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Since January 2025, farmers, agricultural organizations, and the communities they serve have experienced unprecedented instability in long-standing federal partnerships with the US Department of Agriculture (USDA). Lengthy funding freezes, unanticipated grant terminations, full program cancellations, and a woefully understaffed USDA have detrimentally disrupted the programs, services, and resources that farmers and rural communities leverage to build environmentally resilient and economically viable businesses, strengthen local and regional supply chains, and grow the next generation of farmers and ranchers. Now, proposed changes to federal rules governing grants and cooperative agreements threaten to further destabilize an already fragile agricultural sector by injecting additional uncertainty and risk into the agreements farmers and farmer-serving organizations enter into with the USDA. This post provides context and background on the issue, analyzes key concerns with the proposed rule, and offers resources for stakeholders who wish to take action.

Overview of USDA Funding Agreements and Recent Impacts

USDA funding recipients have long been subject to specific terms and conditions that govern their federally-funded projects, in part based on the Uniform Grants Guidance issued by the Office of Management and Budget. This guidance includes a provision rarely – if ever – invoked allowing a signed agreement to be terminated, “to the extent authorized by law, if an award no longer effectuates the program goals or agency priorities.” 2 CFR 200.340(a)(4). However, it has not been until the second Trump Administration that USDA has started relying on that provision to terminate hundreds of signed agreements, evidently in pursuit of rooting out what this Administration has termed “illegal diversity, equity, and inclusion (DEI).” USDA’s authority for these terminations has been challenged in the courts by both organizations and states whose funding was abruptly canceled, with early indications of a likelihood of success on the merits in at least one case. 

Even while these lawsuits unfold, USDA has taken additional steps to limit the kinds of activities that projects might undertake to expand equitable access to opportunity for all farmers, and particularly for the farmers, ranchers, and communities that have historically been – and in many cases continue to be – underserved by USDA resources. This includes the release of new General Terms and Conditions at USDA at the end of December 2025, which have generated significant stress and confusion among federal grantees due to their breadth and the vague terms they contain related to DEI, general, and civil rights compliance. Several of these new Terms and Conditions have already been challenged in court, with the plaintiff states recently receiving a preliminary injunction given the impacts of these terms on their funding and the states’ likelihood of success on the merits.

These kinds of actions are not limited to USDA; they are occurring across the federal government. This includes recent proposed updates to the SAM.gov portal, which would require federal grantees to certify compliance with Executive Orders regarding so-called “illegal DEI,” immigration, and national security. And most recently, and the primary focus of this post, the Office of Management and Budget (OMB) has proposed revisions to the rules that govern federal financial assistance agreements, including agency grants, cooperative agreements, “and other agreement[s] for assistance”. 

This proposed rule would expand on and codify the anti-equity provisions and termination authority discussed above – despite active legal challenges to these authorities and the significant disruptions and harms their use has levied on farmers and farmer-serving organizations. It also includes other changes to federal grantmaking that raise significant concerns for USDA funding recipients. 

Key Concerns and Impacts

The proposed rule contains a wide range of changes to federal grantmaking, including by elevating these provisions from non-binding guidance for agencies to binding regulations. This analysis focuses on several key concerns with the rules as applied to USDA-funded projects: broad termination authority, compliance with vague and undefined terms, new burdens on grantees and partnership projects, politicization of funding decisions, and uncertain scope. 

Broad Termination Authority Destabilizes Longstanding USDA Partnerships

One of the most problematic aspects of the proposed rule for agricultural stakeholders is the expansion and codification of what the rule is calling the federal government’s “discretionary termination” authority. The expanded language would permit termination of a signed agreement at any time if the agency determines “it is in the interest of the Federal agency or pass-through entity, including if a Federal award does not effectuate program goals, Federal agency priorities, or the national interest as they exist at the time of the termination.” This is an incredibly permissive standard, and one that largely ignores Congress’ role in establishing agricultural program goals and priorities through the Farm Bill. The proposed rule does not define “national interest,” which is often used interchangeably in the rule with “public interest,” which is also undefined. The proposed rule also adds a new authority to temporarily suspend program funding “at any time” and for any reason where it determines suspension is “in the interest of the Federal agency.”

These unbounded authorities to terminate or suspend lawfully signed agreements are unquestionably one of the most destabilizing aspects of the proposed rule. Farmers, farm service providers, and countless others across the food and agricultural supply chain rely on the USDA to uphold their end of an agreement. As we have already seen over the past two years, sudden funding freezes and program terminations have upended farmers’ business plans and planting decisions, delayed and prevented farmland purchases, prompted layoffs, and left farmers in the lurch awaiting reimbursements for purchases made under duly executed agreements.

While the proposed rule seeks to encourage multi-year project funding as purportedly being more stable for grantees and efficient to administer, in reality this intention is directly undercut by the agency’s expanded ability to terminate a project at any time. USDA operates numerous multi-year funding programs, from five-year Regional Conservation Partnership Program (RCPP) projects to help farmers apply regionally-relevant conservation practices in targeted areas, to three-year Beginning Farmer and Rancher Development Program (BFRDP) grants to support trainings for next-generation farmers, to multi-year research projects on cover cropping systems through the Sustainable Agriculture Research and Education (SARE), to grants designed to support meat processing capacity expansion, and many more. 

It can take years to get these multi-year partnership projects off the ground due to the time and effort involved in the lead up to and during the application process, and in the post-award agreement negotiation. It is unconscionable to expect USDA partners to expend that degree of effort to launch and implement a project while the agency maintains wide latitude to terminate the project at any time, and without notice or opportunity to adjust the project prior to termination. The full impact of such terminations on the partners – including foregone opportunities, sunk costs, reputational damage – and on the farmers lined up to participate, not to mention the lost community and public benefits that these projects yield, is nearly impossible to measure and impossible to fully recover under these rules.

Putting aside whether such broad termination authority is lawful, the proposed rule would do away with farmers’ and organizations’ right to appeal such a termination administratively, foreclosing the opportunity to explain the project’s alignment with the agency’s newly identified priorities or to identify a pathway to make any necessary changes to the project to support alignment. Rather than retaining the termination option as a last resort, this proposed change makes it the norm, guaranteeing uncertainty at best and chaos at worst for USDA-funded projects, particularly when projects span changing Administrations, ultimately penalizing farmers for shifts in national political leadership that are well beyond their control. Farmers and farmer-serving organizations depend on a stable business relationship with the USDA. The unfettered ability to suspend or terminate duly executed funding agreements – particularly without any obligation for USDA to seek modification first before terminating, and without any opportunity to appeal the decision – erodes confidence in USDA as a trustworthy business partner and will severely undermine the agency’s mission and vision.

Vague and Undefined Terms Raise Constitutional and Compliance Concerns

The proposed rule continues along a similar path as USDA’s General Terms and Conditions discussed above, prohibiting funding recipients from engaging in so-called “illegal DEI” and other vague or undefined terms. These prohibitions are troubling for several reasons. 

First, as noted above, USDA has used this as grounds to terminate agreements already, and the courts have not upheld that authority. In fact, grantees whose Increasing Land Capital and Market Access projects were canceled earlier this spring just received a preliminary injunction, with the court finding USDA’s actions “suspect” and questioning USDA’s ability to “terminate grants for the very reason that the grants further the aims Congress explicitly instructed [USDA] to pursue.” 

Second, the restriction of activities based on vague or undefined terms poses compliance challenges for grant recipients. Grant recipients are also responsible for ensuring any subawardees are complying with these vague terms, including a new responsibility for grantees to ensure subawardees are not taking any action that would “damage the reputation” of the Federal government. If such damaging action is determined by the Federal government to have happened, they can direct the grantee to terminate the subaward or decide to terminate the award in its entirety. No guidance is offered in the proposed rule explaining what kinds of activities would be considered damaging, or how a lead grantee is supposed to verify compliance, increasing uncertainty and administrative burdens for grantees, and especially those engaged in partnership projects.

New Burdens on Grantees & Partnership Projects

The rule poses additional administrative and compliance burdens on grantees, and in particular on grantees involved in projects that involve multiple partners or subawardees. In addition to the foregoing, the proposed rule would:

• Eliminate the use of fixed amount subawards, limiting an otherwise valuable tool for managing multi-partner projects, particularly those that provide micro-grants for farmers, and encourage smaller-scale producer participation, along the lines of the guaranteed minimum payment amounts for producers to to enroll in certain conservation programs.
• Grant USDA the authority to shift from advance payment to reimbursement during the grant project. For farmers and lower-resourced organizations, advance payments offer a critical way to procure the goods or services necessary to carry out the work funded under the agreement. In fact, some farm bill programs – like EQIP – have advance payment options explicitly authorized by statute. For programs where advance payments are not statutorily protected, the ability of USDA to midway switch to a reimbursement method could have significant budgetary impacts for organizations that develop (and receive USDA approval for) project budgets years in advance given their limited ability to switch payment methods partway through a planned project.
• Allow agencies to add or change agreement terms throughout the course of the project, based on an assessment of risk that does not have to be clearly articulated at the time the grant was awarded, impacting compliance obligations and organizational planning.

Countless USDA programs are statutorily designed as partnership projects, and partnerships are often encouraged and prioritized as part of grant application review processes. The uncertainty and increased compliance obligations posed by these new provisions stand to severely undermine USDA’s ability to implement these Congressionally-directed programs.

Politicization of Funding Decisions

The rule also seeks to codify some of the recent changes initiated across agencies during the DOGE funding review process and subsequent Executive Orders, which place significant authority over funding decisions not with expert career agency personnel and peer reviewers, but with political appointees. These appointees would now have the ability to pre-screen applications and remove them from consideration altogether if they fail to “advance the President’s priorities” or are determined to “promote anti-American values.” These terms are undefined, leaving grantees uncertain as to whether developing a proposal that addresses the goals outlined in the program’s Notice of Funding Opportunity (NOFO) is sufficient to be eligible for funding, and potentially conflicting with the program’s underlying congressionally-defined purpose and goals.

Lack of Clarity Regarding Scope

The lack of clarity regarding how these rules will apply across the many programs USDA offers exacerbates the uncertainty regarding the impacts of this proposed rule.

The proposed rule applies to federal financial assistance agreements, including agency grants, cooperative agreements, and “other agreement[s] for assistance”, leaving many questions regarding applicability across USDA’s varied program offerings. The rule differentiates between “discretionary” and “non-discretionary” awards, signaling that programs like SNAP and ARC/PLC or other direct payments are unlikely to be covered. It is equally clear that traditional competitive grants operated by agencies like the National Institute of Food and Agriculture or the Agricultural Marketing Service fall under its purview. But it offers no specificity with regard to the unique agreements that USDA enters into with farmers to carry out programs like the Environmental Quality Incentives Program and the Conservation Stewardship Program; agricultural credit programs like Farm Ownership Loans; and other discretionary agreements. The broader the reach of these rules, the more instability it injects into an already destabilized agricultural sector, and the more damaging the impacts when USDA freely exercises its “discretionary termination” authority.

How to Take Action

Agricultural stakeholders are encouraged to submit comments to the public docket here before midnight EST on Monday, July 13. For guidance on how to approach submitting a comment, we encourage you to utilize this worksheet developed by Farm Commons. 

The post Proposed Grant Rules Increase Uncertainty, Risk for Farmers  appeared first on National Sustainable Agriculture Coalition.