March 1, 2017
In recent weeks, the debate around the next farm bill – which will be up for reauthorization next year – has begun to gain momentum. The Senate Agriculture Committee held its first field hearing last week in Kansas and yesterday the House Agriculture Committee held its first subcommittee hearing focused on the farm bill, choosing to begin with the Conservation Subcommittee.
Along with initial movement on the farm bill, the annual budget and appropriations cycle is starting up in the nation’s capital as well, as Congress awaits the President’s budget blueprint for the upcoming 2018 fiscal year. The appropriations process, which deals with discretionary (not farm bill) funding is separate from the farm bill process. To begin examining anticipated discretionary funding needs for USDA programs, the Agriculture Appropriations Subcommittee of the House Appropriations Committee held its first hearing yesterday to take a closer look at farm credit and lending programs.
This post highlights key takeaways from yesterday’s hearings, including an examination of federal conservation programs and farm loan programs for small, beginning, and other underserved farmers.
Conservation: A Focus on Working Lands Programs
At yesterday’s conservation hearing, Subcommittee Chairman Frank Lucas (R-OK), whose parents lived through the Dust Bowl, noted that USDA conservation programs are critical to ensuring that a
Dust Bowl never happens again. “I’m proud of the work of the farmers, ranchers and forest owners who implement these important conservation practices,” Lucas said. “I think the results speak for themselves—voluntary conservation works.”
Conservation Subcommittee Ranking Member Marcia Fudge (D-OH) opened her remarks by noting that the 2014 Farm Bill cut conservation program spending by $6 billion. Further cuts in the upcoming reauthorization, she said, would hamstring our conservation efforts.
The Subcommittee heard from five witnesses: Chuck Coffey, a rancher from Oklahoma, representing the National Cattlemen’s Beef Association; Timothy Gertson, a rice farmer from Texas, representing the USA Rice Federation; Jeremy Peters, the CEO of the National Association of Conservation Districts; Dave Nomsen, Vice President of Government Affairs for Pheasants Forever; and John Piotti, President of American Farmland Trust.
Both Mr. Coffey and Mr. Gertson spent much of their time talking about the importance of working lands conservation programs, including the Conservation Stewardship Program (CSP) and Environmental Quality Incentives Program (EQIP).
“CSP rewards those of us that have been conservationists and have spent the time and money improving our land, water, and wildlife habitats,” said Mr. Coffey, who owns and operates 30,000 acres of ranchland. “CSP offers cattlemen the opportunity to earn payments for actively managing, maintaining, and expanding conservation activities like cover crops, rotational grazing, ecologically-based pest management, and buffer strips.”
Mr. Gertson expanded on the importance of working lands programs. He noted that “EQIP’s structural practices can help establish the equipment needed to better manage water resources, help with irrigation efficiency, fencing, and erosion control,” while CSP “helps to target specific resources using a number of complimentary practices, and has been a great tool for rice farmers to have in our toolbox to pay for expensive long-term management practices.”
Mr. Gertson also pointed to the economic importance of these programs. “Think about the outside technicians, engineers, and local soil and water conservation districts needed to help oversee the conservation planning; the scientists, the land movers, the equipment that needs to be purchased to implement these conservation practices,” he said. “Not to mention, with working lands programs the land is still in production, so the economic drivers of small communities are still working, unlike some programs like the Conservation Reserve Program (CRP) that pay farmers not to grow a crop.”
In his written testimony, Gertson touched on one additional issue that has been front and center in the National Sustainable Agriculture Coalition’s (NSAC) advocacy work each year. “As an industry, we see these two programs [CSP and EQIP] targeted every year during the appropriations process,” he said. “It is important to us that these are not only preserved but codified in a way that they are not always seen as low-hanging fruit when it’s time to find savings.” NSAC will pick up this fight again in the coming weeks as Congress begins to debate funding legislation for the 2018 fiscal year.
Farm Credit: Are Small and Beginning Farmers Being Served?
Concurrent with the House Agriculture Committee hearing, the Agriculture Appropriations Subcommittee of the House Appropriations Committee held a hearing to examine the Farm Credit Administration (FCA), which oversees a national network of regional Farm Credit institutions that provide roughly 41 percent of our nation’s agricultural credit. The Subcommittee heard from Dallas Tonsanger, Chairman and CEO of the FCA, and Jeffery Hall, an FCA board member.
The Farm Credit system was established over 100 years ago in order to ensure access to agricultural credit to farmers, with a statutory focus on providing capital to young, beginning, and small (YBS) farmers. Within the Farm Credit system, “YBS” includes farmers who are 35 or younger (“young”), have been farming for 10 years or less (“beginning”), and whose gross annual farm sales are less than $250,000 (“small”).
Along with commercial banks and USDA’s Farm Service Agency (FSA), Farm Credit plays a critical role in ensuring access to capital for farmers of all kinds. While FSA holds a smaller share of the farm credit market, FSA guaranteed loan programs are essential in allowing lenders like Farm Credit to extend credit to riskier borrowers – including YBS farmers. Demand for loan funding – including FSA and Farm Credit – has increased in recent years, spurred by depressed commodity prices and stagnation in farmland real estate values, and ensuring that FSA and lenders like Farm Credit have the funding they need to meet the financial needs of farmers in these uncertain economic times will be of utmost importance as Congress determines future funding levels for FSA loan programs. For more information on recent farm lending trends, see our previous blog post.
Beginning with Subcommittee Chairman Robert Aderholt’s (R-AL) opening remarks, much of yesterday’s conversation centered on the current economic downturn and the growing need for credit from farmers across the country. In this context, the Subcommittee also addressed rural development, consolidation within the farm credit system, and FCA budget caps. One of the key portions of the hearing dealt with FCA’s ability to serve young, beginning, and small farmers, for whom access to credit is often a make or break issue.
Subcommittee Ranking Member Sanford Bishop (D-GA) noted that many loans seem to go towards wealthy individuals. Building off of this, Representatives Chellie Pingree (D-ME), Rosa DeLauro (D-CT), and David Young (R-IA) each followed up with questions regarding FCA’s outreach to beginning farmers. Congresswoman Pingree pointed to the importance of Farm Credit East’s program geared towards beginning farmers, and asked whether similar models existed in other regions. Congresswoman DeLauro questioned whether there should be an income cap for credit eligibility; and Congressman Young asked whether FCA is truly marketing farm loans to beginning farmers.
While Tonsanger’s responses highlighted FCA’s recognition of the challenges faced by young, beginning and small farmers, he also pointed out limitations in FCA’s regional structure to establish universal targets to increase loans to these borrowers nationwide. He noted that each Farm Credit institution is required to create a program to conduct outreach to young, beginning, and small farmers. However, because each institution is autonomous in designing their own YBS programs and establishing their own target participation rates for these borrowers, FCA is limited in its ability to enforce increased lending to these traditionally underserved farmers. Tonsager stressed that there are no national statutory target participation rates, and that rather, the role of FCA is to evaluate whether or not each regional farm credit YBS program is being successfully implemented as designed for the farmers in their region.
Tonsanger did cite some encouraging statistics, stating that one in six Farm Credit loans are made to young farmers; one in five loans are made to beginning farmers; and one in two are made to small farmers (based on USDA definitions). For further details on how well Farm Credit is meeting the needs of beginning farmers, see our previous post on Farm Credit lending trends.
Hearing Season to Continue
Both the Agriculture Committees and the Agriculture Appropriations Subcommittees in the House and Senate will be holding numerous hearings through the spring as the 2018 Farm Bill debate and 2018 appropriations debate heat up simultaneously. Stay tuned for more coverage in the coming weeks.