Home Commodities The Family Farm Inspires Nostalgia But Is Not Easily Defined – Commodities/Derivatives/Stock...

The Family Farm Inspires Nostalgia But Is Not Easily Defined – Commodities/Derivatives/Stock Exchanges

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An idealized vision of the family farm holds a special place in
the psyche of the American people. But what exactly constitutes a
“family farm”? That is one of the definitional challenges
that the Department of Financial Protection and Innovation faces in
adopting regulations implementing the California Consumer Financial
Protection Law (CCFPL). Section 90009(e) of the Financial Code
authorizes the DFPI to define unfair, deceptive, and abusive acts
and practices in connection with the offering or provision of
commercial financing or other financial products and services to
small businesses, nonprofits, and family farms.

As reported in this post, the DFPI has recently proposed adopting
regulations implementing the CCFPL. Among other things, the DFPI is
proposing to define “family farm” by borrowing the
definition from federal regulations concerning the making and
insuring of loans to family farms by the Farm Service Agency of the
U.S. Department of Agriculture. 7 C.F.R. § 761.2(b).

(e) “Family farm” means a business operation:

(1) That produces agricultural commodities for sale in sufficient
quantities so that it is recognized as a farm rather than a rural
residence.

(2) In which a substantial amount of physical operating labor is
provided by, the majority of day-to-day, operating decisions are
made by, and all strategic management decisions are made by:

(A) the consumer, with input and assistance allowed from relatives
of the consumer, in the case of an individual consumer seeking
credit, or

(B) the members responsible for operating the farm, in the case of
an entity seeking credit.

(3) That may use full-time hired labor in amounts only to
supplement family labor.

(4) That may use reasonable amounts of temporary labor for
seasonal-peak workload periods or intermittently for
labor-intensive activities.

The DFPI’s proposed definition, however, uses terms that are
defined in the federal regulation but not in the proposed
definition (e.g., “agricultural commodity” and
“farm”). Several of the elements of the proposed
definition are also hopelessly vague. For example, what constitutes
“substantial amount of physical operating labor” or
“reasonable amounts of temporary labor”? It is also
unclear what it means to be “recognized as a farm rather than
a rural residence”. After all, the two categories – farm and
rural residence – are not mutually exclusive.

It turns out that the California Constitution defines
“family farm” in Article XIII A, Section 2(e)(2):

“Family farm” means any real property which is under
cultivation or which is being used for pasture or grazing, or that
is used to produce any agricultural commodity, as that term is
defined in Section 51201 of the Government Code as that section
read on January 1, 2020.

I believe that this definition is generally superior to the
DFPI’s proposed definition if you add the text of Government
Code Section 51201 in effect on January 1, 2020:

“Family farm” means any real property which is under
cultivation or which is being used for pasture or grazing, or that
is used to produce any and all plant and animal products produced
in this state for commercial purposes.

This definition is much less verbose. It also makes it clear
that a family farm may be ranch. It is missing one element – the
concept of family. Therefore, I would add the following to the
definition:

“Family farm” means any real property owned or
controlled by a natural person or natural persons related by blood,
marriage or adoption which is under cultivation or which is being
used for pasture or grazing, or that is used to produce any and all
plant and animal products produced in this state for commercial
purposes.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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