A new loan program being developed by the U.S. Department of Agriculture (USDA) aims to help farmers who have been affected by the increasingly high interest on locally grown food.
Most of the food in the United States is grown on large industrial farms that receive heavy amounts of government subsidies. But there is a burgeoning market in the farming industry for organic and locally grown food. The USDA’s new loan program will hopefully allow smaller farms to stay competitive and not get completely buried by larger industrial farms.
The proposal was set forth by Secretary of Agriculture Tom Vilsack in a meeting with the Associated Press. Secretary Vilsack indicated that the program will use “microloans” with sums of up to 35,000 to help family run farms and minority growers receive the startup capital that they need in order to get started. It is specifically constructed to help those farmers who have otherwise had a difficult time qualifying for loans from banks or other USDA loan programs.
The stated goal of the new program is to help spur entrepreneurship and expand business opportunities in the farming industry. Money from the loan will be able to help farmers buy seed, rent land and purchase the necessary equipment to begin production.
“It’s about making sure that we have diversity within agriculture, that we have a good blend of large production facilities, medium-sized operations and smaller operations,” Vilsack said. “It will help bolster the local and regional food system movement that is taking place.”
Responses to the program by economists and local farmers have been mixed, but there are still some noteworthy benefits.
Kay Jensen, an organic farmer who raises broccoli, strawberries and tomatoes in Sun Prairie, Wis., said that he could see at least two immediate benefits for smaller scale farmers. First, the paperwork needed to apply for the loan would fall dramatically from 30 pages to 7. Second, it would make it easier for farmers to borrow a manageable sum.
Jensen notes the new microloans fill a much needed niche within the farming industry. Most lenders try to cut costs by only giving out loans with values of $100,000 or more.
“A lot [of] times what we need is just small amounts of money, but a lot of times the only funding available is large amounts of money,” she said. “This whole concept of a microloan, where you’re looking at smaller, reasonable amounts of money, this really fits an incredible niche.”
By contrast, some are concerned that that the microloans are simply too small to be useful. David Swenson, an Iowa State University economist and local food researcher, believes that the proposed $35,000 isn’t enough to help local farmers set up shop or “capitalize any kind of meaningful food production system.” He argues that the cost for all the materials necessary for such a project are simply too expensive.
The interest rate on the loans is 1.25 percent and they don’t have to be repaid for seven years.