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Legal issues in farming

I know this topic is about as boring as watching paint dry to most of my readers...stay with me though!

Last night I took part in a 2-hour webinar which is part of a longer legal series from Farm Commons. (I don't plan to attend others because, at this point, those are less relevant.) They're a nonprofit doing legal counsel for local, organic, and direct-market farmers. In other sessions, attorney Rachel Armstrong covers issues surrounding on-farm tourism, CSAs (did you know gift certificate and securities laws may apply?), food safety liability, etc.. Last night's talk was mostly around topics of organizing the business such as protecting the name, insurance, financing, farm transfers, etc.. 

I found all her information very helpful and it was 2 hours well-spent...I'll just point out a couple of highlights that may be of interest to a more general audience. 

Rachel made a key distinction between assets and stock in an existing operation. It seems highly important to me that with America's farming population getting older and retiring, that the younger generation understand this. It's the first time I've come across it in my reading about the transfer of agricultural lands.

Basically, the process of taking over a farm as a new owner can be broken down into 2 categories...are you buying the acreage, barns, tractors only? Or are you taking over the existing business with the intent to keep it running? If the current owners have a dairy farm and you want to start growing lettuce, there could be problems if you only want the assets--most of the contracts, zoning variances, the like, will rest with the current business. Simply taking over the property may not always be "enough." Do your homework. 

This was one area that really surprised me and left me a little more hopeful for the future. The Farm Service Agency representative for sort-of Southeast Wisconsin was on the call with some slides to talk about financing. 

When you see the price tag on, say, a $600,000 farm it can be a little daunting. But I had no idea the programs that are available in agriculture...including help for beginning farms, socially disadvantaged farmers, and they don't necessarily need a large down payment or look at repayment ability in the same way that, say, a regular business loan might. 

One of the beginning farmer loans they ask for just 5% down payment, FSA brings 45%, then a major bank brings the other 50%. Some of the loans the rep discussed have something like a 1.5% interest rate where they are more lenient on your cash flow and credit worthiness than some of the misers in the normal banking industry. 

And we're talking $300,000 loans for equipment and livestock. Plus separate loans for real estate and building. There's also a smaller micro-loan program. That's a lot of cash on the table that wouldn't be there for Joe Smith buying a first home. 

I don't know why those numbers blew my mind, but they did. It makes sense that we want to support the nation's agriculture infrastructure like's our food supply after all. It just made me think that all lending should be so generous and fair in the terms. I'm pretty sure one of my credit cards is somewhere in the 20% range for an interest rate. 

Crop insurance--
Another fascinating subject (to me) was that hardly anybody on the panel could think of any major crop insurance programs outside the federally subsidized one. 77% of crop insurance in the US goes to corn, wheat, soybeans, and cotton. If you fall outside that, you're a "specialty crop." Wrap your mind around that for a second. 

Rachel even gave the wonderful example of an apple orchard and how difficult it can be to get protection unless you are in a county with an historic volume of apple production. I see it from the flip side that insurers want to know risk-potential and outcome probabilities. But that sucks for apple growers or whoever. 

My side note: something like this is going on in the US sheep industry--it was once huge. But numbers of dropped, prices are too variable, we can't compete with Australia or New Zealand for volume...even in our large Western flocks. Personally, I see the national shift of the US flock to something other than strict commodity as a mix of good and bad. 5 ewes eat about as much as one cow. I see why the incentive is on the higher input animal(s), but in my opinion you lose something in that system. We should be prioritizing low input farming, but that's a policy debate for another time. 

For those of you curious about the numbers and supporting our farmers/ example that was tossed out was that if you lost between 25-50% of your crop for the year, the insurance will pay something like 70% of normal price. Better than nothing, I guess.