Beginning Farmers: Additional Steps Needed to Demonstrate the	 
Effectiveness of USDA Assistance (18-SEP-07, GAO-07-1130).	 
                                                                 
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.		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-1130					        
    ACCNO:   A76495						        
  TITLE:     Beginning Farmers: Additional Steps Needed to Demonstrate
the Effectiveness of USDA Assistance				 
     DATE:   09/18/2007 
  SUBJECT:   Agricultural assistance				 
	     Agricultural industry				 
	     Agricultural policies				 
	     Agricultural programs				 
	     Agricultural workers				 
	     Conservation programs				 
	     Farm credit					 
	     Farm credit banks					 
	     Farm subsidies					 
	     Land transfers					 
	     Program evaluation 				 

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GAO-07-1130

   

     * [1]Results in Brief
     * [2]Background
     * [3]USDA's Lending and Conservation Assistance for Beginning Far

          * [4]Lending to Beginning Farmers Exceeds $1 Billion per Year
          * [5]Conservation Assistance for Beginning Farmers Nearly Doubled
          * [6]Other USDA Programs Assist Beginning Farmers

     * [7]USDA Has Not Demonstrated the Effectiveness of Its Assistanc

          * [8]USDA Lacks a Crosscutting, Departmental Strategic Goal for I
          * [9]USDA Has Begun to Develop Information on Beginning Farmers T

     * [10]Conclusions
     * [11]Recommendations for Executive Action
     * [12]Agency Comments and Our Evaluation
     * [13]GAO Contact
     * [14]Staff Acknowledgments
     * [15]GAO's Mission
     * [16]Obtaining Copies of GAO Reports and Testimony

          * [17]Order by Mail or Phone

     * [18]To Report Fraud, Waste, and Abuse in Federal Programs
     * [19]Congressional Relations
     * [20]Public Affairs

Report to the Chairman, Committee on Agriculture, Nutrition, and Forestry,
U.S. Senate

United States Government Accountability Office

GAO

September 2007

BEGINNING FARMERS

Additional Steps Needed to Demonstrate the Effectiveness of USDA
Assistance

GAO-07-1130

Contents

Letter 1

Results in Brief 4
Background 5
USDA's Lending and Conservation Assistance for Beginning Farmers Has
Increased 8
USDA Has Not Demonstrated the Effectiveness of Its Assistance for
Beginning Farmers 12
Conclusions 22
Recommendations for Executive Action 23
Agency Comments and Our Evaluation 23
Appendix I Scope and Methodology 26
Appendix II FSA Loans to Beginning Farmers by State and Loan Type, Fiscal
Year 2006 28
Appendix III EQIP Financial Assistance Approved for Beginning Farmers by
State, Fiscal Year 2006 30
Appendix IV USDA Small Farms and Beginning Farmers and Ranchers Policy 32
Appendix V FSA and NRCS Beginning Farmer Definitions 38
Appendix VI Comments from the Department of Agriculture 39
Appendix VII GAO Contact and Staff Acknowledgments 42

Tables

Table 1: FSA's Direct and Guaranteed Loans to Beginning Farmers and All
Borrowers, Fiscal Year 2000 through April 30, 2007 9
Table 2: EQIP and CSP Financial Assistance Approved, Fiscal Years 2004
through 2006 10
Table 3: Selected RMA and CSREES Projects That Assist Beginning Farmers,
Fiscal Year 2006 12
Table 4: Selected Statements from USDA's Small Farms and Beginning Farmers
and Ranchers Policy 14
Table 5: FSA Loan Program Performance Goals and Measures 16
Table 6: RMA Performance Goals Relating to Beginning Farmers, Fiscal Years
2006-2011 18
Table 7: Selected Characteristics of Beginning Farmers 20
Table 8: Distribution of Beginning Farmer Borrowers by Type of Production
for FSA Direct Loans Made in Fiscal Years 2005-2006 21
Table 9: FSA and NRCS Beginning Farmer Definitions 38

Abbreviations

AMS Agricultural Marketing Service
CSP Conservation Security Program
CSREES Cooperative State Research, Education, and Extension Service
EQIP Environmental Quality Incentives Program
ERS Economic Research Service
FSA Farm Service Agency
NASS National Agricultural Statistics Service
NRCS Natural Resources Conservation Service
OMB Office of Management and Budget
PART Program Assessment Rating Tool
RMA Risk Management Agency
USDA United States Department of Agriculture

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United States Government Accountability Office
Washington, DC 20548

September 18, 2007

The Honorable Tom Harkin
Chairman
Committee on Agriculture, Nutrition, and
  Forestry
United States Senate

Dear Mr. Chairman:

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.^1 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.^2 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.

^1For simplicity, we refer to beginning farmers and ranchers as "beginning
farmers" in this report.

^2USDA's Farm Service Agency defines socially disadvantaged farmers or
ranchers as members of groups whose members have been subjected to racial,
ethnic, or gender prejudice because of their identities as members of a
group without regard to their individual qualities. The Farm Service
Agency defines these groups to include women, African-Americans, American
Indians, Alaskan Natives, Hispanics, Asian-Americans, and Pacific
Islanders.

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.^3 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.^4 As of December 2006, the Farm Credit System had in
its portfolio over 189,000 loans to beginning farmers valued at $25.4
billion.

^3Pub. L. No. 102-554, 106 Stat. 4142.

^4GAO, Farm Credit Administration: Oversight of Special Mission to Serve
Young, Beginning, and Small Farmers Needs to Be Improved, GAO-02-304 ,
(Washington, D.C.: Mar. 8, 2002). Among other things, GAO found that just
over half of the Farm Credit System's lending institutions had features
designed to target services to young, beginning, and small farmers. The
Administration agreed to make improvements in response to GAO's
recommendations.

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.^5 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.^6 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.

^5GAO, Assistance to Beginning Farmers, (Washington, D.C.: May 14, 1982),
and GAO, Farm Finance: Number of New Farmers Is Declining, GAO/RCED-93-95
(Washington, D.C.: May 3, 1993).

^6GAO, Suggested Areas for Oversight for the 110th Congress, GAO-07-235R
(Washington, D.C.: Nov. 17, 2006).

Results in Brief

USDA lending and conservation assistance to beginning farmers has been
substantial and is growing. From fiscal year 2000 through fiscal year
2006, FSA's lending to beginning farmers rose from $716 million to $1.1
billion annually--for a total of more than $6 billion in loans. The $1.1
billion that FSA loaned to beginning farmers in fiscal year 2006 was 35
percent of the total amount USDA loaned all farmers. Assistance provided
by NRCS through two key conservation programs--EQIP and CSP--has also
increased. From fiscal year 2004 through 2006, the most recent years for
which data are available, the amount of financial assistance for beginning
farmers nearly doubled from over $47 million to nearly $92 million, for a
total of $233 million. The $92 million for beginning farmers in fiscal
year 2006 was 11 percent of the assistance for all farmers through these
programs.

However, despite these multiple forms of assistance provided to beginning
farmers, USDA has not demonstrated the effectiveness of its efforts to
assist this group. First, USDA has not developed a crosscutting,
departmental strategic goal to track the effectiveness of its multiple
beginning farmer efforts. Second, USDA has only recently begun to develop
baseline information about the characteristics of beginning farmers and
their farming operations that should help it evaluate and better target
its beginning farmer efforts. More specifically:

Crosscutting, departmental strategic performance goal. USDA has not
developed a crosscutting, departmental strategic beginning farmer goal
that demonstrates the outcomes it expects its several beginning farmer
efforts to achieve. Such a goal might relate to, 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. In 2006, USDA took a step to better
recognize the importance of assisting beginning farmers by including
beginning farmers in its existing departmental policy designed to maintain
the viability of small farms. However, this revised policy does not
provide a management and accountability focus for USDA's efforts.
Moreover, agency beginning farmer goals currently in place track the
numbers of farmers assisted and dollars provided to them, rather than
measuring outcomes. For example, 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 had 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. More
outcome-based information could provide additional insight into program
effectiveness and allow FSA to evaluate the extent to which its loan
programs contribute to a crosscutting, departmental strategic goal.

Baseline information about beginning farmer characteristics. USDA has
recently begun to develop baseline information 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 in agriculture change over time.

To provide Congress and the public with a more comprehensive understanding
of the effectiveness of USDA's beginning farmer efforts and to establish a
basis for monitoring its programs, we are recommending that the Secretary
of Agriculture adopt a crosscutting, departmental strategic beginning
farmer goal and related agency goals, as well as track progress toward
accomplishing them. USDA commented on a draft of this report and stated it
generally agreed with our report and recommendations. Specifically, USDA
commented that it would be able to develop more focused performance
measures once the 2007 Farm Bill is complete.

Background

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.^7 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.^8
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.^9 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.

^7Pub. L. No. 101-624, 104 Stat. 3359.

^8FSA reserves 35 percent of direct operating loans and 70 percent of
direct farm ownership loans for beginning farmers until September 1 of
each fiscal year. It reserves 40 percent of guaranteed operating loans and
25 percent of guaranteed farm ownership loans for beginning farmers until
April 1 of each fiscal year.

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.^10 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.^11

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.

^9The Conservation Reserve Program is a voluntary program through which
agricultural landowners retire farmland for conservation purposes. Through
this program, a landowner can receive annual rental payments and
cost-share assistance to establish long-term, resource-conserving covers
on eligible farmland.

^10Pub. L. No. 107-171, 116 Stat. 134.

^11For CSP, cost-share is only provided on new practice payments, a small
component of total CSP financial assistance.

USDA's Lending and Conservation Assistance for Beginning Farmers Has Increased

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.

Lending to Beginning Farmers Exceeds $1 Billion per Year

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.

Table 1: FSA's Direct and Guaranteed Loans to Beginning Farmers and All
Borrowers, Fiscal Year 2000 through April 30, 2007

Dollars in millions
                         Beginning                                            
             Number of farmer loan     Total Total loan   Percentage of total 
             beginning     dollars number of    dollars       loan dollars to 
Year   farmer loans   obligated     loans  obligated     beginning farmers 
2000          8,109      $716.2    31,040   $3,571.3                    20 
2001          8,003       706.6    28,243    3,168.5                    22 
2002          8,691       839.5    29,511    3,496.8                    24 
2003          8,633       851.2    29,196    3,520.9                    24 
2004          8,572       867.5    26,060    3,073.6                    28 
2005          9,592     1,030.3    25,968    3,022.9                    34 
2006         10,677     1,082.8    26,999    3,073.6                    35 
2007^a        6,995       709.0    17,295    2,035.5                    35 
Total        69,272    $6,803.1   214,312  $24,963.0                       

Source: GAO analysis of FSA data.

Note: Totals may not add due to rounding.

aFiscal year 2007 data represent the number of loans and obligations as of
April 30, 2007.

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.

Conservation Assistance for Beginning Farmers Nearly Doubled between Fiscal
Years 2004 and 2006

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.^12 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.

Table 2: EQIP and CSP Financial Assistance Approved, Fiscal Years 2004
through 2006^a

Dollars in millions
                            Beginning farmers             All farmers
                           Number of     Financial    Number of     Financial 
Year     Program        contracts    assistance    contracts    assistance 
2004     EQIP               2,274         $47.3       46,413        $718.2 
2005     EQIP               4,135          92.2       49,406         794.3 
2006     EQIP               3,377          91.1       41,190         788.0 
Subtotal EQIP               9,786        $230.7      137,009      $2,300.4 
2004     CSP                   20           $.2        2,188         $35.2 
2005     CSP                  150           1.4       12,780         145.7 
2006     CSP                  107            .7        4,323          49.6 
Subtotal CSP                  277          $2.3       19,291        $230.5 
Total    EQIP and                                                          
            CSP               $232.9      $2,530.9                            

Source: NRCS.

Note: Totals and subtotals may not add due to rounding.

aCSP financial assistance data represent payments approved for new
contracts in the given fiscal year. Payments farmers receive in subsequent
years for ongoing contracts are not reflected in the table. According to
the Congressional Research Service, for example, in fiscal year 2006,
funding for new and existing contracts was limited to $259 million, of
which approximately $50 million was available for new contracts.

^12NRCS began tracking EQIP and CSP assistance to beginning farmers in
fiscal year 2004. CSP data provided by NRCS used to compute totals in this
section reflect financial assistance for contracts approved in a given
fiscal year, rather than cumulative financial assistance for current and
previous year contracts. NRCS does not track the assistance provided to
beginning farmers through its other conservation programs.

Other USDA Programs Assist Beginning Farmers

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.^13 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.

^13These include, for example, the Community Outreach and Assistance
Partnership Program, Commodity Partnerships for Risk Management Education
Program, and the Commodity Partnerships Small Sessions Program.

Table 3: Selected RMA and CSREES Projects That Assist Beginning Farmers,
Fiscal Year 2006

                                       Amount of                              
Program            Organization         award Objective/project goals      
RMA Commodity      Minnesota Fruit   $149,511 Provide an integrated set of 
Partnerships       and Vegetable              educational conferences and  
Program for Risk   Growers                    workshops for existing       
Management         Association                producers, beginning         
Education                                     growers, producers planning  
                                                 to transfer the farm to the  
                                                 next generation, farmers'    
                                                 market vendors, and          
                                                 managers.                    
RMA Commodity      Oregon State       $10,000 Provide risk management      
Partnerships Small University                 education to new and         
Sessions Program                              beginning farmers of         
                                                 specialty crops in Jackson   
                                                 and Josephine Counties.      
                                                 Producers will learn how to  
                                                 create farm business and     
                                                 marketing plans, use         
                                                 diversification strategies   
                                                 for choosing enterprises,    
                                                 use and employ crop          
                                                 insurance, and understand    
                                                 the various direct marketing 
                                                 techniques available to      
                                                 small producers.             
RMA Community      Land Stewardship   $90,000 To increase the quality and  
Outreach and       Project                    quantity of support and      
Assistance                                    service for socially         
Partnership                                   disadvantaged beginning      
Program                                       farmers at all stages of     
                                                 farming, from exploration    
                                                 through establishment.       
CSREES Outreach    University of     $200,000 To bridge the gap between    
and Assistance for Maryland Eastern           traditional farmers and      
Socially           Shore                      minority, women, new and     
Disadvantaged                                 beginning farmers and        
Farmers and                                   ranchers by designing        
Ranchers                                      programs that assist them to 
                                                 acquire, own, operate, and   
                                                 retain farms and ranches.    

Source: Risk Management Agency and Cooperative State Research, Education,
and Extension Service.

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 Not Demonstrated the Effectiveness of Its Assistance for Beginning
Farmers

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.

USDA Lacks a Crosscutting, Departmental Strategic Goal for Its Beginning Farmer
Efforts

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.

Table 4: Selected Statements from USDA's Small Farms and Beginning Farmers
and Ranchers Policy

It is the policy of USDA to:                                               
      o Enable farmers, farm workers and ranchers to live and work in a safe  
      and responsible environment, own and operate farms and ranches as a     
      livelihood, and enhance opportunities for them to generate farm and     
      ranch incomes comparable to other economic sectors where feasible.      
      o Establish and support research, development, marketing, incentive,    
      regulatory, and outreach programs and initiatives that focus on the     
      special needs of small farms and beginning farmers and ranchers.        
      o Encourage and emphasize educational, outreach, marketing, regulatory, 
      credit, and other programs that will help ensure new generations of     
      small farmers and ranchers can gain access to the resources they need.  
      o ... emphasize sustainable agriculture, sustainable forestry, and      
      agroforestry as profitable, environmentally sound, and socially         
      desirable strategies for small farms and beginning farmers and          
      ranchers.                                                               

Source: USDA Departmental Regulation 9700-001, Small Farms and Beginning
Farmers and Ranchers Policy, August 3, 2006.

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.^14 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.^15
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.

^14FSA's estimate of the number of beginning and socially disadvantaged
farmers is based on its analysis of data collected in the 2002 Census of
Agriculture--the total number of all principal farm operators identified
as beginning farmers (estimated as farmers with less than 10 years on
their current farming operation), women, and minorities with at least
$10,000 in gross sales.

^15Of these 42,495 beginning and socially disadvantaged borrowers, 25,064
were beginning farmers and 17,431 were socially disadvantaged.

Table 5: FSA Loan Program Performance Goals and Measures

                     Measures                   Goal reported in
                                                                   FSA          
                                                       USDA  Strategic          
                                        USDA    Performance       Plan          
                  Fiscal  Fiscal   Strategic            and  Framework      OMB 
Performance      year    year Plan(fiscal Accountability    (fiscal  Program 
goals and        2006    2007       years Report (fiscal      years   Rating 
measures       actual    goal  2005-2010)     year 2006) 2005-2011) (PART)^a 
Goals directly                                                               
related to                                                                   
beginning                                                                    
farmers                                                                      
Increase                                                                     
lending to                                                                   
minority,                                                                    
women, and                                                                   
beginning                                                                    
farmers                                                                      
(percentage of                                                               
loan                                                                         
obligations)^b     39    37.1      X            X                      X     
Increase                                                                     
percentage of                                                                
beginning                                                                    
farmers,                                                                     
racial and                                                                   
ethnic                                                                       
minority                                                                     
farmers, and                                                                 
women farmers                                                                
financed by                                                                  
FSA                                                                          
(percent)^c      15.5    16.0                                X               
Goals related                                                                
to loan                                                                      
performance                                                                  
Reduce                                                                       
first-year                                                                   
delinquency                                                                  
rates on new                                                                 
loans                                                                        
(percent)           7      10                                                
Reduce average                                                               
processing                                                                   
time for                                                                     
direct loans                                                                 
(number of                                                                   
days)              31    34.5                   X            X         X     
Reduce average                                                               
processing                                                                   
time for                                                                     
guaranteed                                                                   
loans (number                                                                
of days)        12.63      14                   X            X         X     
Maintain or                                                                  
reduce direct                                                                
loan loss rate                                                               
(percent)         2.6     3.2                                X         X     
Maintain or                                                                  
reduce                                                                       
guaranteed                                                                   
loan loss rate                                                               
(percent)         .34       1                                X         X     
Maintain or                                                                  
reduce direct                                                                
loan                                                                         
delinquency                                                                  
rate (percent)    8.1     9.7                                          X     
Maintain or                                                                  
reduce                                                                       
guaranteed                                                                   
loan                                                                         
delinquency                                                                  
rate (percent)   1.45    1.99                                                
Administrative                                                               
cost per loan                                                                
(percent)        1.91    2.03                                          X     
Other                                                                        
performance                                                                  
goals                                                                        
Increased                                                                    
revenue and                                                                  
profit of                                                                    
farms and                                                                    
ranches                   $55                                                
(dollars)         N/A billion                                          X     
Graduate                                                                     
direct                                                                       
borrowers to                                                                 
the guaranteed                                                               
program                                                                      
(percent)          35      33                                          X     

Source: USDA and Office of Management and Budget documents.

Note: N/A refers to data that was not available at the time we wrote this
report.

aThe Office of Management and Budget (OMB) performed a Program Assessment
Rating Tool (PART) review of the FSA guaranteed loan program in 2003 and a
review of the direct loan program in 2004, and assessed both of these
programs as moderately effective.

bIn 2007, FSA combined its goal for beginning and socially disadvantaged
farmers--women and minority farmers--into a single goal. It also modified
its formula for calculating lending to this group to eliminate the double
counting of borrowers who are both beginning and socially disadvantaged
farmers.

cFSA developed this goal in fiscal year 2006. This goal reflects the
number of beginning farmers, racial and ethnic minorities, and women
currently in FSA's loan portfolio divided by the total number of all
principal farm operators in the 2002 Census of Agriculture with $10,000 or
more in gross sales who were identified as minority, women, or beginning
farmers (farmers with less than 10 years on their present farm).

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.^16 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).^17

^16John Nwoha, Bruce L. Ahrendsen, Bruce L. Dixon, Eddie C. Chavez, Sandra
J. Hamm, Daniel M. Settlage, and Diana Danforth. Farm Service Agency
Direct Farm Loan Program Effectiveness Study. Research Report 977.
Arkansas Agricultural Experiment Station, Division of Agriculture,
University of Arkansas System. Fayetteville, Arkansas. December 2005. The
study analyzed a sample of loans originated between October 1, 1993, and
September 30, 1996.

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.

Table 6: RMA Performance Goals Relating to Beginning Farmers, Fiscal Years
2006-2011

Performance goals       Baseline 2006           Target 2011                
Improve the delivery    Development of two risk Improve communications and 
mechanisms and reduce   management tools is     delivery mechanisms for    
barriers to             targeted to small farms new risk management tools  
participation for risk  and beginning limited   that are targeted to       
management tools        resource producers to   increase the participation 
targeted for small      increase participation. of small farms and         
farms and beginning                             beginning limited resource 
limited resource                                producers.                 
producers.                                                                 
Provide small farms and Progress measured in    Progress measured in       
beginning limited       numbers served.         improved ability to manage 
resource producers with Information and         risks. Seventy percent of  
information and         technical assistance    producer participants in   
technical assistance    provided to 50,000      an RMA-funded educational  
necessary to access and small farms and         activity will report that  
participate in RMA      beginning limited       they are more prepared to  
programs.               resource producers.     manage risks as a result   
                                                   of participating in the    
                                                   RMA-funded activity.       
Educate small farms and Utilize 62 Outreach     Utilize 75 Outreach        
beginning limited       Partnerships to provide Partnerships to provide    
resource producers on   training on risk        training on risk           
risk management         management strategies   management strategies to   
strategies.             to small farms and      small farms and beginning  
                           beginning limited       limited resource           
                           resource producers.     producers.                 

Source: RMA Strategic Plan for fiscal year 2006-2011.

Note: In addition to the goals reflected in this table, RMA has
established additional performance goals more broadly related to its
programs.

^17These statistics represent beginning farmers who are not considered
socially disadvantaged. The study calculated separate figures for
borrowers who were both beginning and socially disadvantaged. Of
beginning, non-socially disadvantaged farmers using direct operating loans
who had left the program by 2004, about half (50 percent) 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 35 percent), involuntarily (approximately 12 percent), or
through retirement (2 percent).

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.^18 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 Begun to Develop Information on Beginning Farmers That Could Help
Better Target Its Efforts

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.

^18GAO. Results-Oriented Government: Practices That Can Help Enhance and
Sustain Collaboration among Federal Agencies, GAO-06-15 (Washington, D.C.:
Oct. 21, 2005).

Table 7: Selected Characteristics of Beginning Farmers

                            Established farmers Beginning farmers 
Number of farms                    1,476,558           484,981 
Average farm net worth              $723,075          $384,755 
Under 55 years of age                    37%               70% 
55 years of age or older                 63%               30% 
Nonwhite or Hispanic                      6%                8% 
White, non-Hispanic                      94%               92% 
Male                                     91%               87% 
Female                                    9%               13% 

Source: D. Newton and M. Ahearn. USDA's Farm Definition and the Targeting
of Underserved Farmers. Presented at the Professional Agricultural Workers
Conference, December 2006. Tuskegee, Alabama.

Note: Beginning farmer data were calculated by analyzing data about
principal farm operators from the 2005 Agricultural Resource Management
Survey.

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.^19

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.

^19D. Newton and M. Ahearn. Management Strategies of Beginning Farmers and
Ranchers. Poster Presentation. Presented at the American Agricultural
Economics Association Meetings, July 29-31, 2007. Portland, Oregon.

Table 8: Distribution of Beginning Farmer Borrowers by Type of Production
for FSA Direct Loans Made in Fiscal Years 2005-2006

Type of production   Farm ownership loans Operating loans 
Beef cattle                         38.2%           37.8% 
Corn, soybean                        19.5            11.2 
General row crops                    11.4            10.7 
Dairy                                10.1            17.2 
Other crops                           4.9             6.5 
Wheat                                 5.6             3.0 
Other livestock                       3.0             2.6 
Cotton                                 .9             4.4 
Fruit, nut, nursery                   1.9             2.4 
Vegetable and potato                  1.6             2.6 
Poultry and eggs                      2.9             1.7 
Total                                100%          100%^a 

Source: FSA.

Note: According to FSA, for the purposes of this analysis general row
crops included rice, peanuts, grain sorghum, and diversified crop farms.
Other crops included hay, sugar, tobacco, and grass seed. Other livestock
included hogs, sheep, goats, horses, bees, alpacas, and aquaculture.

aTotals do not add to 100 percent due to rounding.

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.^20 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.^21 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.

Conclusions

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.

^20Related reports include, among others, Robert A. Hoppe, Penni Korb,
Erik J. O'Donoghue, and David E. Banker, Structure and Finances of U.S.
Farms. Family Farm Report, 2007 Edition. USDA Economic Research Service.
June 2007.; Fred Gale, "Age-Specific Patterns of Exit and Entry in U.S.
Farming, 1978-1997." Review of Agricultural Economics, vol. 25, no. 1
(2003); and Fred Gale, The New Generation of American Farmers: Farm Entry
and Exit Prospects for the 1990's. USDA Economic Research Service. October
1994.

^21Robert A. Hoppe and Penni Korb. Understanding U.S. Farm Exits. USDA
Economic Research Service. June 2006.

Recommendations for Executive Action

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.

Agency Comments and Our Evaluation

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
[email protected]. 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.

Sincerely yours,

Lisa Shames
Director, Natural Resources and Environment

Appendix I: Scope and Methodology

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.

Appendix II: FSA Loans to Beginning Farmers by State and Loan Type, Fiscal
Year 2006

Dollars in millions
                                                         Guaranteed          
                 Direct      Guaranteed    Direct farm      farm             
                operating     operating     ownership     ownership          
                  loans         loans         loans         loans       Total loans
                      Total         Total         Total         Total           Total 
              Number amount Number amount Number amount Number amount Number   amount 
                  of     of     of     of     of     of     of     of     of       of 
State          loans  loans  loans  loans  loans  loans  loans  loans  loans  loans^a 
Alabama           51   $1.8      6   $0.3      6   $0.4     32  $15.0     95    $17.6 
Alaska             2    0.1      0    0.0      0    0.0      0    0.0      2      0.1 
Arizona           15    1.0      3    0.2      2    0.4      0    0.0     20      1.6 
Arkansas         393   26.4    178   28.5     38    5.2    105   44.3    714    104.4 
California        59    4.7     70   16.1      9    1.5     15    5.2    153     27.6 
Colorado          41    2.1     16    1.7     15    1.4     13    4.0     85      9.2 
Connecticut        3    0.1      2    0.5      0    0.0      2    0.3      7      0.9 
Delaware           1    0.1      0    0.0      3    0.6      3    1.2      7      1.9 
Florida           29    2.1     10    1.1      4    0.5      6    3.4     49      7.1 
Georgia          164   11.8     73   10.5     12    1.4     35   19.2    284     42.9 
Hawaii            25    0.4      1    0.0      0    0.0      1    0.2     27      0.7 
Idaho            109    7.0     48    7.0     16    2.4     13    2.1    186     18.6 
Illinois         103    5.8     59    6.1     73    7.1     18    2.5    253     21.4 
Indiana           42    2.0     20    1.6     61    8.8     33   10.2    156     22.7 
Iowa             492   19.6    102   15.3    200   26.6     42   11.1    836     72.6 
Kansas           162    8.5     27    2.6    123   13.8     18    2.1    330     27.0 
Kentucky         308    8.9     41    5.6     59    6.8     32    8.1    440     29.4 
Louisiana        126    8.8     52   10.1      3    0.6      8    3.0    189     22.5 
Maine             34    1.6      6    0.6      2    0.4      2    0.3     44      2.9 
Maryland           2    0.1      4    0.3      1    0.2     12    2.9     19      3.6 
Massachusetts     19    0.8      5    1.0      3    0.3      2    1.3     29      3.3 
Michigan         117    7.1     31    3.4     51    6.3     25    5.0    224     21.9 
Minnesota        437   23.4    115   14.2    106   16.1     23    4.9    681     58.5 
Mississippi      106    6.3     23    5.6      5    0.4      4    2.9    138     15.2 
Missouri         159    8.1     60    8.1     83   10.1     65   19.0    367     45.3 
Montana           43    2.7     29    2.2     14    2.3     14    2.5    100      9.7 
Nebraska         526   25.4     53    8.5    138   17.9     28    6.3    745     58.1 
Nevada            14    1.1      1    0.1      0    0.0      0    0.0     15      1.2 
New Hampshire     24    0.8      0    0.0      3    0.2      0    0.0     27      1.0 
New Jersey        23    1.1      2    0.2      2    0.4      1    0.9     28      2.5 
New Mexico        15    0.9      9    1.6      4    0.4      4    0.4     32      3.3 
New York         118    7.0     42    3.2     27    3.3     10    1.7    197     15.2 
North             78    3.9     39    5.7      9    1.1     40   12.6    166     23.3 
Carolina                                                                              
North Dakota     206   13.4     94   17.2     51    5.6     12    1.8    363     38.0 
Ohio              42    1.3     33    2.9     42    4.7     66   10.2    183     19.2 
Oklahoma         223    9.0     38    7.8    110   12.5     45   13.7    416     43.0 
Oregon           124    5.6     29    4.1      9    1.7      5    1.7    167     13.0 
Pennsylvania     229   12.7     18    1.8     34    5.7     17    5.0    298     25.2 
Rhode Island       3    0.0      0    0.0      0    0.0      0    0.0      3      0.0 
South            129    8.9     15    3.7     22    3.0     46   18.6    212     34.3 
Carolina                                                                              
South Dakota     368   19.3     57    8.1     80   10.7     16    4.5    521     42.6 
Tennessee         76    4.4     23    5.2     21    2.9     10    3.9    130     16.4 
Texas            265   15.5     70   13.8     51    7.1     16    6.7    402     43.1 
Utah             110    5.8      5    0.5     20    2.4     11    1.9    146     10.7 
Vermont           63    3.0      7    1.6      2    0.3      5    1.0     77      5.9 
Virginia          24    1.2     11    1.4      9    1.2     10    3.0     54      6.8 
Washington        86    6.0     37    4.9     10    1.6      8    2.1    141     14.6 
West Virginia     91    2.5      1    0.1      8    1.1      2    0.3    102      4.1 
Wisconsin        527   30.5     84   12.0    107   16.5     45   10.4    763     69.4 
Wyoming           20    1.0      4    0.5      8    1.2      2    0.3     34      3.0 
Puerto Rico        4    0.1      0    0.0      7    0.4      0    0.0     11      0.5 
Virgin             2    0.0      0    0.0      0    0.0      0    0.0      2      0.0 
Islands                                                                               
Western            6    0.1      0    0.0      1    0.1      0    0.0      7      0.1 
Pacific                                                                               
Territories                                                                           
National       6,438 $341.8  1,653 $247.5  1,664 $215.4    922 $278.1 10,677 $1,082.8 
total^a                                                                               

Source: FSA

aDollar totals may not add due to rounding.

Appendix III: EQIP Financial Assistance Approved for Beginning Farmers by
State, Fiscal Year 2006

Dollars in millions                                
State               Contracts Financial assistance 
Alabama                   106                 $1.4 
Alaska                     26                  1.3 
Arizona                    52                  4.6 
Arkansas                   72                  1.3 
California                182                  8.4 
Colorado                   96                  2.8 
Connecticut                23                  2.3 
Delaware                   25                  1.2 
Florida                     1                    0 
Georgia                     7                  0.1 
Hawaii                     32                  1.1 
Idaho                      56                  2.1 
Illinois                    5                  0.1 
Indiana                    38                  0.9 
Iowa                       65                  1.5 
Kansas                     87                  1.5 
Kentucky                  100                  1.0 
Louisiana                 182                  2.5 
Maine                      64                  1.4 
Maryland                   48                  0.6 
Massachusetts              24                  0.5 
Michigan                   45                  2.3 
Minnesota                  11                  0.2 
Mississippi               293                  2.0 
Missouri                   77                  1.6 
Montana                    88                  2.6 
Nebraska                   51                  1.4 
Nevada                      7                  0.8 
New Hampshire              63                  1.9 
New Jersey                 30                  1.9 
New Mexico                114                  3.2 
New York                   33                  0.8 
North Carolina            148                  4.5 
North Dakota               55                  2.6 
Ohio                       23                  0.2 
Oklahoma                  260                  3.2 
Oregon                     44                  1.6 
Pennsylvania               48                  2.3 
Rhode Island               30                  1.8 
South Carolina             96                  1.7 
South Dakota               31                  1.8 
Tennessee                  39                  0.7 
Texas                     107                  2.1 
Utah                       74                  3.4 
Vermont                     9                  0.4 
Virginia                   88                  3.1 
Washington                 42                  1.7 
West Virginia              18                  0.2 
Wisconsin                   4                  0.1 
Wyoming                    26                  1.1 
Pacific Basin              23                  0.7 
Puerto Rico               109                  2.7 
National Total          3,377                $91.1 

Source: NRCS

Appendix IV: USDA Small Farms and Beginning Farmers and Ranchers Policy

Source: USDA

Appendix V: FSA and NRCS Beginning Farmer Definitions

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.

Table 9: FSA and NRCS Beginning Farmer Definitions

                                          Natural Resources Conservation      
Farm Service Agency                    Service                             
As defined in 7 U.S.C. 1991(a)(11) and As defined in 7 C.F.R. SS 1466.3    
7 C.F.R. S 1941.4 a beginning farmer   and 1469.3, a beginning farmer or   
or rancher is an individual or entity  rancher is an individual or entity  
who:                                   who:                                
      o has not operated a farm or ranch     o has not operated a farm or     
      or has operated a farm or ranch for    ranch, or who has operated a     
      not more than 10 years                 farm or ranch for not more than  
                                             10 consecutive years             
      o will materially and substantially    o will materially and            
      participate in the operation of the    substantially participate in the 
      farm or ranch^a                        operation of the farm or ranch^a 
      o meets the loan eligibility                                            
      requirements of the program to                                          
      which he/she is applying                                                
      o agrees to participate in such                                         
      loan assessment, borrower training,                                     
      and financial management programs                                       
      as the Secretary requires                                               
      o demonstrates insufficient                                             
      resources to continue farming or                                        
      ranching on a viable scale                                              
      o does not own a farm greater than                                      
      30 percent of the average size farm                                     
      in the county (farm ownership loans                                     
      only)                                                                   

Source: GAO.

aIf the applicant is an entity, all members must materially and
substantially participate in the operation of the farm or ranch.

Appendix VI: Comments from the Department of Agriculture

Appendix VII: GAO Contact and Staff Acknowledgments

GAO Contact

Lisa Shames, (202) 512-3841

Staff Acknowledgments

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.

(360761)

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Highlights of GAO-07-1130 , a report to the Chairman of the Committee on
Agriculture, Nutrition, and Forestry, U.S. Senate

BEGINNING FARMERS

Additional Steps Needed to Demonstrate the Effectiveness of USDA
Assistance

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.

[21]What GAO Recommends

GAO recommends that USDA adopt a crosscutting, departmental strategic
beginning farmer goal that identifies the desired outcomes for its
beginning farmer assistance and links to related agency performance goals.
We also recommend that USDA track progress toward implementing these
goals. In commenting on a draft of this report, USDA said it generally
agreed with our report and recommendations.

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:

           o 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.

           o 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.

*** End of document. ***