Bunching Around FSA's Guaranteed Farm Loan Program's Lending Limits

In 2024, the Farm Service Agency (FSA) helped generate $2.25 billion in agricultural credit through their Guaranteed Farm Loan Program (FLP)s. One key stipulation of the FSA Guaranteed FLPs is that banks cannot obtain a guarantee for loans issued over a certain principal amount. A share of all FSA Guaranteed Farm Ownership Loans have been issued at the maximum lending limit since 2012. This study uses FSA data on guaranteed loans issued by commercial and Farm Credit System (FCS) lending institutions. We show that the lending limit have heterogeneous impacts across loan, lender, and borrower types, regions, and years. These results help us understand how different producers would be affected by the The $3.5 million guaranteed lending limit proposed by the PACE Act (Reps. Finstad, Craig, Sens. Hoeven, Klobuchar Reintroduce Legislation Modernizing Loan Limits for Ag Producers, 2025). We show that an increase in the maximum lending limit would relieve much of the excess credit demanded from borrowers. However, we estimate that a smaller increase would also significantly reduce the credit constraints faced by borrowers who take out loans at the maximum lending limit. The FSA is a critical player in agricultural credit markets for beginning farmers and ranchers, and yet the effect of its Guaranteed Farm Loan Programs’ maximum loan limits on the supply of agricultural credit has not been previously researched. This study will inform FSA and United States Department of Agriculture (USDA) policymakers of the role that lending limits have on demand for guaranteed farm loans and highlight the potential for these programs to further expand access to credit for eligible borrowers.