A coalition of 19 farm and advocacy groups and lenders wrote a letter to members of Congress Wednesday urging them not to raise the cap on loans issued by the Farm Service Agency. The groups argue that a higher lending limit would favor larger producers over small and beginning producers.
The groups support some modification to the FSA’s lending program but argue that any adjustments should be “more prudent and targeted” than an across-the-board increase to loan limits. In the letter, the groups maintain that “in a budget-constrained environment, increased FSA loan limits will almost certainly result in fewer, but larger loans — reducing credit availability to small and mid-scale farms, many of whom are beginning farmers, for which the program is intended.”
Demand for FSA loans in recent years has exceeded the lending capacity of the agency, which is often characterized as the “lender of last resort” for farmers who are having difficulty accessing credit from non-government lenders. That demand, along with low commodity prices, has led to conversations in Congress about raising the lending limit. The current cap for guaranteed FSA loans is $1.399 million; the agency has a separate program for loans of up to $100,000. FSA loans are guaranteed up to 95 percent by the agency.
The groups offered other suggestions in their letter, including that “preferred lender status” be tied to meeting certain participation targets laid out by Congress. They also argued that FSA loans for contract producers shouldn’t be made unless the producers have a contract that lasts the length of the loan. Higher loan rates, they argue, raise the risk of defaults and farm loss, especially for farmers taking on huge loans to pay for expensive equipment and structures.