WASHINGTON -- The Agriculture Department has run out of money to make loans to farmers with credit problems, but most farmers still can get credit, federal officials testified at a House Agriculture Conservation, Credit, Energy and Research Subcommittee hearing on June 11.
USDA's Farm Service Agency has approved more than $300 million in farm operating and land purchase loans for more than 2,700 farmers, but does not have any more money in its budget to make the loans, FSA Administrator Doug Caruso testified.
FSA's loan programs are for those farmers who cannot get conventional credit. As commercial banks and Farm Credit System institutions have tightened up their lending standards during the financial crisis, more and more farmers, particularly beginning farmers, have turned to FSA.
"The programs are experiencing demand levels that have not been in more than 20 years," Caruso said. Commodity prices have remained high, but livestock producers, particularly dairy farmers, are stressed, lobbyists said. FSA did receive additional funds in the economic stimulus package, but used that money to provide operating loans to more than 2,000 farmers, Caruso said.
Leland Strom, chairman of the Farm Credit Administration, the regulator for the Farm Credit System, said most farmers still can credit, but at higher interest rates. Farmers' credit quality has "been the best in history" in the last few years, Strom said, and now has "gone back to more historic levels."
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But he added that farmers' financial positions could change if climate change legislation increases the cost of production. Rural banks and the Farm Credit System institutions have performed much better than many urban and suburban banks during the financial crisis, but they have had some stress because of other factors in other sectors and they have tightened credit standards, Strom said.
