FSA leader outlines loan process

WASHINGTON -- The Farm Service Agency makes loans to urban farmers as well as rural farmers, a key Agriculture Department official said today, facing questions from a congressional subcommittee about whether the FSA provides services to those who sell to farmer's markets and are trying to farm in cities.

"This is an agricultural program, not a rural program," Farm Service Agency Administrator Bruce Nelson said at a House Agriculture Department Operations, Oversight and Credit Subcommittee hearing, in response to questions from Reps. Jeff Fortenberry, R-Neb., and Marcia Fudge, D-Ohio.

Farmer focus

The hearing, on USDA's loan programs for beginning and socially disadvantaged farmers who do not qualify for commercial credit was part of the House Agriculture Committee's audit of farm programs in preparation for writing the 2012 farm bill.

Noting the Obama administration's "Know Your Farmer, Know Your Food" program, Nelson, who previously headed the Montana FSA, said his agency, which makes direct loans and guarantees bank loans, has more experience in rural areas, but has made loans to rooftop gardens, aviaries and community supported agriculture efforts.

But he added, "We are pretty new to urban areas and could use help from you in how to help serve people in urban areas."

Securing loans

In his opening statement, Fortenberry, subcommittee chairman, said it can be impossible for beginning farmers with no credit history to obtain a loan.

"My district is home to a growing community of farmers who raise food specifically for local farmers' markets and other emerging food retailers," he said. "With little historical data on farmers producing for new markets, commercial credit institutions are sometimes reluctant to offer them credit. Farm Service Agency loans ensure that new farmers have access to the credit they need to start farming."

Fudge, ranking member on the subcommittee, noted in her opening statement that she does not have a lot of farmers in her district, which includes Cleveland and its suburbs. She said that while the farmers who grow food close to her district are important, she also is interested in how agriculture lenders are responding to the interest in locally produced foods and "the very real problem of 'food deserts.'"

"I want to ensure that FSA is meeting the needs of young and innovative producers who can fill these gaps," Fudge said.

Fortenberry also asked about a provision in the farm bill that allows farmers to participate in the direct and guaranteed loan programs for only 15 years.

Nelson noted that Congress has suspended that rule in the past, and said he wishes it would be suspended again so that the agency could allow farmers who have experienced problems through no fault of their own could participate for a longer period. He also noted that 2,221 direct loan borrowers had graduated from the direct loan program in 2010, with a total of 70,000 borrowers in that program.

Losses in the direct loan program are at their second-lowest level while delinquency rates are at historic lows, but applications have been unusually high for the past two years, particularly from farmers who never have borrowed from the agency before.