A budget provision passed earlier this month by Congress means no one who qualifies for a government farm loan will be denied in the next four months. U.S. farmers drained all available government agricultural loan money this past fiscal year to get through one of the worst agricultural downturns in recent memory.
With the passage of the budget provision, there is no limit to how much the USDA can lend through April 28 of 2017.
Kansas U.S. Senator Jerry Moran, who chairs an agricultural appropriations panel, said the budget patch gives the USDA’s Farm Service Agency (FSA) authority to meet the spike in loan demand by using future funding.
Corn and wheat prices have pushed farmers to the limit, and beef prices are hurting ranchers. They turned to lenders, leading the FSA to fall $137 million short of needed direct and guaranteed loan funds in the fiscal year ending Sept. 30.
When the money ran out, approved loans were funded in the current fiscal year. This piled on to the demand for loans and raised the prospect that the FSA would again run out of money before spring when many farmers need it the most.
“If you are trying to grow a crop and feed a family and pay the bills, it is a problem,” Moran said. “This is one of the most difficult times in agriculture in a long time.”
Not as many people are able to pay off their 2016 operating loans, and the next 60 to 90 days will be telling according to Steve Apodaca who is Vice President for the D.C. based American Bankers Association Center for Agricultural and Rural Banking.
Apodaca said most borrowers will be able to sustain themselves another year, and bankers will be able to help restructure their loans and add federal guarantees to commercial loans. He is not expecting a repeat of the farm crisis of the 1980s, when land values tanked and interest rates were high.
This year’s mostly bountiful yields and low interest rates on loans helped many growers. However, many commercial lenders are now demanding farmers whose operations are under stress to get government guarantees that any money lent for next year’s crops will be repaid.
“When a farmer goes under, it affects that rural community,” Apodaca told the Associated Press. “He is no longer buying seed, he is no longer buying equipment. His family is no longer going to the local Main Street and buying goods and services.”
The move by Congress reflects the ongoing, widespread downturn in the agricultural economy. It is a victory for farm groups who pressed Washington to avert a looming loan crisis. Farmers in Georgia, the Carolinas and Alabama have battled drought and flooding. While Midwestern states are reeling from a glut in global grain markets which have slashed crop prices.
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