Farmers Face Barriers to Credit, Report Says
MARCH 26, 2011
Farmers have had difficulty accessing credit since 2009, according to Don’t Bank On It, a survey of farm credit counselors and advocates released today by a coalition of farm organizations, including RAFI.
The report comes as the U.S. Department of Agriculture touts boom times for U.S. farmers.
Banks were rejecting farmers for loans more frequently and that demand for government farm loans was rising, according to the report. Eighty-five percent of those surveyed reported that farmers had more difficulty accessing credit since 2009.
“In this economic crisis, bankers are reducing their risks by requiring more collateral and putting more conditions on loans, making it harder for farmers--especially small and mid-scale family farmers--to get the credit they need to farm this spring,” said RAFI's North Carolina-based farm advocate, Benny Bunting.
“Even with high crop prices, our phones are still ringing at the same pace,” Bunting said.
Farmers of any scale rely on loans to purchase seeds and fertilizer that keep their operations running. Farmers who cannot access timely credit face economic uncertainty that can threaten the viability of their farms.
The credit crisis struck at the same time many farmers experienced sharply declining prices, especially hog and dairy producers.
Farm households faced layoffs, loss of health care coverage and rising household debt at the same time that banks were tightening lending conditions. The Federal Reserve Board reports that farm loan delinquency rates tripled between 2007 and the first quarter of 2010.
These factors combined to endanger the economic security of many farmers. Almost all of those surveyed (86 percent) reported higher demand for farm credit counseling services.
“Since the start of the economic crisis, Farm Aid’s farmer hotline has been flooded with calls, with most farmers calling for financial and credit help,” said Farm Aid president Willie Nelson.
“Farmers are the backbone of our economy, and the backbone of a strong farm economy is available and affordable credit and fair prices. Without those, our farmers--and our overall economy--suffer,” Nelson said.
The credit survey’s key findings include:
- 74 percent reported that the number of farmers that could not access credit in 2010 was higher than in recent years—33 percent reported that it was significantly higher.
- 70 percent reported that the number of commercial farm loan rejections was higher since the beginning of 2009.
- 62 percent of farm credit counselors reported that farm household financial difficulties increased the number of loan rejections—one fifth of those surveyed volunteered that layoffs from off-farm jobs contributed to loan rejections and two-fifths volunteered that the loss of health care contributed.
For more information, contact Scott Marlow, Farm Sustainability Program Director, at smarlow@rafiusa.org or (919) 542-1396 x210.
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Page Updated 03.25.2011