By Leah Douglas and P.J. Huffstutter

WASHINGTON (Reuters) - Farm loan employees at the U.S. Department of Agriculture’s Farm Service Agency will now need approval from billionaire Elon Musk’s Department of Government Efficiency to issue loans over $500,000, according to a memo seen by Reuters on Wednesday.

DOGE has led President Donald Trump’s effort to slash the federal workforce and cut spending. Several programs for farmers, such as for local food purchasing and climate-smart farming, have been frozen or cut in the administration’s first 100 days.

Farmers rely heavily on loans to pay for operational expenses including seeds, fertilizers and pesticides, or to buy land. The USDA typically offers loans to farmers who have trouble accessing credit through traditional lending institutions.

The April 29 memo sent by Houston Bruck, deputy administrator for farm loan programs, said that the new policy requiring clearance from the Office of the Secretary and DOGE for some lending is in compliance with an executive order on government cost efficiency.

Under the policy, which went into effect on Wednesday, all loans and guarantees of $500,000 or more and to "formal entities" like corporations will need to be approved by the two offices, the memo said.

Direct farm loans made to farmers by the FSA have a borrowing cap of $600,000. Guaranteed farm loans, which are financed by commercial banks with FSA backing, are capped at $2.2 million.

"We recognize the potential impact that this effort may have on our customers, lending partners, and FSA staff, and are committed to ensuring minimal disruption to service delivery," said USDA’s Farm Service Agency administrator Bill Beam in a note sent along with the memo.

The USDA, the trade group American Bankers Association, and officials with the Farm Credit System did not immediately respond to requests for comment.

’THE MENTAL STRESS OF IT ALL’

"What this says to me is we’re adding another layer of bureaucracy and clearance to one of the most efficient programs in the federal government," said Zach Ducheneaux, the FSA administrator under the Biden administration.

Ducheneaux said the approval requirement will delay lending decisions, which can have significant impact for farmers.

"It can trigger a domino effect to getting the crop planted in the ground or send those cattle to market," Ducheneaux said.

"It’s not just the financial hardship, where delays can lead to farmers defaulting on payments and result in penalties and fees, but also the mental stress of it all," he said.

The FSA services about 8% to 10% of farms with loans, according to USDA data. In fiscal year 2023, the agency issued 22,600 farm loans worth about $4.7 billion, according to agency data.

Staff departures at the USDA have raised concerns about whether the FSA will be able to maintain services to farmers at their local offices around the country.

During travel on Monday to Versailles, Ohio, Agriculture Secretary Brooke Rollins said FSA staff and other frontline USDA employees would not be affected by the agency’s forthcoming reduction in force plan.

"We are working overtime to ensure that we’ve got the right people in the right place to ensure that we’re able to serve our farmers and our ranchers every single day," she said.

Some FSA staff were denied their requests to opt into the second Deferred Resignation Program, an incentive to leave the agency, because of concerns about local staffing, according to an April 17 email sent from Beam to agency staff.

"Where DRP 2.0 participation by one or more employees would potentially leave an office critically understaffed, hinder continuity of operations, adversely impact delivery of our programs, and disrupt customer service, we have denied DRP 2.0 elections," the email said.