USDA Farm Service Agency Greg Foulke, Farm Loan Chief November 7, 2012

1. USDA Farm Service AgencyGreg Foulke, Farm Loan Chief November 7, 2012

2. What Comprises FSA? Farm Programs Farm Loan Programs In October 1995, the Farm Loan Division of the Farmers Home Administration merged with the Agricultural Stabilization and Conservation Service (ASCS) to create the Farm Service Agency (FSA) 2

3. Over 40 Programs & Services Available: Guaranteed Operating Loans Direct and Counter-cyclical Program Farm Loans CRP ELAP Farm Storage Facility Loans GRP Disaster Programs Commodity Loans Dairy Programs Tobacco Transition Ag Mediation Beginner Farmer Loans ACRE SURE Livestock Indemnity Program County Committees NAP Coverage BCAP CREP Emergency Conservation Programs Direct Operating Loans Commodity Loans TAP MILC Program

4. Farm Programs • Price Support – principally commodity loans and loan deficiency payments (LDP’s) • Commodity loans are 9 month loans. Can repay P & I or at posted county price, whichever is lower, or producer can forfeit grain. Lenders with crop liens must execute lien waivers but can require the loan funds be paid jointly • LDP’s are only in effect when the market price is lower than the county loan rate

5. Farm Programs • What will the new Farm Bill bring? Past programs have included: • Direct & Countercyclical payments • Disaster Programs – NAP, LIP and Ad Hoc • Supplemental Revenue Assistance Payments (SURE) – expired 9/30/11 – sort of… payments are paid 2 years after the fact • Average Crop Revenue Election (ACRE) Program • Most likely will still have: • Compliance – acreage and bin measuring, HEL & wetland, etc. • AGI – Payment Limitations • Reconstitutions

6. Farm Programs • Conservation Programs • Conservation Reserve Program (CRP) • General and continuous signup (waterways, filter strips, etc.), 10 – 15 year contracts with annual payments • Emergency Conservation Program (ECP) • Cleanup from natural disasters such as tornadoes, flooding, & drought on crop land (some cost share) • Emergency Forest Restoration Program (EFRP) • Similar to ECP except for woods and forests

7. FY 2011 FSA Farm Support – Indiana • DCP and ACRE Payments ~ $220 Million • Conservation Reserve Program Payments ~ $44.8 Million • SURE Disaster Payments ~ $32.5 Million • Farm Storage Facility Loans ~ $14 Million • Other Disaster Programs ~ $2.36 Million

8. Farm Loan Programs (FLP) The Farm Service Agency makes and guarantees loans and provides credit counseling and supervision to farmers and ranchers who are temporarily unable to obtain private, commercial credit.

9. 10 FLP Offices Statewide Greensburg Columbia City Marion Corydon New Castle Rensselaer Hanover Vincennes Warsaw Rockville

10. Farm Loan Programs • Direct Loans • Farm Ownership, Operating and Emergency (Conservation loans will not be funded in FY 13) • Youth Loans • Guaranteed Loans • Farm Ownership and Term Operating (Conservation loans not yet funded for FY 13) • Lines of Credit • Interest Assistance (will not be funded in FY 13)

11. Loan Program Delivery • Direct loan requests are processed and serviced in local FSA offices • Guaranteed requests are completed by the lender and applicant and submitted to FSA for processing • Upon request, FSA staff assists applicants in completing paperwork • Most adverse decisions are appealable

12. Direct and Guaranteed Dollars Loaned – IN

13. Basic FLP Eligibility Criteria • unable to get credit elsewhere* • must be actively engaged in farming • family sized farmer * • sufficient training and experience • no prior agency loss • not delinquent on any non-tax Federal debt *Not applicable to Conservation Loans

14. Direct Loans • Farm Ownership Loans • $300,000 maximum per person/entity • up to 40 year repayment period • regular & “limited resource” interest rates • funds used to acquire or enlarge a farm • cannot refinance debts with FO funds • bridge loans authorized (with conditions) • limited funds available • joint financing/participation loans are popular • cannot finance non-farm enterprises

15. Beginning Farmer Definition • Meet regular eligibility requirements • Must not have operated farm/ranch for more than 10 years – applies to all entity members • Materially participate in operation of farm • Agree to borrower training as required • Cannot already own more than 30% of median farm size in the county where farm will be purchased (applies only if using FO program to purchase real estate)

16. Socially Disadvantaged Applicants • What is a Socially Disadvantaged Applicant (SDA)? An SDA applicant is one who is a member of a socially disadvantaged group whose members have been subjected to racial, ethnic, or gender prejudice because of their identity as a member of a group, without regard to their individual qualities. SDA groups include African Americans, American Indians, Alaskan Natives, Hispanics, Asians, Pacific Islanders, and Women.

17. SDA Applicants • FSA does not have a specific SDA loan program, but rather targets funds in existing programs to applicants that meet the definition • The targets are set by law • SDA loan applicants must meet regular loan program requirements

18. Direct Loans • Down Payment Program • Must meet definition of a beginning farmer or Socially Disadvantaged Applicant (SDA) • Applicant provides 5% down payment (cash) • FSA can loan up to 45% of purchase price or appraised value (whichever is less) over 20 years • No limit on purchase price but FSA loan cannot exceed $225,000 • Other lender loans at least 50% – must use a 30 year amortization and cannot balloon before 20 years • FSA interest rate is fixed at 1.5%

19. Direct Loans • Joint Financing Program • Also called FSA’s 50-50 participation loan program • Do not have to be a beginning farmer but must meet other FSA eligibility requirements • Another lender provide at least 50% of the financing for the R/E purchase • Other lender can have first mortgage – FSA will even guarantee their loan (if necessary) • FSA interest rate is fixed at 5% or can use FSA’s regular rate, whichever is lower

20. Direct Loans • Conservation Loans (CL)– not funded in FY 2013 • Must meet FSA’s regular elig requirements – except no ‘test for credit’ and don’t have to be a family sized farmer • CL funds may be used for any conservation purpose in a conservation plan, including, but not limited to: • Installation of structures to address soil, water, and related resource conservation • Establishment of forest cover for sustainable yield timber management, erosion control, or shelter belt purposes • Installation of water conservation measures • Establishment or improvement of permanent pasture • Installation of waste management systems

21. Direct Loans • Operating Loans • $300,000 maximum per person/entity • Up to 7 year repayment period • Regular & “limited resource” interest rates • Used for annual operating, equipment or livestock purchases, refinancing, etc. • Limited funds available • Cannot fund non-farm enterprises

22. Direct Loans • Emergency Loans • $500,000 maximum per person/entity • Various repayment periods – normally not to exceed 20 years • Fixed interest rate (OL rate + 1% – changes monthly) • Must have a qualifying loss ( 30% for production) – different for physical losses • County must be designated as a disaster area or contiguous to a designated county

23. Direct Loans • Youth Loans • $5,000 maximum per person • Various repayment periods • Regular operating loan interest rate • age 10 – 20 and live in town of 50,000 or less • Must have a sponsor/advisor (4-H Leader, Vo-Ag. Teacher, County Extension Agent) • Finance most agriculturally related projects

24. Direct Loan Applications • Applications for direct loan assistance are submitted to the FSA local office serving the area where the operation is located • Local FSA offices are listed in the telephone directory under U.S. Government, Department of Agriculture, Farm Service Agency • Applications, other forms, and office locations are available online at: www.fsa.usda.gov

25. Application Tips • Good farm business plan is critical • Applicants should: • Set short and long term goals • Plan conservatively • Have records to support production projections • Have good financial records • Get help from experts (Extension, State Programs, etc.)

26. Farm Storage Loans • Farm Storage Facility Loans • Available to all producers of eligible commodities • Eligible structures now include hay, renewable biomass and cold storage • $500,000 loan limit per structure • Mortgage required if loan exceeds $100,000 • 15% down payment required • Eligibility is based on need for additional storage • 7, 10 and 12 year terms and low fixed interest rates (published monthly – rates vary by loan term) • No test for credit requirement – most are eligible • Consider a Rural Development REAP grant to help pay for new energy efficient grain dryers

27. Confinement Operations • Hogs, Chickens, Ducks & Turkeys • Usually ≤ 12 year amortization on new hog buildings • 15 – 20 years on poultry buildings • FSA is very wary of older hog and poultry buildings – obsolete • Most under contracts – payment assignments • IDEM permit process • Underlying acreages vary – more is better

28. Guaranteed Loans • Operating and Farm Ownership Loans (Conservation loans were not funded in FY 2012) • Lender applies for the guarantee • $1,302,000 maximum per person/entity – adjusted annually (this is the FY 2013 limit) • Rates and terms negotiated by lender • Can use funds to refinance debt or purchase assets • Mostly 90% guarantees but up to 95% • Local FSA offices have lists of participating lenders

29. Guaranteed Loans • Land Contract Guarantee Program – purpose is to facilitate land transfers to Beginning Farmer or SDA applicants • 2 types of guarantees under this program – Seller may request either of the following: • Prompt Payment Guarantee: Guarantee of up to the amount of 3 amortized annual installments plus the cost of any related real estate taxes and insurance; or • Standard Guarantee: Guarantee of 90 percent of the outstanding principal balance under the land contract

30. Guaranteed Loans • Guarantee Fees • One time fee of 1.5% of the guaranteed portion of loan except: • No fee if loan has interest assistance • No fee if majority of loan ( 50%) will refinance FSA’s direct loan indebtedness • No fee if Down Payment Loan

31. Guaranteed Loans • Basic Guarantee Process • Lender submits application • Lender submits narrative, balance sheet, cash flow, appraisal, historical info, verifications, etc, as needed • Assuming all in order, FSA issues a conditional commitment (CC) • Lender closes loan after receiving CC • Lender submits closing information to FSA • FSA issues loan note guarantee • Lender may or may not sell guaranteed portion

32. Real Estate Appraisals • FSA appraisals must meet USPAP requirements for real estate • Self contained or summary – not restricted • Must use State Certified General appraisers if loan is  $250,000 • May use qualified if < $250,000

33. Questions or More Info? • Contact any FSA Office – we’re located in 75 counties • FSA State Office: 317-290-3030