Utilizing FSA conservation loan programs to support farm conservation activities

Abstract

Purpose

The Farm Service Agency (FSA) conservation loan program was introduced in the 2008 Farm Bill to provide additional credit to assist producers implementing approved Natural Resources Conservation Service (NRCS) conservation projects. This paper explores why this program has been widely underutilized despite an overall increase in United States Department of Agriculture (USDA) Conservation Program participation.

Design/methodology/approach

The FSA administrative loan data are merged with NRCS program participation and payments data for 2010–2021. The share of project costs paid by producers and resulting savings achieved by farmers participating in both programs if their cost-share portion was paid by FSA loans are estimated, as well as the impact on farmer conservation spending under different estimates of increased participation.

Findings

A significant share of FSA farmers are likely to take advantage of NRCS programs, with the majority of participants paying under $25,000 in cost-share portions. These loans are less suited to guaranteed conservation loans and more appropriate for the discontinued direct conservation loan program. Few FSA borrowers participating in NRCS cost-share programs pay more than $50,000 in cost-share portions. These loans would receive the majority of benefits from interest reduction schemes under the current guaranteed loan program.

Practical implications

Our results and suggestions provide valuable information when discussing the Guaranteed Conservation Loan Program in the 2023 Farm Bill legislation.

Originality/value

No prior research has attempted to merge FSA guaranteed or direct loan data with conservation program participation and payment data, focused on producer cost-share levels or the FSA Guaranteed Conservation Loan Program in the last decade, making this study a valuable contribution to the literature.