May 10, 2012
The House Agriculture Subcommittee held a hearing today, Thursday May 10th, to examine federal credit programs as they take up writing the 2012 Farm Bill. In addition to Chairman Fortenberry (R-NE-1) and Ranking Member Fudge (D-OH-11), Reps. King (R-IA-5), Crawford (R-AR-1), Baca (D-CA-43), and Pingree (D-ME-1) were also in attendance.
The panel of witnesses were chosen from both Chairman Fortenberry’s and Ranking Member Fudge’s home states of Nebraska and Ohio, along with a witness from Maryland. The panel was comprised of a mix of bankers and producers, and included the following witnesses:
In his opening statement, Chairman Fortenberry stressed the importance of federal credit programs in meeting the needs of young and beginning farmers who often face difficulty obtaining commercial credit due to their lack of an established credit history. He also mentioned that federal credit programs need to be receptive to the financial needs of producers who sell to local markets.
Ranking Member Fudge focused on the specific challenges that urban farmers face when trying to obtain credit through direct or guaranteed loan programs, and emphasized the unique perspective that these producers can bring to federal credit policies and programs.
The specific credit needs of young and beginning farmers was a hot topic at today’s credit hearing, which is not all that surprising, given that the Chair of this subcommittee is also the leading Republican sponsor of the Beginning Farmer and Rancher Opportunity Act (H.R.3236). The producer witness who was able to speak most directly to these issues was Justin D. Doerr – a beginning farmer and veteran from Plainview, Nebraska, who represented himself as well as NSAC and NSAC member organization Center for Rural Affairs.
Doerr is a mixed crop and livestock farmer who rents land in Northeastern Nebraska. He grows alfalfa, corn, and soybeans, and raises sheep, goats, and chickens. In his testimony, Doerr told the story of the obstacles that he faced as a beginning farmer and military veteran, speaking to several programs included in the Beginning Farmer and Rancher Opportunity Act that address the credit and land access needs of new producers.
He spoke about his difficulty in finding affordable land to farm and his experience trying to use the Conservation Reserve Program Transition Incentives Program – a popular federal program that incentivizes retiring landowners to sell or rent their expiring CRP land to beginning farmers. Since starting in 2010, demand for this program has grown tremendously and over 1,600 beginning farmers have used CRP TIP to access over 260,000 acres of farmland to begin or expand their farming operations. Unfortunately, as of early this spring, all of the funding provided by the 2008 Farm Bill for this program has already been obligated, and thus, beginning farmers like Doerr, were unable to take advantage of this land access incentive program. For this reason, NSAC is advocating for renewed but increased funding for this program in the 2012 Farm Bill.
In addition to access to land, which is often the first obstacle beginning farmers face, Doerr also discussed other challenges he faced that specifically deal with financing his farming operation.
With the price of farmland skyrocketing all across the country, two important programs that Doerr mentioned in his testimony are the Down Payment Loan Program and the Beginning Farmer and Rancher Individual Account (IDA) program. Both of these farm bill credit programs are specifically targeted to helping beginning farmers and ranchers finance the purchase of farmland or accumulate savings to use towards a down payment or other operating expense.
One provision included in the Beginning Farmer and Rancher Opportunity Act that would help beginning farmers like Doerr finance the purchase of farmland, is to give priority to joint financing programs, like the Down Payment Loan Program, which leverage federal funding with the collateral of private lenders. The IDA program is an innovative matched savings program that has been around since the 2008 Farm Bill, but despite annual funding requests by USDA, has unfortunately never received an annual appropriation and thus has not been available as a potential resource for young farmers. NSAC will continue to advocate for mandatory funding for the IDA program as the House takes up the farm bill reauthorization.
Other beginning farmer programs that Doerr mentioned in his testimony included FSA microloans, whole farm risk management insurance, and beginning farmer and veteran training and agricultural rehabilitation programs.
Almost every other witness on this panel discussed the specific credit needs of beginning farmers as well. Frazee, who testified on behalf of the Farm Credit Council, spoke about their “Start Right” program, which targets lending to young, beginning, and small producers, and Williams, who was representing the American Bankers Association, said that many borrowers that private banks lend to are young, beginning, and small farmers and how important federally guaranteed credit programs are in serving their needs.
Urban Farmers and Local Food
Rep. Fudge’s witness, Michael Walton, discussed the specific challenges that non-traditional borrowers, like urban farmers and those that provide for local markets, face when trying to obtain credit. Walton is an urban farmer from Cleveland, Ohio who runs a hoop house design, fabrication, and installation company, and is involved in urban farming ventures that have transformed vacant city lots into thriving, urban food production sites all across the city.
Although the witness from MidAtlantic Farm Credit discussed a program they are creating to meet the credit needs of urban farmers in Baltimore, MD, the other commercial lenders on the panel acknowledged that there are major challenges to fit non-traditional borrowers like Walton into their loan “boxes.” The panelist from the American Bankers Association suggested that we need to work on designing a program that works for these borrowers, and overcomes existing obstacles, such as lack of agricultural credit expertise among urban lenders.
Crop Insurance and Credit
Unsurprisingly, crop insurance also weaved its way into today’s credit hearing, and occupied much of the question and answer period. All three lenders – FCS, ICBA, and ABA – said they did not as a general rule require borrowers to have crop insurance but they strongly encouraged it. They also all spoke in favor of funding for federal loan guarantees and in favor of removing the statutory term limit on how many years a bank borrower could receive a loan with a federal guarantee. Obviously, both federal expenditures – crop insurance subsidies and loan guarantees – firm up lenders’ bottom lines.
Along those same lines, the lenders spoke out against proposals to place a cap on the size of insurance premium subsidies any one farm could receive and against linking basic conservation requirements to protect the natural resource base on which food security depends to receipt of such subsidies. It is always troubling, though not surprising, to see the Farm Credit System and the commercial banking sector opposing sound public policies such as entitlement reform, natural resource protection, and limits on federal guarantees on bank loans.
To see a video of the hearing or download copies of the witnessess’ written testimony, click here.
To see a video of Doerr and Fortenberry following the hearing, click here.