Bankers Push for Farm Bill Changes

Higher farm land prices and the continuing need for healthy safety net require changing some provisions, preserving others.

Published on: May 11, 2012

The House Ag Committee heard from lenders Thursday during a hearing of the Subcommittee on Department Operations, Oversight and Credit held to discuss credit programs. The message from lenders: preserve crop insurance, make changes to lending rules to help small and beginning farmers.

Jeff Gerhart, chairman of the Independent Community Bankers of America and chair of the Bank of Newman Grove in Nebraska offered up some interesting ag lending stats. Turns out community banks with under $1 billion in assets extend about 56% of the farm operating loans and 62% of farm real estate loans from the banking sector.

Higher land prices and the continuing need for healthy safety net require changing some provisions, preserving others.
Higher land prices and the continuing need for healthy safety net require changing some provisions, preserving others.

He notes that the financial strength of the farm economy has been improving: "Farmers have been paying down debt and taking steps to become more efficient, which should better prepare them for a successful future should financial stress arise."

For bankers managing risk is critical and ICBA along with the American Bankers Association testified that preserving crop insurance as a safety net is important.

ABA Chairman-elect Matthew Williams says the crop insurance program should be preserved as it is a broadly used tool that allows farmers and bankers to manage the risk presented by weather and volatile agricultural conditions. Williams is chair and president of Gothenburg State Bank, Gothenburg, Neb., and during his testimony he also pushed for an end to term limits on loans guaranteed by USDA's Farm Service Agency.

"As a result of term limits on loans…an increasing number of farmers and ranchers are no longer elighible for additional credit under the program, which could make access to credit in the future very difficult, if not impossible, for these producers," Williams says.

He notes that over 35,000 farmers use the guaranteed loand program for credit, yet the practical application of term limits has caused hardships for producers that can least weather a financial setback.

ICBA notes that there is no need for the term limits because the program is self-funding, which means there is no reason to limit eligibility. And the group is pushing to increase the loan size limit. Gerhart says that at today's farmland prices, a 160-acre tract of land sold near his town exceeded the USDA's loan limit and that the "small tract of land would not be a viable family farm even at twice the size."

Rep. Jeff Fortenberry, R-Neb., chair of the House Ag Committee's Subcommittee on Department Operations, Oversight and Credit held the public hearing. He issued this statement at the end of the hearing:

"Today we heard that ensuring a stable food supply is directly connected to farmers and ranchers having access to steady sources of credit. It is especially important for our nation’s beginning farmers and ranchers, who are just starting their operations. As we prepare to write the next Farm Bill, it is critical that we continue to provide a credit system that meets the needs of our agricultural producers and rural communities."

Ranking Member Marcia L. Fudge, had an additional perspective on the importance of credit for all farmers: "I was particularly pleased to have an urban farmer and entrepreneur, Mr. Michael Walton from Cleveland, provide my colleages a different perspective. Urban farmers are legitimate agricultural producers who happen to live and farm outside of the traditional rural environment.  They are filling an increasingly important role in the economic well being of urban areas, and provide healthy nutrition for many who would otherwise not have access to it.  They are doing this without the same resources afforded to traditional farmers such as credit. As we update the Farm Bill, I am urging my colleagues to give serious consideration to the needs of urban farmers. Access to credit can make or break rural farm operations, and urban farm operations are no different."

There is a growing need for credit access to a greater range of farmers, and rising production costs impact all aspects of the industry.