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 20, 2022
The Consumer Financial Protection Bureau issued a report on the challenges faced by Americans in rural communities.
Report Details: The report says many in rural communities lack access to physical bank branches, are more likely to seek credit from nonbanks, and are heavily affected by medical bills. The CFPB said it will expand its efforts to address these and other challenges facing rural America.
ICBA Letter: The report follows a recent ICBA letter to the bureau noting that regulatory compliance burdens are driving consolidation while exacerbating the decline of rural businesses and their ability to access low-cost credit.
Community Bank Impact: In its letter, ICBA said community banks proportionally maintain more branches than larger institutions and are robust lenders to minority and low-to-moderate-income borrowers.
Recommendations: ICBA also encouraged policymakers to:
Support the ECORA Act, which would exempt from taxation interest income on farm real estate and rural mortgage loans.
Enhance the farm bill’s rural safety net, particularly through guaranteed loan programs.
Examine the tax and regulatory advantages of credit unions and Farm Credit System entities as well as credit union acquisitions of community banks.