By Mark Scanlan
One of the biggest unanswered questions going into 2018 was whether Congress would overcome the partisan and policy hurdles necessary to adopt a new farm bill. Not only did Congress deliver, but it did so by historic margins. The Senate voted 87-13 in favor of H.R. 2, The Agriculture Act of 2018, and the House passed it by a 369-47 margin.
The adoption of the ICBA-backed legislation is quite remarkable given that community bankers and the agricultural community have been told for most of this year that the most likely outcome would be a one-year extension, thus pushing the legislation’s enactment into the next Congress. Passing a new farm bill is good for American agriculture and for community bankers’ ability to provide credit to support their local economies. Here are a few reasons why.
The 2018 farm bill continues the Agricultural Risk Coverage (ARC) and the Price Loss Coverage (PLC) programs, which are essential price-protection options for producers experiencing the fifth straight year of declining net farm income. USDA projected a 12 percent drop in net farm income in 2018 to $66.3 billion, well below the average from 2000 to 2017. Community bankers also felt it extremely important to protect crop insurance from amendments to curtail funding and producer eligibility. This goal was also accomplished.
ICBA urged Congress to raise loan limits on USDA guaranteed farm loans. Congress raised guaranteed limits to $1.75 million, up from the current $1.39 million level, with an index to inflation. The higher limits will be available immediately upon enactment. Congress also raised direct operating loans to $400,000 and direct farm ownership loans to $600,000. The higher guaranteed loan limits will allow community banks to better work with family farmers during the current times of financial distress.
Congress raised the population limit to 50,000 for three rural development programs—community facilities, water and waste management, and broadband loans—while also mandating a zero-subsidy rate. In addition to allowing these loans for larger communities, Congress’s intent is to shift more loan making from USDA direct financing towards greater guaranteed lending from the private sector. The bill also includes a study of whether it is feasible to move to a zero-subsidy rate for guaranteed Business and Industry (B&I) loans and Rural Energy for America Program (REAP) loans without jeopardizing loan demand and participation by community banks and other small lenders.
ICBA staunchly opposed new lending powers for the Farm Credit System (FCS), although we expect FCS to push for amendments to other bills moving through Congress next year. A very real expansion threat from FCS in recent years has been due to creative rulemaking by their regulator, the Farm Credit Administration (FCA). Interestingly, the bill requires a Government Accountability Office study regarding “the lending situation for socially disadvantaged farmers with the Farm Credit System and all other commercial lenders as well as recommendations for improvement.” ICBA’s “Focus on Farm Policy” white paper revealed a decline of more than 450,000 FCS loans under $250,000 between 2014 and 2015.
ICBA and community bankers will need to closely follow implementation of the new bill’s many provisions in the coming months. But before we close out 2018, we should celebrate the unwavering advocacy of ICBA and community bankers across the nation, which led to this victory. Our dedication has resulted in a new farm bill that will benefit our customers and rural communities for the next five years.
Mark Scanlan is ICBA’s senior vice president of agriculture and rural policy.