Tuesday, October 22, 2013
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Lender Groups Urge Repeal of Term Limits on USDA’s Guaranteed Farm Loans

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Repealing term limits for guaranteed farm loans made by the U.S. Department of Agriculture is imperative, USA Rice Federation and 15 other farm and lending organizations have told U.S. Representatives and farm-bill negotiators in an October 22 letter.  The House farm bill, H.R. 2642, does not repeal the term limits, but the Senate legislation, S. 954, would eliminate them.

Several thousand farmers and ranchers will be forced out of the guaranteed loan program by December 31 if the limits are not terminated, which would diminish some farmers’ future credit options and make it very difficult for some to obtain credit in the future.  Those most affected would be young and beginning farmers.

 

A farm loan guaranteed by USDA  is a credit enhancement, not a loan, and a limited amount of federal funding is leveraged into many loans for farmers and ranchers.  The guaranteed-loan programs give farmers and ranchers who have some credit deficiency the opportunity to borrow money from a commercial source.

The public-private partnership embodied in the programs is a success, the producer groups and lenders said.  Today, more than 35,000 farmers and ranchers access nearly $12 billion in credit through the programs, and it is worth noting that losses paid on them have consistently averaged less than .005% since 2005 and less than .025% since 1988.  All USDA guaranteed-loan borrowers are expected to graduate eventually to conventional credit.

Over the years, Congress has stepped up to waive (or suspend) the term limits, but the issue will have to be resolved again during the current farm bill conference because of the rapidly approaching expiration date.

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