Farmers and ranchers grapple with shutdown effects on FSA loan programs
MANDAN, N.D. — Farmers with Farm Service Agency loans and the ag lenders they work with are grappling with how to handle finances during the government shutdown.
FSA, a division of the U.S. Department of Agriculture, offers several loan programs to farmers and ranchers, including providing direct loans for things like operating. When a farmer or rancher gets a direct loan from FSA and sells products of the farm, FSA is listed on the check and has to sign off for the funds to be released, whether to be applied to a loan or for other purposes.
"The thing there is, FSA is listed as lienholder on the check. So that check can't be cashed until FSA signs off on it," explains Todd Neurohr, an ag lender at Starion Bank in Mandan. "Everybody's hands are kind of tied on something like that."
"That check is basically frozen, for lack of a better term," says Cary Anderson, an ag lender at Security First Bank, also in Mandan.
FSA offices nationwide closed after Dec. 28 due to the ongoing government shutdown, leaving no one in county offices able to sign off on checks or work on new loan paperwork for 2019.
Holding checks until the shutdown ends is more than just an inconvenience; when farmers can't apply money they've brought in to their loans, interest continues to accrue. Neurohr says if someone sold $150,000 worth of calves and has to hold the check, that costs about $24 per day in interest.
Anderson says another issue is that farmers and ranchers need to get their 2019 loans in place, and that also is at a stand-still. Though FSA personnel will begin working on the backlog of paperwork when the government reopens, farmers and ranchers are in a bit of lurch in the meantime. Anderson says rental payments for land will be coming due for some people soon, which means producers could risk losing land or landowners may not get their expected income in payments.
Kyle Olson, a farm management education instructor and assistant professor at Bismarck State College, works directly with farmers as part of the Farm Management Education program, a continuing education course for farmers and ranchers. Olson says he's advising students in his program to send in their paperwork for new loans, just as they would if the government was operating. From what he has heard, when the agency reopens, personnel will go by postmarks to determine the order of getting things done.
One couple with whom Olson works recently paid off an FSA loan but cannot obtain information about what was applied to principal and what was applied to interest, as well as other information important for tax purposes and for reconfiguring balance sheets.
Anderson and Neurohr say producers need to talk to their lenders sooner than later to find a plan of action. Neurohr says Starion Bank plans to offer interim operating loans, provided that customers have updated cashflow and balance sheet information available.
"We're going to try to help them as much as we can for 2019," he says.
Anderson says every situation is different, but most lenders will try to find a way to assist. And that isn't just advice for farmers and ranchers — government workers or anyone else financially affected by the government shutdown also should talk to their lenders before major problems arise.
Lenders already do "bridge notes" to get some producers through the process of obtaining FSA loans, Olson explains, so that's not a big difference from normal procedures. However, if the shutdown lasts longer than hoped, it might complicate things further.
"People are trying to work with this for the next couple weeks. There is not a lot of long-term thinking on if it's a long-term shutdown," he says.
Anderson also urges farmers and ranchers affected by the shutdown to contact their Congressional delegation and urge them to work on solutions.
In a statement issued Thursday, Jan. 10, Sen. John Hoeven, R-N.D., said he has spoken with Secretary of Agriculture Sonny Perdue to discuss the importance of continuing USDA loan programs while negotiations continue.
"I spoke with USDA Secretary Perdue to request that USDA work with OMB (Office of Management and Budget) to deem these loan programs essential and ensure that these loans are processed for our producers," Hoeven said in the statement.