WASHINGTON, D.C. — The USDA’s Farm Service Agency (FSA) recently announced U.S. farm families had accessed nearly $6 billion in new credit – either directly or guaranteed through commercial lenders – in 2017, which was a near-record year for farm loans.
In fact, by the end of last year, more than 120,000 families received loans totaling more than $25 billion, the FSA said.
“FSA loan funds have been in high demand the last few years,” said Robert Johansson, FSA acting deputy undersecretary for the farm production and conservation mission area. “We provide opportunities to qualified small, beginning and underserved farmers who are unable to obtain commercial credit, to help them get started, gain access to land and grow their operations.
“Family farmers across America also come to us for credit when they face challenges to stay in business. We’re proud to support rural prosperity by providing credit to those who need it most.”
According to the USDA, the FSA provides a variety of loan assistance, including direct and guaranteed farm ownership loans, operating loans and even direct microloans up to $50,000, and EZ Guarantees up to $100,000, with streamlined application processes.
The FSA said more than 25,000 direct and guaranteed FSA loans went to beginning or underserved farmers and ranchers.
“Over 4,200 beginning farmers received direct farm ownership loans from the FSA to make their first land purchase,” the agency added. “And of the approximately 6,500 microloans made in the last fiscal year, three-quarters (almost 4,900) went to beginning farmers; 1,000 went to women and 400, to veterans.”
In a Jan. 29 statement to Farm World, the FSA’s national office in Washington, D.C., said its diverse loan portfolio now has more options to meet the unique operation needs of more producers. “Fluctuation in commodity prices drives farm loan demand. Lower or flat farm income – coupled with increased input prices – is a contributing factor; impacts of natural disasters and the capital required to recover.”
Dave Miller, Iowa Farm Bureau Federation director of research and commodity services, said as the depression in farm commodity prices continues, farm debt continues to climb.
“This trend continued in 2017, with farmers looking to USDA loans and loan guarantees in near record levels,” he explained. “At the height of the farm commodity boom, which ended nearly five years ago, a significant portion of USDA loans and guarantees were made to young or beginning farmers.
“But a more than 50 percent drop in net farm income is spreading financial stress much broader across the sector, and farmers young and old are proactively seeking ways to manage cash flow, equity and debt with the assistance of USDA programs.”
Chris Hurt, Purdue University professor of agricultural economics, said the FSA’s direct and guarantee loans were down for the federal government’s fiscal year 2017, to $5.889 billion.
“The (FSA) said this was their second-highest loan volume year, so that means fiscal 2016, at $6.365 billion, their biggest year, (decreased in 2017),” he noted.
Hurt said the USDA’s Economic Research Service (ERS) collects data on debt in the agricultural sector, and “that data shows FSA loans had generally been decreasing as a percent of total debt from 2000 to 2013.
“However, since 2013, the FSA has been increasing its importance as a lender to the agricultural sector. This is likely the way the program is constructed such that the government provides more support when other lenders cannot or will not.”
He looked at the breakout from ERS data of who is supplying the debt to the agricultural sector. “These are as a percentage of the total farm debt,” he said. “The importance of commercial banks and Farm Credit Services of America (FCSAmerica) is obvious.
“I was surprised at the decline of ‘individuals,’ especially in recent years. I would have guessed families were helping out more. But I am not sure how the USDA gets the data for individuals, as many families would not record family loans at the courthouse.”
Hurt said of these four main lenders (FCSAmerica, commercial banks, individuals and insurance companies), “you would have to add the FSA’s 2.5 percent. Unfortunately, they do not have the 2017 data for debt by lender. You might see some jump in the FSA data, but I doubt it since the volume of new loans was down in fiscal 2017.”
He said it’s likely the FSA will be more important to farmers in tight margin times. “The FSA also has grain storage loans that generally have favorable interest rates,” he noted. “Farmers should review FSA types of loans and use them if it is to their advantage.”
Overall, he said the Midwest region – especially in corn, soybeans and wheat – has had more financial difficulty than other regions. “It is likely that the FSA has been more important to farmers in these states. The national data that I used may look different in the Midwest.
“Margins are tight, cash flow is weak and incomes are low,” he added. “Thus, farmers are working closely with their agricultural lenders to establish financial management plans to sustain their businesses until margins improve.”
The FSA said its booklet Your FSA Farm Loan Compass was recently developed specifically for farmers and ranchers who have existing FSA loans: “It provides detailed guidance outlining borrower responsibilities and the servicing options that the FSA offers. It also addresses common questions borrowers may have as they navigate through loan program requirements and the financial concepts involved.”
First published in 2012, the booklet was initially designed for new loan customers and provides information about the various types of farm loans available and guides borrowers through the application process. “The revised version addresses program changes and includes new loan offerings, like the popular microloan program that was rolled out after the publication of the original guide,” the agency said.
“The FSA’s direct farm loans are unique in that the agency provides technical assistance in addition to credit. Consistent with efforts to continually improve technical assistance, today (Jan. 23), the FSA announced the publication of two booklets that will serve as important informational tools and resources for existing and prospective farm loan borrowers.”
The FSA said the booklets, Your FSA Farm Loan Compass and Your Guide to FSA Farm Loans, are available on the FSA website at www.fsa.usda.gov/dafl
The agency is encouraging farmers and ranchers to download and share these with others in their community who may require assistance in understanding the FSA’s loans and servicing processes. For more information about FSA farm loans, contact your loan officer or other staff at your FSA office.