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 during times of low commodity prices.
The 2018 Farm Bill expires September 30, 2023, which incentivizes Congress to begin hearings in 2021 on the next farm bill.
The current legislation maintains a strong crop insurance program, which is a successful public-private partnership 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 primarily business oriented. Program fee levels should not discourage participation by community bank borrowers and should not be set at levels that overfund programs.
The Farm Bill legalizes hemp in states with plans approved by the USDA and also makes significant changes to rural development programs.
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.
Any climate change should not increase regulatory or economic burden, particularly for small businesses, agricultural producers, or the community banks that serve them.
In December 2020, the U.S. Department of Agriculture forecasted net farm income to increase from $84 billion in 2019 to $120 billion in 2020. This forecast includes $24 billion, or a 107 percent increase, in direct federal farm payments to a record $46 billion, mostly related to the caronovirus pandemic. The forecast also includes a $5 billion reduction in expenses. Without the added direct payments and lower expenses, forecasted 2020 net farm income would be much lower at approximately $90 billion. Because these unique additional payments cannot be depended on in future years, maintaining the current farm bill programs is essential.
The 2014 Farm Bill was renewed as the Agriculture Act of 2018 (Public Law No: 115-334), providing stability to the volatile farm sector. ICBA worked with the administration and Congress to ensure the 2018 Farm Bill facilitates private sector community banks working with farm and ranch customers.
The new Farm Bill will continue 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.
Approximately 1.1 million polices protect more than 100 different crops covering approximately 380 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 successfully urged Congress to protect previously adopted enhancements including expanding crop insurance and revenue insurance programs to better support producers’ risk management strategies and ensure their ability to repay bank loans.
ICBA is closely monitoring 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 expeditious approval of state plans that will allow hemp production. Likewise, the Farm Bill creates insurance-style coverages for dairy producers. USDA should 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 previous $1.4 million level to a higher level of $1.75 million indexed for inflation. Additional increases are warranted given the costs of current land prices and operating expenses. This would 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, or quotas, requirements should be minimized in favor of expanding the program’s borrower base as widely as possible.
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 closely monitor implementation of these programs to ensure community banks’ perspectives are considered.
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 implement their own secondary market in competition with Farmer Mac.
ICBA believes that any policies adopted by Congress or regulators should not increase regulatory or economic burdens upon the business sector, particularly small businesses and agricultural producers, and the community banks that provide credit to these businesses and individuals.
Policies adopted to address climate change should provide economic and regulatory relief incentives to undertake scientifically backed mitigation responses rather than impose new burdens or mandates.
Legislation promotes access to credit in rural communities
Washington, D.C. (July 1, 2021) — The Independent Community Bankers of America (ICBA) today expressed its strong support for the Senate introduction of the Enhancing Credit Opportunities in Rural America (ECORA) Act to support farmers, ranchers and rural homeowners.
The ECORA Act (S. 2202/H.R. 1977) would exempt from taxation interest income on farm real estate and rural mortgage loans, allowing community banks to lower loan rates and more efficiently serve these borrowers. Sen. Jerry Moran (R-Kan.) introduced the bill in the Senate following House introduction earlier this year by Reps. Ron Kind (D-Wis.) and Randy Feenstra (R-Iowa).
“With community banks making 80 percent of banking industry agricultural loans, ICBA strongly supports the Enhancing Credit Opportunities in Rural America Act to help them offer lower rates in rural communities," ICBA President and CEO Rebeca Romero Rainey said. "This important legislation will help sustain and revive rural economies affected by the COVID-19 pandemic while providing community bank lenders with benefits they can pass on to customers, similar to other rural credit providers."
With rural America and the agricultural sector facing continued challenges, ECORA will:
ICBA looks forward to working with Congress to advance this critical legislation.
The Independent Community Bankers of America creates and promotes an environment where community banks flourish. ICBA is dedicated exclusively to representing the interests of the community banking industry and its membership through effective advocacy, best-in-class education, and high-quality products and services.
With nearly 50,000 locations nationwide, community banks constitute 99 percent of all banks, employ more than 700,000 Americans and are the only physical banking presence in one in three U.S. counties. Holding more than $5 trillion in assets, over $4.4 trillion in deposits, and more than $3.4 trillion in loans to consumers, small businesses and the agricultural community, community banks channel local deposits into the Main Streets and neighborhoods they serve, spurring job creation, fostering innovation and fueling their customers’ dreams in communities throughout America. For more information, visit ICBA’s website at www.icba.org.