ICBA Policy Resolution: Rural American and Farm Bill Programs

Position

  • The 2018 Farm Bill provides essential assistance to the farm sector and rural America. Price support programs provide a financial safety net for many producers, particularly in an era of low commodity prices.
  • The Farm Bill maintains a strong crop insurance program, which 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 ranchers and allow community banks to better manage the lending risks of farmers and ranchers who would otherwise be unable to obtain commercial credit. These programs should remain as business-oriented programs. Program fee levels should not discourage participation by community banks and should not be set at levels that overfund programs.
  • The Farm Bill legalizes hemp in states whose plans receive approval from USDA. It also makes significant changes to rural development programs that, if implemented appropriately, could benefit rural communities.
  • Farmer Mac should continue to focus on its primary mission of improving secondary market access for community banks. ICBA opposes allowing the Farm Credit System to operate their own secondary market independent from or in competition with Farmer Mac.
  • Rural America and farm and ranch families have benefitted from low interest rates, ample energy supplies, and a de-regulatory environment. Congress should not enact policies that discourage business innovation and activity in rural areas.

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 has important provisions 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 300 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 helping farmers survive weather-related disasters and repay bank loans. 

ICBA urged Congress to protect enhancements from prior Farm Bills. The 2018 bill continues and expands 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 budget cuts.

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 other uses. Crop insurance was added for hemp producers. ICBA has encouraged quick implementation of these program changes and expeditious approval of state plans. Likewise, the Farm Bill creates insurance-style coverages for dairy producers. USDA should quickly implement these changes and provide necessary educational materials for producers, lenders, and 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 indicator. This increase will allow community banks to work with more family farmers particularly during times of 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. Social targeting requirements should be minimized in favor of expanding the program’s borrower base as widely as possible without quota-type requirements.

Rural Development Loans. The Farm Bill made several key changes 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 tied to Congressional appropriations, possibly providing a greater volume of loans from the private sector rather than relying on USDA 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. ICBA opposes efforts to allow the Farm Credit System to conduct their own secondary market in competition with Farmer Mac.

Staff Contact: Mark Scanlan