Associate Editor
MADISON
Wisconsin Agriculture Secretary Rod Nilsestuen shared with members of his citizen policy board last week a letter he wrote outlining his concerns about the farm credit situation.
In the letter, Nilsestuen told U.S. Agriculture Secretary Tom Vilsack that the farm credit picture is worsening as dairy and other livestock markets remain depressed. “In Wisconsin, debts are mounting on dairy farms while milk prices stay below the cost of production,” he wrote to the U.S. Department of Agriculture chief. “We know that these farms are bleeding equity.”
Nilsestuen told the USDA chief that most lenders have been forbearing, but the question is now how long they can continue to lend, allowing reasonable loan restructuring and avoiding farm foreclosures before banking regulators clamp down on them.
“It may be that we need a special guarantee for debt restructuring to help farmers and their lenders stay in business and avoid the asset devaluation that would follow increased foreclosures,” he wrote.
The letter, which was part of the ag board meeting on Nov. 11 in Madison, outlined several actions Nilsestuen believed were needed. The first was an analysis by USDA and others to determine how much debt has accumulated on farms, by type and by region, and to determine whether the lending system can handle the loan restructuring that farmers will need.
He also urged Vilsack to identify and assess options that can help address the farm debt restructuring needs, including use of the Agricultural Credit Act of 1987. That law, explained board member Mike Krutza, required the Farm Credit System to restructure loans for farmers as long as the cost of that restructure was less than the cost of foreclosure.
During the farm crisis of the 1980s, Krutza was in the Farm Credit system. He said it was a constructive approach.
Nilsestuen also suggested to Vilsack that as banks, Farm Credit and the Farm Service Agency make their way forward to restructure loans for farmers there should be an administration task force to coordinate regulatory guidance.
Nilsestuen said he hoped initial discussions Vilsack had with regulatory officials had been encouraging and he hoped that those discussions are occurring regularly as this situation demands.
Board member Dick Cates, who heads the University of Wisconsin-Madison’s School for Beginning Dairy Farmers said much of his curriculum for those who want to create their own dairy business is about business planning.
“For God’s sake, how do you plan for something like this?” he said.
Three major questions need to be answered over the next few months, ag officials said. Will there be enough credit available and equitable terms? How will the actions of regulators affect available credit? How much will milk prices recover relative to costs?
