Broader Eligibility Urged for U.S. Loan Guarantee

Some farmers may be ineligible for a federal guaranteed loan program this year because their income is expected to be less than normal, so bankers and a federal agency want the program's rules changed to reflect the 1999 farm crisis.

The Farm Service Agency program requires farmers to show that their income is expected to exceed expenses by 10% before the FSA will issue a government guarantee. Bankers say the 10% rule is arbitrary and difficult to satisfy while crop prices remain at near-record lows.

"It's frustrating for bankers," said John Blanchfield, manager of the American Bankers Association's agricultural bankers division. "There are perfectly bankable deals that aren't getting done."

Now the FSA has asked Congress to reduce the income requirement so that farms breaking even financially would qualify for guarantees. A banker, Dennis Everson of First Dakota National Bank in Yankton, S.D., recently testified before Congress that the requirement could be made even lower if the government guarantees less than its usual share of the loan.

A quick-fix solution is not in sight, however. Lawmakers have not yet taken up legislation to address the FSA income requirement.