture (USDA) Economic Research Service report found that the number of beginning farmers declined by 12 percent between 1982 and 2007. And the average age of principal farm operators in New Jersey has increased to 57 years old, the same as the average age of an American farmer. Experts estimate that as much as half of the country’s farmland will change hands in the next 5 to 15 years.
It remains very difficult to make a living as a full-time farmer, and especially difficult for a new or beginning farmer. According to the 2007 U.S. Census of Agriculture, over 53 percent of farmers in New Jersey claim an off-farm job as their primary source of income. Nationwide, beginning farmers are significantly more likely to have earned off-farm income than established farmers.
USDA defines beginning farmers and ranchers as those who have operated a farm or ranch as the principal operator for 10 or fewer years.
- 22% of all US farms are operated by beginning farmers.
- Beginning farmers are not necessarily young. The average age of a farmer that started farming between 1998 and 2007 is 49.
- Leasing land may be a sign of success: 61% of established farmers own all of the land they operate, while 78% of beginning farmers own all of the land they operate. It appears some farmers rent more land as they become more experienced or successful, or do not own land as part of their business model.
- 34% of beginning farmers list farming as primary occupation, while 45% of all farmers list farming as a primary occupation.
Current Opportunities and Challenges in Farming
Increased interest and awareness of food, food production, and farming has created more market opportunities for farmers. Simultaneously, a new generation of farmers – many of whom do not come from farming families – are trying their hands at agriculture. Despite a need for more farmers and a growing (but still small) interest in agriculture as a profession, farming is a hard industry to get in to.
A survey by the National Young Farmers Coalition found that beginning farmers are facing three main challenges: (1) access to capital; (2) access to land; and (3) access to healthcare. And nurturing young and beginning farmers is a key to the future of US (and New Jersey’s) agriculture.
- Non-farm Backgrounds. An increasing number of beginning farmers today come from non-farm backgrounds. These new farmers often have trouble accessing farmland since more traditional, family farms are often passed down from generation to generation. They may also lack access to mentors or support networks that are built into family farms.
- Land Intensive Business. Farmers need access to affordable land because agriculture is land-intensive, has slim margins for profitability, and is subject to weather uncertainties and extreme fluctuations in global prices. When urban development encroaches upon farmland, the value of the remaining farmland increases. According to the American Farmland Trust (http://www.farmland.org), between 2002 and 2007, 4,080,300 acres of agricultural land were converted to developed uses—nearly the size of New Jersey’s land area. This decrease in available, suitable land creates obstacles for new and aspiring farmers to purchase or lease land, and increases the costs of farming, as property taxes, labor costs, and other transaction and opportunity costs rise. Farm real estate is a major financial asset for farmers, accounting for 84 percent of the total value of U.S. farm assets in 2009. Farm real estate is often the principal source of collateral for farm loans, allowing farm operators to purchase additional land and equipment or finance current operating expenses and meet household needs.
- Farmland Preservation. Farmland preservation programs aim to maintain affordable farmland for the future by reducing land’s development potential while retaining its agricultural value. New Jersey is a model for state farmland preservation programs. By the end of 2012, New Jersey had preserved over 2,100 farms, bringing the total amount of preserved acreage to 201,327.
- Making Farming Profitable. Farming can be a profitable enterprise; however it often requires substantial start-up costs and many years of sound business decisions to realize a profit. A 2009 USDA report on Beginning Farmers and Ranchers found that a farm that grosses at least $50,000 in value of production has an average asset base valued over $1.9 million. The considerable upfront capital and land investment required to earn a profit is often a barrier to many beginning and small farmers.
- Lack of Credit History and Collateral. Many beginning farmers, especially younger farmers, have trouble securing a loan because they lack the required credit history, capital, or assets to collateralize a loan. Because beginning farmers, like other small business owners, often need additional financing in order to make their enterprises more profitable, some have turned to friends or family to finance farm expenses; which limits new farming enterprises to personal networks.
Supporting local farmers and the growth of the farming industry is an important component of sustaining and increasing access to healthy foods, supporting economic development, and preserving open space in New Jersey. To start and maintain successful farming enterprises, farmers need access to land, capital, and technical assistance in addition to other needs, such as health insurance. While DVRPC is not a financial expert, to further encourage a new generation of farmers, DVRPC has highlighted a few of the following recommendations:
- Promote land leasing. The Pennsylvania Association for Sustainable Agriculture (PASA) created the Farm Lease Connection that blends web technology with personal communities to build new farm enterprises in Pennsylvania and New Jersey. PASA worked with the Temple School of Business to determine the costs of land ownership for a young farmer and how a land leasing program may help the farmer build a profitable business more quickly.
- Combine Technical Assistance with Financial Assistance. There are many non-traditional farmer financing programs, such as small revolving loan programs, Individual Development Accounts (IDAs), and tax credits, which have been created by a variety of organizations in other states and regions. These new programs rely on community partners to supplement administrative and financial products. They are often tied to technical assistance to ensure that the farmer has the best chance for future business success. NOFA-NJ’s Beginning Farmer Program ties mentoring with a farm incubator apprenticeship.
- Establish Relationship Lending. Lenders should reevaluate lending criteria for small and midsized farms. Many traditional loan programs are based on conventional agriculture models and commodity products. Intensive agriculture, such as growing vegetables that require harvesting by hand or with small machines, often has lower equipment and capital needs, but relatively high labor and operating costs. If not buying land, farmers seek loans in smaller amounts ($50,000 or less) and may require flexible repayment programs based on their cash flow projections. Organizations such as the Carrot Project and the Michigan State University’s Center for Regional Food Systems recommend that lenders focus on “relationship lending” and asset building. Relationship lending helps the lender to understand the borrower’s capacity to manage a profitable enterprise and often involves a more hands-on approach.
- Create Communities of Practice at County and Regional Levels. A county or regional entity, such as a County Agriculture Development Council, is in a good position to develop a community of practice among borrowers, lenders, investors, technical assistance providers. These communities of practice could host networking events and workshops to provide more opportunities for coordination between technical and financial assistance providers, as well as help to bridge the knowledge gap between farmers and lenders through better communication.
Alison Hastings of the Delaware Valley Regional Planning Commission and the Commission’s partners are regular contributors to the Dodge blog on issues of food policy and regional food systems.