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Emerging Minnesota farmers get a boost in the form of down payment assistance

The state will give grants up to $15,000 per eligible farmer, which the person has to match.

The price of corn and soybeans is a key driver of land prices.
The price of corn and soybeans is a key driver of land prices.
REUTERS/Bryan Woolston

Minnesota officials want more new farmers, including people of color, as the average age of the predominantly white industry inches higher.

The latest initiative to help meet that goal is a new program that funds down payments on farmland, a subsidy meant to entice people into agriculture and help them stay in the sector long term. The Legislature this year approved $500,000 for down payment assistance, an idea that boosters say will especially help small-scale and minority farmers overcome a range of hurdles that make it hard to buy land.

The down payment aid is part of a modest slate of agriculture policies and initiatives lawmakers sent to Gov. Tim Walz this year, and one of the only things lawmakers could agree to spend part of Minnesota’s historic budget surplus on.

The extra money for emerging farmers comes amid high land costs, which might continue to rise.

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A program aimed at helping small-scale and minority farmers

The new program is limited to certain farmers. It’s only open to those who will do the majority of day-to-day labor and management of a farm themselves — and gross $250,000 per year or less from selling their products. People who have, or have had, direct or indirect interest in farmland also don’t qualify.

The state will give grants up to $15,000 per eligible farmer, which the person has to match. The farmer also has to commit to owning and farming the land purchased for at least five years and would pay 20 percent of the grant back for each year they don’t own the land or farm it.

Gene Dornink
State Sen. Gene Dornink
The policy was first in a bill sponsored in the Democratic-led House by Rep. Samantha Vang, DFL-Brooklyn Center, and in the Republican-majority Senate by Sen. Gene Dornink, R-Brownsdale.

Initially the proposal was for $3 million, but it was slimmed down to $500,000 in the current two-year budget, and will include $1.5 million each biennium after that.

Vang, vice chairwoman of the House’s Agriculture Finance and Policy Committee, said the idea came from listening to small farmers and emerging farmers about difficulty getting access to land. Many farmers rent and have no certainty in how long-term leases will be, which affects their ability to build livelihoods and continue farming, Vang said.

State Rep. Samantha Vang, vice chairwoman of the House’s Agriculture Finance and Policy Committee, said the idea came from listening to small farmers and emerging farmers about difficulty getting access to land.
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State Rep. Samantha Vang, vice chairwoman of the House’s Agriculture Finance and Policy Committee, said the idea came from listening to small farmers and emerging farmers about difficulty getting access to land.
Thom Petersen, commissioner of the Minnesota Department of Agriculture, said access to land is the number one issue identified by a task force focused on helping emerging farmers.

Vang also said there are parallels between the huge gap in home ownership between white and Black Minnesotans and the gap in farmland ownership by race. Nearly all Minnesota farmers are white, and the average age is 56, which has led lawmakers and state officials to try to diversify the field and help younger people become farmers. 

Vang said she modeled her bill after a different proposal aimed at helping people of color with down payments on residential homes.

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Owning land, Vang said, can help the farmers she works with, including Hmong, African and Latino farmers, create a more solidified and sustainable business model and reach more markets.

“We know that 99 percent of farmers are white and historically Black farmers have been forced to sell their land or have their land taken away,” Vang said. “Having down payment assistance for farmland can be a critical part of bridging that gap.”

Vang said one barrier for minority farmers, or those with small-scale operations, is a lack of connections that help them know who is selling land. Newer farmers are also often competing with investors to buy land.

It’s common for young minority farmers to struggle getting access to capital from banks and lenders, said Vong Thao, a St. Paul resident with a background in farming that includes working at the USDA. Thao testified in favor of the policy at a hearing in Vang’s committee earlier this year.

And David Bau, a University of Minnesota Extension educator in Worthington, said a lot of beginning farmers get help from their family when starting out, perhaps by lending equipment to lower costs or by offering money.

State Sen. Torrey Westrom
State Sen. Torrey Westrom
That was the case for Petersen, who said he paid a farmland down payment with money from his parents. But he also raised cash by selling part of his baseball card collection and a prized saddle. Neither is an option for everyone.

Torrey Westrom, a Republican from Alexandria who chairs the Senate’s Agriculture and Rural Development Finance and Policy Committee, said the GOP wants to help small farmers flourish, including a lot of metro-area farmers looking for ways to start a business.

Westrom said there is big demand in the metro for products from specialty farmers, but he said there’s a lot of niche markets and cottage food farmers — which sell products like home-canned pickles or fruit — in rural areas as well. Promoting more farmers is important because the more people in agriculture there are, the more new innovative crops, niches and ideas are spurred because of entrepreneurs, Westrom said.

“Government just wants to help start the opportunity and your blood, sweat and tears, hard work and determination is what’s going to ultimately make you successful,” Westrom said. “This is a shot in the arm for promoting what we want more of.”

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There are some existing state and federal loan and grant programs aimed at helping new farmers. One is Minnesota’s beginning farmer tax credit, which applies to those who rent or sell farmland or other farm assets like machinery or buildings to industry newcomers.

Another program doles out loans through the state’s Rural Finance Authority, which offers low interest rates for beginning farmers.

But Petersen said it’s good to have a “suite of options” to entice farmers into the field.

It’s common for young minority farmers to struggle getting access to capital from banks and lenders, said Vong Thao, a St. Paul resident with a background in farming that includes working at the USDA.
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It’s common for young minority farmers to struggle getting access to capital from banks and lenders, said Vong Thao, a St. Paul resident with a background in farming that includes working at the USDA.
The rising price of farmland

Farmland is also becoming more expensive. Bau said the price of corn and soybeans is a key driver of land prices. When the commodity prices are up, farmers make more money and the rents and land values rise as well.

David Bau
David Bau
Bau said it’s not unusual to see $15,000 per-acre prices though the average sale price in southern Minnesota is likely about $8,000 per acre. Prices do vary by region, however, based on the productivity of the soil and other factors. In 2019, the average price per acre in Pine County — where Petersen said many smaller-scale farmers have flocked to — was $4,428, according to the UMN Extension. Though Bau also said land in the metro area close to development can be much more expensive.

Bau said land price could get tamped down by factors like rising interest rates announced this week. But he said farmers are likely to do well this year, which means land prices will likely be high, too.

For some perspective, Vang said the program is aimed at helping someone buy a couple of acres of land. That means it’s not likely to be used by large-scale commodity farmers. Bau said it would be hard to make a living on 80 acres in that case, and the $15,000 down payment aid would be helpful but only a small start.

It would be more significant for someone growing specialty crops like vegetables or berries.

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One such farmer is Thao, who wants to start a five-to-10-acre peony farm and carry on a family tradition of flower growing. He said his parents farmed in California and Washington state growing up, including supplying Chinese vegetables to the International District in Seattle and later transitioning to selling flowers.  His family still has a booth in Seattle’s famous Pike Place Market.

But Thao said his parents are aging and he’s looking to get into the business in Minnesota after moving to the state and connecting with the large Hmong population. Even with a long history in agriculture, Thao, who works for the city of Brooklyn Center, said a down payment is difficult when balancing a mortgage, student loans and other factors.

Owning land is important for many reasons besides avoiding rental payments, he said. One is that farmers understand the land better and have more flexibility to try things and fine tune their operation over time. Another is the ability to leverage the land as collateral for things like buying equipment. Thao also said once people own the land they’re more likely to farm it for longer, meaning they’ll stay in the industry.

He said once the program is up and running, he might apply if eligible for help with a down payment. Either way he hopes to promote the money to other farmers. “To be a part of the supplier of fresh locally grown peonies for local weddings, I mean that would be amazing,” Thao said.