Congress’ bud­get patch averts farm loan cri­sis

The Denver Post - - BUSINESS - By Rox­ana Hege­man

wi­chita, kan.»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 years, but no one who qual­i­fies for a farm loan will be de­nied in the next four months due to an un­usual pro­vi­sion passed this month by Congress.

The bud­get patch gives the Agri­cul­ture Depart­ment’s Farm Ser­vice Agency au­thor­ity to meet the spike in loan de­mand by us­ing fu­ture fund­ing, ac­cord­ing to U.S. Sen. Jerry Mo­ran, a Kansas Repub­li­can who chairs an agri­cul­tural ap­pro­pri­a­tions panel. There is no limit to how much the USDA can lend through April 28.

Al­ready, 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 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, pil­ing on to the de­mand for loans and rais­ing the specter that FSA would again run out of money be­fore spring — when most farm­ers need it the most.

Oper­at­ing loans for 2016 are com­ing due at a time of wide­spread down­turn. Farm­ers in Ge­or­gia, the Caroli­nas and Alabama have got­ten a dou­ble whammy of drought and flood­ing. Mid­west states are reel­ing from a glut in global grain mar­kets that has slashed crop prices, and cot­ton grow­ers in Ge­or­gia and Texas also are suf­fer­ing due to low prices. Con­sumer de­mand for milk is down. Cat­tle prices are fall­ing.

Not as many peo­ple are able to pay off their 2016 oper­at­ing loans, and the next 60 to 90 days will be telling, said Steve Apodaca, vice pres­i­dent for the Wash­ing­ton, D.C.-based The Amer­i­can Bankers As­so­ci­a­tion’s Cen­ter for Agri­cul­tural and Ru­ral Bank­ing.

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, Apodaca said. He is not ex­pect­ing a re­peat of the cri­sis of the 1980s, when land val­ues tanked and in­ter­est rates were high.

One mea­sure of the farm econ­omy is eq­uity — the amount of debt com­pared to as­sets like land and ma­chin­ery. The USDA’s Eco­nomic Re­search Ser­vice pre­dicted last month U.S. farm eq­uity would de­cline 3.1 per­cent in 2016 to $2.47 tril­lion — the sec­ond straight year of de­clines. Farm debt is ex­pected to rise 5.2 per­cent to $375.4 bil­lion in 2016.

With such low com­mod­ity prices, Rus­sell Boen­ing, 57, said he is do­ing every­thing he can not to bor­row more money than he needs to op­er­ate his 7,500-acre fam­ily farm in south Texas be­cause “that gets you fur­ther and fur­ther be­hind.” That in­cludes de­lay­ing equip­ment pur­chases.

This year’s boun­ti­ful yields and low in­ter­est rates on loans helped many grow­ers. But 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 said. “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.”

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