GRAND ISLAND, Neb., Sept. 15, 2005 - Agriculture Secretary Mike Johanns today announced the addition of California, Minnesota and Nebraska to the list of states participating in the Beginning Farmer and Rancher Land Contract Guarantee Pilot Program.

"USDA is committed to helping beginning farmers and ranchers preserve their family farms and prosper in the marketplace," said Johanns. "Expanding the Land Contract Guarantee Pilot Program gives new producers another tool for acquiring property that will help them accomplish their goals of becoming successful farm operators."

Since 2003, the pilot program has been tested in Indiana, North Dakota, Oregon, Pennsylvania, Wisconsin and Iowa. The program, created by the 2002 Farm Bill, will continue in all nine pilot states through fiscal year 2007. Every year, up to five land contracts in each of the nine pilot states may be guaranteed.

The pilot program provides the seller of the land a 10-year "prompt payment" guarantee of the sale to the beginning farmer or rancher (buyer). If the buyer does not pay an annual installment due on the contract, or pays only part of an installment, USDA's Farm Service Agency (FSA) provides the scheduled payment or the unpaid portion to the seller through an escrow agent after the seller unsuccessfully attempts collection. The defaulted amount then becomes a federal debt of the buyer. If the buyer does not restructure the debt into a repayment plan or other FSA-approved plan, FSA may use other means to collect the buyer's debt. The guarantee is limited to the total of two annual installments and also covers the amount of unpaid taxes and insurance for a period of two years.

To be eligible for the Beginning Farmer and Rancher Land Contract Guarantee Pilot Program, a prospective buyer must:

• Be a beginning farmer or rancher and the owner and operator of a family farm after the contract is completed;
• Have participated in the business operations of a farm or ranch for at least three years;
• Be unable to obtain sufficient credit elsewhere without a guarantee to finance actual needs at reasonable rates and terms;
• Have an acceptable credit history demonstrated by satisfactory debt repayment; and
• Meet other requirements of the program.

Under the pilot program, the purchase price of the farm, ranch or other agricultural operation, cannot exceed the lesser of $500,000 or its current market value as determined by FSA. The interest rate charged to the buyer for the 10-year term of the guarantee cannot exceed FSA's direct farm ownership loan interest rate in effect at the time the guarantee is issued, plus three percentage points. Currently, the direct farm ownership interest rate is 4.875 percent. Rates change monthly and can be found at http://www.fsa.usda.gov/dafl/rates.htm. Contract payments must be amortized for a minimum of 20 years. In addition, balloon payments are prohibited, and payments on the contract must be of equal amounts.

FSA offers direct and guaranteed loans to farmers, ranchers and other agricultural producers to buy farms, equipment, feed, livestock and other farming essentials. FSA also offers farm loan programs for socially disadvantaged (minorities and women) persons and rural youth. Every year, FSA makes thousands of loans to producers who cannot obtain private, commercial credit. More information about FSA programs can be obtained by visiting a local FSA office or USDA Service Center and online at http://www.fsa.usda.gov.