ICBA to Congress: enhance USDA credit programs to prevent farm credit crunch
WASHINGTON D.C. - The Independent Community Bankers of America® (ICBA) called on Congress to support agricultural programs that help community banks serve rural America amid a steady deterioration in farm incomes.
Steve Handke, president and CEO of the Union State Bank of Everest, Kan., testified that implementing more robust and better-financed USDA guaranteed lending programs through the 2018 farm bill will help avoid a farm credit crunch and prevent an exodus of producers from the agricultural sector.
“Congress has the power to help avoid a farm credit crisis,” Handke told the House Agriculture Subcommittee on Commodity Exchanges, Energy and Credit. “We need to be thinking about USDA guaranteed lending programs as a major tool, along with commodity programs and crop insurance, to keep thousands of farmers in business during what could be severely stressful times ahead.”
Amid a deterioration in farm incomes—with net farm income projected by the USDA to decline another 8.7 percent this year—community banks have provided ample credit at near historically low interest rates. With farmers using up working capital, which has decreased each of the past three years and showing tighter cashflows, many are expected to need additional loans going forward.
To meet the growing demand for these programs, Handke encouraged Congress to provide adequate funding, raise loan limits to reflect the higher cost of modern agriculture, minimize origination fees and paperwork requirements, and provide uniform requirements in financing USDA loans across state lines in addition to other recommendations.
“Banks fear regulators may over-react to lower commodity prices,” Handke told the committee. “Having a much-expanded, robust and well-financed guaranteed loan program would allow banks to continue working with distressed borrowers as the guarantees would decrease classified loan amounts that count against bank capital by 90 percent, thus representing a significant step in helping to avoid a farm credit crunch.”