ICBA Policy Resolution: Agricultural Policy

Enacting a New Farm Bill and Reforming the Farm Credit System

Position

Farm Bill Programs

  • The new farm bill provides essential assistance to the farm sector and rural America. In an era of low commodity prices, must be implemented quickly and in a manner that reflects Congressional intent while facilitating community bank lending to farm and ranch customers.

  • Crop insurance is a successful public-private program critical to the ability of farmers and ranchers to survive weather-related disasters and repay farm loans.
  • USDA farm loan guarantee programs benefit family farmers and allow community banks to better manage the lending risks of farmers and ranchers who would otherwise be unable to obtain commercial credit.
  • The farm bill legalizes hemp in states whose plans receive approval from USDA. It also makes significant changes to rural development programs. ICBA believes these program changes need to be implemented in a manner that ensures the ability of community banks to serve their rural customers.
  • Farmer Mac should continue to focus on its primary mission of improving secondary market access for community banks.

Farm Credit System

  • FCS lenders enjoy unfair competitive advantages over rural community banks, leveraging their tax and funding advantages as a government sponsored enterprise (GSE) to siphon the best loans away from community banks’ portfolios. Such abusive activities wreak havoc on community banks’ lending portfolios, jeopardizing the viability of many community banks and the economic strength of the thousands of rural communities they serve.
  • ICBA strenuously opposes the Farm Credit Administration’s (FCA’s) “case-by-case approval” of FCS’s (non-farm) “investments.” This program is a successor to the FCA’s “Rural Community Investments” proposal, which was withdrawn in November 2013, but has now been implemented via regulatory guidance.
  • ICBA further rejects proposed legislation by the Farm Credit Council to allow blanket approval authority of FCS investments without FCA approval.
  • ICBA believes numerous changes to the Farm Credit Act are necessary to reform the FCS, ensuring its adherence to its historical mission of serving bona fide farmers and ranchers while preventing it from engaging in below-market pricing of loans and non-farm lending including the extension of credit to America’s largest corporations.

Background

The 2014 Farm Bill was renewed as the Agriculture Act of 2018 (Public Law No: 115-334) with meaningful and helpful changes. A strong Farm Bill provides stability to the volatile farm sector. ICBA worked with the administration and Congress to ensure the new farm bill facilitates private sector community banks working with farm and ranch customers to survive low commodity prices.

The new Farm Bill will run through September 30, 2023. The legislation is projected to cost approximately $867 billion over 10 years, mostly for nutrition programs but with important sections related to commodities, dairy, crop insurance, conservation, credit, rural development and other important titles. The bill provides lenders and farm customers a long-term policy framework for business and planning purposes. Farm Bill money circulates through the farm sector in America’s rural communities strengthening rural economies and boosting employment and economic activity.

Crop Insurance

Approximately 1.1 million polices protect more than 100 different crops covering approximately 280 million acres, an area larger than Texas and California combined, with an insured value of over $100 billion. Crop insurance plays a vital role in surviving weather-related disasters and allowing producers to repay bank loans. 

ICBA urged Congress to protect enhancements from the 2014 and prior Farm Bills while not undermining the role of community banks in serving rural America. The 2018 bill continues strong crop and revenue insurance programs to better support producers’ risk management strategies and ensure their ability to repay bank loans.

ICBA will closely monitor all aspects of the new bill’s implementation to ensure community bank interests are understood and adopted to protect these programs during the life of the bill from miscellaneous legislation targeting crop insurance for Congressional budget savings or spending on other programs.

The new hemp program should ensure community banks’ ability to finance hemp growers and related businesses that utilize hemp for commercial products such as CBD oils and various other uses. Crop insurance-type protections were added for producers under the farm bill’s procedures for legalizing the production of hemp. ICBA encourages USDA to quickly implement these program changes and expeditiously approve any state plans for the production, marketing, and related activities of hemp producers and related businesses without complex regulatory procedures. Likewise, the farm bill creates crop insurance-style coverage for dairy producers with benefits retroactive to Jan. 1 under the bill’s revisions to the dairy program. USDA should quickly implement these changes and provide necessary educational materials for producers, lenders, and other interested stakeholders.

USDA Guaranteed Farm Loans

USDA's guaranteed loan programs allow community banks to lend to higher-risk borrowers with a guarantee of repayment of 90 percent of principal. USDA’s guaranteed farm ownership (real estate) loan program is fully self-funding, and the guaranteed operating loan program has a negligible cost.

ICBA urged Congress to increase loan limits for USDA guaranteed farm loan programs and appreciates the modest increase from the current $1.4 million to $1.75 million indexed to an inflation index. This increase should allow community banks to work with additional family farmers during the current farm financial distress. ICBA successfully fought to eliminate term limits on guaranteed farm loans in the 2014 farm bill and would oppose any efforts to reinstate term limits.

Rural Development Loans

ICBA appreciates a number of changes in the Farm Bill for rural development programs. Congress increased population limits for three USDA rural development programs to communities of 50,000 or less. These three programs are the Community Facilities, Water and Waste Management, and Broadband programs. These programs will have a zero-subsidy rate, meaning they will not be bound by Congressional appropriations, possibly providing a greater volume of loans from the private sector rather than USDA direct funding. The Farm Bill also requires USDA to study whether to apply the zero-rate subsidy concept to the Business and Industry (B&I) program and Rural Energy for America Program (REAP). ICBA will monitor implementation of required regulatory or policy changes to ensure community banks’ perspectives are considered.

Farmer Mac

Farmer Mac was created to serve as a secondary market providing rural lenders the option to sell agricultural real estate and rural housing loans, thereby enhancing community bank liquidity. Farmer Mac should continue to focus on its primary mission of improving secondary market access for community banks. ICBA appreciates Farmer Mac’s efforts in recent years to reach out to the community banking sector to encourage greater use of the secondary market to assist family farm and ranch borrowers.

Staff Contact: Mark Scanlan

2019 National Community Bank Service Awards