APNewsBreak: Farmers avoiding fed loan program

In this Aug. 30, 2011 photo, Keith Beavers exam­ines his dam­aged tobacco crop on his farm in Mount Olive, N.C. When it comes to nat­ural dis­as­ters, this has been a “mon­ster” year for farm­ers, one agri­cul­ture offi­cial said. An Asso­ci­ated Press review of dis­as­ter loans issued nation­wide found the Farm Ser­vice Agency made fewer than 300, total­ing just $32.6 mil­lion, for the fis­cal year end­ing Sept. 30. To put that in per­spec­tive, Texas alone is esti­mated to have $1.5 bil­lion in drought losses this year. (Asso­ci­ated Press File | Jim R. Bounds)

ROXANA HEGEMAN

Asso­ci­ated Press

WICHITA, Kan. — Extreme drought with­ered grain across the Great Plains. Flood­ing from the Mis­sis­sippi and Mis­souri rivers drowned corn and other crops from Nebraska to Louisiana. A trop­i­cal storm on the East Coast sub­merged Car­olina tobacco fields and New Jer­sey blue­berry bushes.

When it comes to nat­ural dis­as­ters, this has been a “mon­ster” year for farm­ers, one agri­cul­ture offi­cial said.

Yet few farm­ers are tak­ing advan­tage of a fed­eral loan pro­gram aimed at help­ing them recover. Only six states have fewer than three-fourths of their coun­ties cov­ered by some type of dis­as­ter dec­la­ra­tion. In nearly half of the states, every county has been offi­cially des­ig­nated a dis­as­ter area. That means thou­sands of farms could apply for emer­gency loans.

But an Asso­ci­ated Press review of dis­as­ter loans issued nation­wide found the Farm Ser­vice Agency made fewer than 300, total­ing just $32.6 mil­lion, for the fis­cal year end­ing Sept. 30. To put that in per­spec­tive, Texas alone is esti­mated to have $1.5 bil­lion in drought losses this year.

Some farm­ers say they aren’t tak­ing out the loans because recent high crop prices have given them enough money to bounce back on their own. Oth­ers say they haven’t applied for loans because there are bet­ter aid pro­grams available.

Both rea­sons call into ques­tion what should be done with the fed­eral emer­gency loan pro­gram as mem­bers of Con­gress look at what to keep — and what to cut — in the next five-year farm bill. Many in agri­cul­ture say the emer­gency loan pro­gram should be pre­served because it helps those who can’t get other credit. But if Con­gress wants it to be use­ful to most farm­ers, it needs improvement.

Vance Ehmke, who farms near Healy in west-central Kansas, said many farm­ers haven’t applied for loans because they don’t need them. Many have money saved after sev­eral years of high grain prices. And with the drought in the South cre­at­ing a hay short­age, some corn and soy­bean farm­ers have been able to bale their failed crops to sell as live­stock feed.

“This is fan­tas­tic, how much money they are mak­ing with fail­ures,” Ehmke said.

Farm­ers in a belt from Texas to North Dakota also tend to have crop insur­ance, which Ehmke char­ac­ter­ized as “real gen­er­ous.” The fed­eral gov­ern­ment sub­si­dizes farm­ers’ pre­mi­ums, and crop insur­ance is avail­able through­out the nation, although farm­ers in other regions tend to use it less.

“Crop insur­ance is a valu­able pro­gram. That is one thing — with all this bud­get cut­ting that is going on — that we want to make sure we keep because it would be pretty dif­fi­cult to farm in Amer­ica with­out some kind of risk man­age­ment pro­gram under­neath you,” said Steve Bac­cus, pres­i­dent of the Kansas Farm Bureau.

But Bac­cus, who also farms, said he was still sur­prised that no emer­gency loans had been issued in Kansas when the state had been hit by both drought and flood­ing. (“This past year has been a mon­ster,” said Arlyn Stiebe, the Farm Ser­vice Agency’s loan direc­tor for Kansas.)

Many farm­ers also hold out for grants, and — the clincher for those con­sid­er­ing loans — FSA’s inter­est rate on emer­gency loans is higher than on its nor­mal ones.

Along with emer­gency loans, FSA offers dis­as­ter grants under its Sup­ple­men­tal Rev­enue Assis­tance Pro­gram that don’t have to be repaid and are — not sur­pris­ingly — far more pop­u­lar. The main prob­lem with that pro­gram is farm­ers must wait more than a year to see any money. And, farm­ers can only apply for losses that hap­pened before Sept. 30 because the pro­gram is end­ing next year.

Farm­ers, how­ever, will still be able to get loans at lower inter­est rates through the FSA’s nor­mal farm loan pro­gram. It’s at 1.75 per­cent now, com­pared to 3.75 per­cent for emer­gency loans. Usu­ally, it’s the other way around, but inter­est rates over­all have plunged. An FSA offi­cial said if the agency low­ers its inter­est rate for emer­gency loans, how­ever, less money will be avail­able to make future loans.

But so few emer­gency loans have been issued to farm­ers that the agency has a two-year cush­ion of roughly $69 mil­lion in the fund, which unlike other FSA loan pro­grams car­ries over into the next year’s bud­get. FSA has loaned between $30 mil­lion and $35 mil­lion in emer­gency loans annu­ally for the past three years, said Bob Bon­net, loan branch chief at the Farm Ser­vice Agency in Washington.

In addi­tion to emer­gency loans and sup­ple­men­tal rev­enue grants, farm­ers in des­ig­nated dis­as­ter areas can also apply for eight other sep­a­rate FSA dis­as­ter pro­grams. One pro­gram pays grow­ers to reha­bil­i­tate farm­land, another com­pen­sates pro­duc­ers for the weather-related deaths of live­stock, hon­ey­bees and fish. Still another pro­gram offers cash pay­ments for graz­ing losses, while another pays orchardists and nurs­ery tree grow­ers for tree losses.

“If agri­cul­ture is any indi­ca­tion of gov­ern­ment pro­grams, if it … is a good indi­ca­tion of what goes on with Social Secu­rity, Medicare, Med­ic­aid, mil­i­tary spend­ing and what­ever, we are just so screwed,” said Ehmke, the farmer. “We are squan­der­ing just untold huge amounts of money.”

The solu­tion to the lack of inter­est in emer­gency loans, how­ever, isn’t to just have farm­ers apply for nor­mal gov­ern­ment farm loans. Bor­row­ers who can’t find a com­mer­cial lender else­where can get those FSA loans for only seven years, or 10 if they are new farm­ers. Those farm­ers can take out both reg­u­lar and emer­gency loans in disaster-designated coun­ties. Farm­ers who’ve already maxed out on the gov­ern­ment loans when a dis­as­ter strikes can still apply for FSA emer­gency loans.

“It is not a big pro­gram, but it is used,” Bon­net said. “We have not pro­posed that it be eliminated.”

Eddie Trevino, the FSA loan direc­tor in Texas, said the har­vest isn’t done there and many farm­ers are still assess­ing whether they’ll need loans for next year.

“His­tor­i­cally, the pro­gram has been very use­ful. Is there room to improve it? Sure,” he said, sug­gest­ing emer­gency loan inter­est rates be set the same as for other FSA loans and the pro­gram be stream­lined to make it eas­ier to use.

All 254 coun­ties in drought-plagued Texas have received dis­as­ter des­ig­na­tions, but just six Texas farm­ers took out $467,540 in emer­gency loans in the fis­cal year end­ing Sept. 30. That com­pares to the $169.5 mil­lion in fed­eral dis­as­ter grants Texas farm­ers received for the 2009 crop year.

Posted by AP News on Nov 11 2011. You can follow any responses to this entry through the RSS Feed. Comments can be made below.