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US: Congress urged to protect loan funding for beginning farmers

The National Sustainable Agriculture Coalition (NSAC) joined with a broad coalition of farm organizations – including National Farmers Union, Rural Advancement Foundation International, and the National Young Farmers Coalition, among others – and agricultural lenders on a letter urging Congress to oppose a proposed across-the-board increase to Farm Service Agency (FSA) loan limits in the upcoming farm bill. The 19 signatories – representing over 250 agricultural organizations – caution Congress that such an increase would seriously threaten beginning and socially disadvantaged farmers’ ability to access FSA loans, and urge that they take a more prudent and targeted approach.

“Congress’ first priority when considering possible changes to FSA loan programs should be to do no harm,” said Juli Obudzinski, Deputy Policy Director at the National Sustainable Agriculture Coalition. “FSA is the lender of first opportunity and last resort for family farmers and ranchers, and Congress should be doing everything in their power to ensure that this critical source of funding remains accessible to our most in-need producers.”

Discussions about whether and how to change FSA lending programs have increased on Capitol Hill over the last few years as commodity prices have remained low, and Congress has struggled to find better risk management solutions for farmers. The approach of the 2018 Farm Bill has accelerated these conversations, and one proposal that has received particular attention has been to increase the statutory limits on FSA loan amounts.

In their letter to Congress, the undersigned organizations outline how increasing statutory limits on FSA loans without a more targeted approach could seriously undermine credit availability for beginning farmers and others who struggle to access financing in the private financial market. The letter states:

“Together, we represent over 250 farm organizations and community lenders that work directly with family farmers and ranchers, including beginning and socially disadvantaged farmers and others underserved by commercial lenders and for whom FSA loans are critical. These are the very farmers who will be impacted the most by any loan limit increase, and their concerns must be both considered and addressed in any debate.”

Increasing FSA loan limits will ultimately lead to FSA making fewer and larger loans – increasing the opportunity for larger, more established farms to receive funds, and fundamentally reducing credit availability to the small and mid-scale farms for which the program is intended.

“USDA loans are a critical part of the farm safety net and often serve as a first-access point to farmers with limited capital or credit history,” said Obudzinski. “Since the passage of the very first farm bill, these loans have filled an important gap in financing for those unable to secure credit in the private market, particularly America’s small and mid-size family farms, and beginning, socially disadvantaged, and veteran farmers.”

In order to ensure our family farmers have a strong farm safety net in the years to come, any policy changes to FSA loan programs made in the next farm bill must be measured against current program usage and demand, historical funding levels, and performance targets.

Looking at FSA loan data from the last few years, one can see that additional funding, not necessarily larger loan limits, is what is needed to fill the farm loan funding gap and best serve our nation’s producers. For example, in recent years demand for FSA loans has well exceeded available funding for almost all loan programs at the current statutory limits. The average loan amount for both direct and guaranteed loans is also currently far below the current statutory loan cap. According to a recent analysis of FSA lending trends, the average FSA loan amount last year was actually 3 percent smaller than 2016, with Guaranteed Operating Loans (GOL) experiencing the largest decrease (8 percent).

Taken in aggregate, the data on FSA loan programs overwhelmingly shows that most of the programs are currently able to address the credit needs of the vast majority of borrowers, with the exception of Direct Farm Ownership loans – which the letter argues should be adjusted to account for real estate inflation in recent years. The organizations signed on to the FSA loan letter are united in urging Congress not to put beginning and socially disadvantaged farmers at risk in order to increase the size of the largest loans to well-established operations, which have a better chance of securing credit in the private market. FSA loans were designed to support our nation’s most in-need producers, and we hope that Congress will maintain the integrity and intention of this program as they craft the 2018 Farm Bill.

Source: National Sustainable Agriculture Coalition

Publication date: 4/12/2018



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