After months of studying the nation's farm crisis, the American Bankers Association has released a report intended to help farmers-and their bankers-weather future downturns.
At a news conference on Thursday, the ABA's Task Force on 21st Century Agricultural Banking reiterated the need for the government to increase funding of Agriculture Department guaranteed loans, to reform crop insurance laws, and to improve rural access to capital.
Topping the task force's recommendations is increasing funding of the guaranteed loan program, which ran out of money to lend in May before Congress approved supplemental funding. These loans were crucial to restructuring farm debt last year when the agricultural crisis began, said Dennis Everson, task force chairman and senior vice president of First Dakota National Bank in Yankton, S.D.
"Loans don't replace weak prices, but they do help bankers across the country restructure debt and assist borrowers who are facing very meager cash flows," Mr. Everson said.
The ABA report is unrelated to the Senate's recent passage of $7.4 billion in agricultural relief. But the ABA hopes its findings will help farmers deal with frequent downturns in crop prices and demand.
In the first quarter, the rate of delinquent agricultural loans for purchases other than real estate increased to 3.7%, from 3.2% a year earlier, said Keith Leggett, the ABA's senior economist.
To help farmers deal with market ebbs and flows, the task force recommends establishing voluntary "rainy day" savings accounts to which farmers could contribute in prosperous times and draw from in weaker markets. Canada has a similar program.
The recommendations also extend beyond farm banking. The task force says small-business development centers could empower farmers and rural entrepreneurs with business skills.
Among other suggestions:
Expand the Aggie bond program. Aggies are tax-exempt, low-interest bonds available to farmers through banks in 15 states. The ABA is asking other states to offer Aggie bonds as a way to encourage more people to enter the farming industry.
Boost the U.S. conservation reduction program from 31 million acres of land to 40 million.
The government often removes acreage from production by paying farmers not to work the land.
Removing an additional nine million acres would help reduce the crop surpluses that have led to low prices.
