Credit Readily Available to Nation's Farmers but Concerns Raised

The Independent Community Bankers of America (ICBA) on Wednesday told a House Agriculture Committee subcommittee examining rural credit availability that credit is plentiful for America’s farmers and ranchers and is being provided at rates near historically low levels. 

But Sean Williams, president and CEO of First National Bank of Wynne, Ark., in testimony at the hearing on credit availability in rural America, noted that "the ag economy has experienced record prices allowing farmers to pay down debt. Livestock producers also are now benefitting from lower feed costs and higher prices providing much-needed profits. The rapid rise in farmland values has slowed or stalled, meaning that land prices are expected to be stable or slightly decline if crop prices continue declining or remain below the cost of production."

Williams asked Congress to hold hearings related to troubling activities of the Farm Credit System (FCS), a government-sponsored enterprise. He voiced community bankers’ alarm over what he called the FCS’s cherry-picking activities, including that it leverages tax and funding advantages to target the financially strongest customers of community banks, which destabilizes agriculture loan portfolios of many banks and increases risks to the community bank industry. This, in turn, can lead to fewer lenders and less credit availability for rural America, he added.

In the testimony, ICBA noted the Farm Credit Administration’s unauthorized "investment" gambit to allow FCS lenders to engage in non-farm lending; questioned why the FCA obtained a $10 billion line of credit without congressional approval; and noted the FCA's "anything goes" regulatory approach led to CoBank, the FCS’s largest cooperative lender, making an unauthorized $725 million loan to Verizon to buy out Vodafone’s interest in Verizon Wireless.

"This deal finances large, corporate, multi-national firms located in New York City and London; this is a non-rural and non-cooperative, international corporate financial deal inappropriate for an ag-based cooperative operating as a taxpayer-backed GSE," Williams said.

Williams also provided the subcommittee with conclusions of a recent ICBA banker survey, which found that:
    •    The farm bill and crop insurance are vital to extending credit,

    •    Reference prices are “adequate” but won’t cover production costs,
    •    Drought and weather problems exist in many states and are a concern, and
    •    More farm bill details and decision-making tools are needed.

The ICBA represents the interests of the community-banking industry and its membership through advocacy, education and various products and services.