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RELEASE: Farm Groups and Farm Lenders Appeal for Assistance During Credit Crunch
June 2, 2016
FOR IMMEDIATE RELEASE
Contact: Juli Obudzinski, 202-547-5754, jobudzinski@sustainableagriculture.net
Ferd Hoefner, 202-547-5754, fhoefner@sustainableagriculture.net
Farm Groups and Farm Lenders Appeal for Assistance During Credit Crunch
Washington, DC, June 2, 2016 – Operating loans are the lifeblood of farming. They help farmers get crops in the ground, by financing needed supplies and equipment, and when necessary, refinancing earlier loans. The federal government assists with loans for farmers who cannot secure adequate credit in commercial markets. During difficult economic times, when crop and livestock prices are low, the need for such assistance rises.
Right now, demand for such assistance is so strong that the U.S. Department of Agriculture’s Farm Service Agency (FSA) expects to completely run out of operating loan funds in the next few weeks. If this happens, farmers applying this year will still be able to have their applications approved by FSA, but they will not actually receive loan funds until Congress acts on the next agricultural spending bill.
Today, eight national farm and financial organizations appealed to Congress to address the emerging farm lending crisis by increasing funding for federally-assisted farm operating loans in the fiscal year (FY) 2017 agricultural appropriations bill. Congress is expected to debate and vote on that bill later this month.
The letter urges Congress to add $16.5 million to the FY 2017 spending bill, the amount needed to make available an additional $300 million in direct FSA operating loans and $350 million in FSA guarantees of private sector commercial loans. These amounts would allow USDA to cover the estimated shortfall of available loan dollars.
Three national farm groups – National Sustainable Agriculture Coalition (NSAC), National Farmers Union, and National Young Farmers Coalition – signed the letter, as did all of the major farm lenders – American Banking Association, Farm Credit Council, Independent Community Bankers of America, National Association of Credit Specialists, and the Opportunity Finance Network, the member organization of Community Development Financial Institutions (CDFIs).
“We are pleased to be joined by a coalition of farm groups and farm lenders in this urgent appeal,” said Ferd Hoefner, Policy Director for NSAC. “We hope that the need underscored by the united voices of the farm sector will persuade Congress to find the necessary funds to fill this shortfall and prevent thousands of farmers from losing access to operating loans that are vital to their ability to do business.”
FSA is both the lender of last resort for farm businesses that cannot secure commercial loans, and the lender of first opportunity for our nation’s young and beginning farmers. The majority of operating loans made or guaranteed by FSA are typically set-aside for beginning farmers, but the competition for these loans is growing as more established, commercial farmers facing – who are facing decreased commodity prices – increasingly need to rely on FSA support.
The coalition emphasizes the urgency of the situation in their letter, stating, “Access to credit can largely determine whether or not farmers can continue working on their lands, and for beginning farmers it can determine whether or not they decide to pursue a career in agriculture in the first place.”
A copy of the letter is available online and is also copied below.
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About the National Sustainable Agriculture Coalition (NSAC)
The National Sustainable Agriculture Coalition is a grassroots alliance that advocates for federal policy reform supporting the long-term social, economic, and environmental sustainability of agriculture, natural resources, and rural communities. Learn more: https://sustainableagriculture.net
June 2, 2016
We, the undersigned organizations, very much appreciate that the Committee-passed House and Senate FY 2017 agriculture appropriations bills include the USDA requested program level of $1.46 billion for Direct Operating Loans (DOL), and $1.432 billion for Guaranteed Operating Loans (GOL).
We have recently learned, however, that FSA is running out of DOL and GOL FY 2016 funding in June, with a third of the fiscal year still remaining. This substantial shortfall will leave many beginning farmers, and others who cannot be fully serviced by commercial credit under current price conditions, without the loans they need to stay in business. It will also create a backlog and long waiting list for FY 2017.
We therefore respectfully urge you to provide a modest increase in funding for FSA direct and guaranteed operating loans, on top of the increase already provided in the House and Senate FY 2017 Agriculture Appropriations bills.
As you well know, access to annual operating credit is a make-or-break issue for many farmers, especially those just starting out. Access to credit can largely determine whether or not farmers can continue working on their lands, and for beginning farmers it can determine whether or not they decide to pursue a career in agriculture in the first place.
According to the best estimates available, to fill the gap and ensure that FSA can meet growing demand for FSA operating loans due to lowered commodity prices, the final FY 2017 appropriations package would need to increase program levels by $300 million and $350 million for direct and guaranteed operating loans, respectively.
Those program levels would require an increase in the appropriation of approximately $12.9 million and $3.6 million in the budget authority (BA), respectively, on top of the levels provided in the bills already passed by the House and Senate Committees.
We realize there are many demands to juggle as you put together the final FY 2017 bill. We urge you to take these escalating operating credit needs into account and make the necessary adjustments.
Sincerely,
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