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The USDA reports net farm income should increase by almost $20 billion from 2021 to $160.5 billion in 2022. Rural America and farm and ranch families have benefitted from low interest rates, ample energy supplies, and a de-regulatory environment. These positive factors have changed quickly, threatening the outlook for American agriculture. Congress should adjust farm programs to allow producers to manage a changed economic environment.
Congress is expected to draft and possibly finalize a new Farm Bill in 2023. The new Farm Bill should build upon the success of the 2018 Farm Bill, which expires September 30, 2023. The next Farm Bill should continue to strongly support Farm Bill provisions which are intended, in part, to provide lenders and customers a long-term policy framework for business and planning purposes and bolster the farm economy.
The Federal Crop Insurance Program (FCIP) plays a prominent role in helping producers manage financial risk, cope with weather related disasters and repay bank loans. In 2022, more than 490 million acres of farmland (90% of insurable farmland) were protected. ICBA opposes reducing spending on crop insurance.
USDA's guaranteed loan programs allow community banks to lend to higher-risk borrowers by guaranteeing 90 percent of loan repayment. Congress should increase loan limits to at least $1.75 million to allow banks to work with more family farmers. Funding set-asides should not interfere with expanding the program’s borrower base.
The 2018 Farm Bill increased population limits for rural development loans and requires most programs to be self-funding. These program changes should be evaluated.
Farmer Mac. Farmer Mac, the secondary market program for ag real estate loans, should continue to focus on improving secondary market access for community banks.
Climate Risk. Policies should not increase regulatory or economic burdens on the agricultural or community banking sectors, should be voluntary, based on scientifically sound data, and offer incentives to establish healthy soil and water resources.
April 12, 2021
ICBA called on the USDA to ensure lenders are compensated for lost income as it prepares to pay off direct and guaranteed farm loans held by Socially Disadvantaged Farmers and Ranchers.
Background: Section 1005 of the American Rescue Plan Act requires the USDA to pay off such loans in existence as of Jan. 1, 2021, by providing up to 120 percent of the outstanding indebtedness for each SDA borrower. The USDA is establishing a process for these loan payments.
Impact: In a letter, ICBA said the abrupt payoff of guaranteed loans could have adverse consequences unless the USDA minimizes disruptions to lenders participating in its guaranteed loan programs or acting as secondary market purchasers.
ICBA Position: In addition to making lenders whole, ICBA also said purchasers of USDA loan guarantees should be paid for lost premium values. Further, the USDA could consider assuming the payments of loans that are not delinquent and have not been associated with previous legal challenges, ICBA said.