Notes for Erie, Huron county farmers

Register
Aug 7, 2014

 

Do I need to follow FSA conservation compliance rules if I have a loan with another bank, but FSA guaranteed my loan?

Recently, our office received this inquiry, and I wanted to share this question and answer with everyone. Simply put: Yes, if a borrower has a guaranteed loan by FSA, then the borrower will have to follow FSA conservation compliance rules, i.e. Highly Erodible Land and Wetland Conservation provisions.

This is why: The U.S. Department of Agriculture’s Farm Service Agency makes and guarantees loans to family farmers topromote, build and sustain family farms in support of a thriving agricultural economy. FSA’s loan programs are designed to help family farmers start, purchase or expand their farming operation. Some farmers obtain their credit needs through the use of loan guarantees. Under a guaranteed loan, a commercial lender (e.g., banks, Farm Credit System institutions, credit unions) makes and services the loan, and FSA guarantees it against the loss of principal and interest on a loan up to a maximum of 90 percent in most cases. Farmers apply to an agricultural lender, which then arranges for the guarantee. The FSA guarantee permits lenders to make agricultural credit available to farmers who do not meet the lender’s normal underwriting criteria.

FSA then has the responsibility of approving all eligible loan guarantees and providing oversight of lenders’ activities. When obtaining a FSA guaranteed loan, the borrower certifies they are not and will not violate for the duration of the loan, the provisions of the Food Security Act of 1985 relating to Highly Erodible Land and Wetlands Conservation.

Simply put: The borrower certifies they are currently in compliance with, and will not violate, HEL and WC provisions, and that loan funds will not be used for a purpose that will contribute to a violation of HEL or WC provisions. The borrower certifies this compliance by completing an AD-1026 form for land in which they have farming interest. If a borrower fails to comply with HEL and WC provisions throughout the duration of the loan, this could result in the borrower being in non-monetary default on the loan. If corrective actions are not taken to mitigate the violation, the loan can be terminated through a foreclosure action.

For more information or for specific questions regarding Conservation Compliance and the FSA guaranteed loan, contact our office.

Successor-in-interest
Many FSA programs will allow payments to be made to heirs or successors when a program participant passes away. Additionally, contracts in programs such as CRP must be revised to reflect the successor(s) to a deceased participant’s interest. In the event of an FSA program participant’s death, it is important FSA be notified. Entities and joint operations that participate in FSA programs also need to notify FSA if a shareholder or member passes away. FSA benefits are reported to IRS and maintaining current, accurate records about participants is vital to ensuring those payments are reported correctly.

Tree Assistance Program signup continues
Orchardists and nursery tree growers who experienced losses from natural disasters that occurred on or after Oct. 1, 2011, can sign up for the Tree Assistance Program.

TAP was authorized by the Agricultural Act of 2014 as a permanent disaster program. TAP provides financial assistance to qualifying orchardists and nursery tree growers to replant or rehabilitate eligible trees, bushes and vines damaged by natural disasters.

Ohio was hit hard this past winter with record low temperatures and now orchard and vineyard producers are seeing the extent of damage. Eligible tree types include trees, bushes or vines that produce an annual crop for commercial purposes. Nursery trees include ornamental, fruit, nut and Christmas trees that are produced for commercial sale. Trees used for pulp or timber are ineligible.

To qualify for TAP, orchardists must suffer a qualifying tree, bush or vine loss in excess of 15 percent mortality from an eligible natural disaster. The eligible trees, bushes or vines must have been owned when the natural disaster occurred; however, eligible growers are not required to own the land on which the eligible trees, bushes and vines were planted. If the TAP application is approved, the eligible trees, bushes and vines must be replaced within 12 months from the date the application is approved. The cumulative total quantity of acres planted to trees, bushes or vines, for which a producer can receive TAP payments, cannot exceed 500 acres annually. If physical evidence of the lost trees, bushes, or vines no longer exists, the owner must provide documentation to determine the eligible trees, bushes or vines existed and were lost on approved disaster condition.

Examples of documentation include:

•Receipts for the original purchase of the eligible trees, bushes, or vines where TAP is requested.

•Documentation of labor and equipment used to plant or remove the eligible trees, bushes, or vines that were lost.

•Chemical, fertilizer or other related receipts to substantiate the existence of the eligible trees, bushes or vines.

RMA appraisal worksheet may be used by COC to substantiate applicant’s certification of trees lost. For more information, producers are encouraged to review the TAP fact sheet or contact their local FSA Office.

HEL and WC compliance
Landowners and operators are reminded that in order to receive payments from USDA, compliance with Highly Erodible Land and Wetland Conservation provisions is required. Farmers with HEL-determined soils are reminded to comply with tillage, crop residue and rotation requirements specified in their conservation plan. Farmers are to notify the USDA Farm Service Agency prior to conducting land clearing or drainage projects to insure compliance. Failure to obtain advance approval for any of these activities can result in the loss of eligibility for certain USDA program benefits. For more information on HEL and WC provisions and your responsibilities contact our office.