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It's a beautiful spot, near the end of a road that winds past the houses and trailers of farmers' sons who commute to Caterpillar factories in Peoria. The farm overlooks wooded valleys that burn with color in a fall sunset.

But like many beautiful farms, the quarter section where Ray Meismer grew up near Washburn, Illinois, isn't rich land. Only 68 acres are tillable. And when Ray went off to the University of Illinois to get his degree in agricultural economics, his parents saw that as the ticket to a decent life.

Ray's father "knew what he was making from the farm and he knew I could get more out of a college entry-level position," Ray says.

Today, after 20 years, the cycle is complete. Ray Meismer has come home. And through a new Illinois loan guarantee program, he and his wife Mary Ann are buying another farm.

The couple has concluded that life in the city isn't that great, even in Denver where Ray worked for the Farm Credit Council. He and Mary Ann--who's from a Wisconsin dairy farm--want to raise their children on a farm. Ray hopes they'll have a childhood as happy as the one he remembers. And the farm lets him "raise kids in an environment where they can learn more responsibility than just taking out the garbage."

Several things make this possible.

* Ray's parents, who've been retired 15 years, have no machinery but have agreed to rent the home place, cash for pasture and 50/50 crop share.

* Mary Ann, a registered occupational therapist, has a good job. She's occupational therapy manager for the northern half of Illinois for a health care provider. Her income pays family living expenses.

* Ray has a sharp pencil. His cash flow plan was so conservative that state officials were surprised that he needed only $24,000 for machinery. That's what he spent to pick up a line of used, low-hour, 4-row equipment at sales, starting last spring. His use of no-fill also cuts costs.

* In December, the Meismers were able to buy a 144-acre farm with 119 tillable acres with a bank loan guaranteed by the state. The farm cost $235,000, with a machine shed and hog farrowing and nursery building.

They had to put 20% down and borrowed $238,000. Part of that buys machinery, 30 cows and 20 sows. The 15-year, 7 1/4% land loan, amortized over 20 years, has a balloon payment.

Guarantee was key

Without the Illinois Farm Development Authority's Young Farmer Guarantee Program, the Meismers could not have expanded.

"Banks are looking for 50% equity. I can't do anything remotely close to that," Ray says. They could handle the smaller down payment. "Basically, the down money that we have is the equity that we had built up in our residence" in the city, he says.

Without the Illinois program, "I'd be here, but this would basically be a hobby farm," he says.

Illinois also uses aggie bonds, which are exempt from federal taxes. With the bonds, banks can charge lower interest rates to young farmers.

But aggie bonds have flaws, says Kevin Koenigstein, the Farm Development Authority's chief administrative officer. Federal law bars aggie bond loans for used machinery without land. The program was in limbo last year when Congress took months to reauthorize aggie bonds.

So the Farm Development Authority asked state approval for the guarantee program. Since 1986, the Authority has run a successful guarantee program for debt restructuring by established farmers. Out of $170 million in loans guaranteed, about $2.5 million has been lost. That's a low default rate of one-fourth percent per year.

The legislature okayed $10 million for a loss reserve to guarantee $35 million in young farmer loans. Little of the reserve is likely to be spent.

Since the Young Farmer program began last April, it has approved 30 beginning farmer loans totaling $3 million, made mostly by country banks and Farm Credit Services.

Program requirements

The state guarantees 85% of the loan and usually requires 20% down. Borrowers need net worth of at least $10,000 but no more than $250,000. Loans are limited to $300,000.

"There seems to be two groups--a lot of $60-70,000 loans and quarter million dollar loans," Koenigstein says. Small loans often buy about 50 acres for young farmers using Dad's machinery. Large loans are used to take over the farm of retiring parents. Only Illinois residents are eligible. For details, call 217/782-5792.

Illinois couple to speak at beginning farmer conference

The Meismer farm uses "20- to 30-year-old equipment sized to our acreage," Ray says. No-till coulters on a 4-row planter are the only new iron. His combine has a two-row corn head. "What I have to offer is my sweat equity."

Ray is so conservative that if he owned land, his break-even would be $1.87/bu. for corn, $3.59/bu. for soybeans, $73/cwt. for 550-pound calves and $31.50/cwt for hogs.

After allocating enterprises to land, real costs are $2.36 for corn, $7.17 for beans. $94 for calves and $39.50 for hogs. At first, the Meismers may have to subsidize the farm by $2,000 a year. In five years, after livestock and machinery are paid off, annual loan payments drop from near $30,000 to $19,250.

You can hear the Meismers at Farmers For The Next Century: The First National Conference for Beginning Farmers and Ranchers, in Omaha, Nebraska, March 4-5. It is sponsored by Successful Farming magazine and The Center for Rural Affairs, with support from John Deere Life Insurance Company and Farm Credit Services of the Midlands.

Advance registration is required, at $30/couple or $25/person, payable to Successful Farming, c/o Farmers for the Next Century, Successful Farming, 1716 Locust St., Des Moines, IA 50309-3023. (Please include your address and age.) The meeting is at Ramada Inn Airport (800/272-63320). For more details, a program, or list of lodging, call SF at 800/678-5755.

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