RAFI is proud to to be part of a broad coalition, representing more than 250 farm organizations and community lenders strong, to urge Congress to oppose across-the-board increases to Farm Service Agency (FSA) loan limits in the upcoming Farm Bill. The coalition, including RAFI, the National Sustainable Agriculture Coalition, the Rural Coalition, the National Family Farm Coalition and the National Farmers Union, among others, sent a letter cautioning Congress that such an increase would seriously threaten access to FSA loans for small- and mid-scale farms, especially beginning and socially disadvantaged farmers. Instead we urge Congress to take a more prudent and targeted approach.
“RAFI staff have worked directly with farmers of all kinds, and personally see the importance of USDA direct and guaranteed loans in keeping farm families in their homes and on the land,” says Scott Marlow, senior policy specialist at RAFI. “But the scale of existing loans calls for greater program funding, not larger loans. In a budget-constrained environment, larger loans mean fewer farms served, and fewer families who stay on the land.”
We urge Congress to measure any policy changes to FSA loan programs against current program usage and demand, historical funding levels and performance targets. In recent years, demand for both FSA direct and guaranteed loans exceeded available funding for all programs, with the exception of Direct Farm Ownership loans.
We believe increased FSA loan limits will result in fewer, larger loans – reducing credit availability to the small- and mid-scale farms for which the program is intended. Furthermore, even at the current loan limits, guaranteed lenders have failed to meet the statutory target participation rates for both beginning and socially disadvantaged farmers. Any increase in maximum loan amounts will decrease the likelihood guaranteed lenders will meet these obligations.
USDA loans are often the first step toward access to credit in private markets. However, allowing taxpayers to finance larger and larger loans through FSA would ultimately increase the risk to the taxpayer and increase dependence on federal programs, rather than private lending.
“USDA Direct and Guaranteed loans are an essential part of the farm safety net. However, USDA loans should serve as a bridge to commercial credit, not a replacement,” says Marlow. “Through our work with farmers in financial crisis, we know the answer to low prices and tight margins is not bigger loans and going deeper into debt.”
As Congress works toward the 2018 Farm Bill, we urge that:
- Any increases to FSA loans reflect demonstrated need.
- Any increases in loan limits be modest and tied to proportionate increases in appropriations.
- Guaranteed preferred lender status be tied to achievement of loan target participation rates of beginning and socially disadvantaged farmers.
- Any increase in maximum loan amounts must be matched by universal implementation of borrower’s rights as set out in statute, which will not allow lenders to weaken or circumvent borrower rights to notification and servicing as established in direct loan programs.
- Contract-based, single-use facility loans must contain sufficient protections to ensure the likelihood the loan can be serviced for its duration, in order to mitigate increased risk to taxpayers.
Let us know you support beginning and socially disadvantaged farmers and taking a prudent, targeted approach to FSA loan limits. Share this on social media and contact your House and Senate Agriculture Committee Members to voice your concerns.