Net farm income and market prices of certain commodities have both decreased over the years — assets have become less valuable while farm debt continues to increase. A continued decline in net farm income will, according to House Committee on Agriculture, lead to “reduction in equipment purchases, changes in food prices for consumers, serious impacts on creditors and their ability to cash flow producers, pressure to reduce voluntary conservation efforts to save money, reductions in the use of cutting edge technology, growing impacts of regulatory overreach on farm profitability, and increased damage from disproportionately large foreign agricultural subsidies.” This is the reality of our industry, unfortunately.
The Farm Bill, historically, works to provide protection from these dire issues with the programs implemented. Farmers and ranchers rely on credit programs to purchase equipment, land, and other assets needed to keep their operation running when income isn’t promising. A strong Farm Bill includes a strong credit program to provide support for farmers and ranchers whom so desperately need it. With loan size limitations decreasing and the need for producers to borrow more — it is crucial to provide more funding for credit programs in the upcoming Farm Bill.
Title 5 on the 2014 Agricultural Act included credit programs, administered by the Farm Service Agency, such as ConAct, State Agricultural Loans Mediation Programs, and Loans to Purchasers of Highly Fractioned Land. These programs support net farm income, which in turn, supports the industry by increasing purchases of such things as land and equipment.
ConAct has three types of loan programs: The Farm Ownership Loan, which aides in the purchase of real estate; the Farm Operating Loans, to purchase livestock, equipment, feed, supplies, land, and water development, as well as other items to keep a farm functioning; and Emergency Loans, for support after natural disasters hit or a quarantine occurs.
The State Agricultural Loans Mediation Program’s purpose is to provide matching grants to states that bring in a third party to mediate agricultural credit disputes regarding USDA loan programs.
Finally, the Loans to Purchasers of Highly Fractioned Land program assists purchases of land on Indian Reservations.
Within the FSA there are many programs aimed at assisting all levels of farmers and ranchers with credit to fund their operation. Especially those who are considered young, beginner, and small farmers, whom also happen to be at the most risk of exiting production farming should net farm continue to decline. Talks for the upcoming Farm Bill look to increase funding of programs to ensure loan limits are keeping up with rising costs and to prevent lack of funding available to those in need. Since the Farm Ownership Loan Program uses very little funding and the Farm Operating Loan Program is self-funded through origination fees, lobbyists are calling for Congress to allow more funding for other loan programs. Bottom line: Title 5 funding needs to continually be a focal point during the Farm Bill talks to ensure producers have access to money during economic declines to remain sustainable.
Markie Hageman is a senior, majoring in agribusiness, at Fort Hays State University. She is actively involved in her state Cattlemen’s Association, Young Farmers chapter, and National Cattlemen’s Beef Association. Follow her series exploring various parts of the next Farm Bill.