WASHINGTON - Bankers are second to none in their desire to see the federal deficit pared down. But agricultural lenders across the farm belt are hoping Congress will shield farm programs from the budget cutting ax.
The House Agriculture Committee will hold its first hearing on the Farm Bill on Feb. 15 and the Senate will begin hearings in April. Many bankers fear that programs near and dear to them and their borrowers could be on the line when those hearings convene.
Lenders are already casting a watchful eye on price supports and certain conservation programs, which provide farmers with a set income, and the Farmers Home Administration, which guarantees loans and provides direct loans to farmers.
"As American agriculture and rural America goes through an adjustment of having fewer farmers, it would be a poor time to cut back on those programs," said Phil Burns, president of Farmers and Merchants Bank in West Point, Neb. "If there were to be an increase in funding anywhere, that is where I would put the money."
Agricultural programs have many powerful supporters, such as Senate Agriculture Committee member and majority leader Bob Dole, R-Kan., and House Agriculture Committee Chairman Pat Roberts, R-Kan. But they may not be able to protect farm programs from the budget cutting ax.
"The whole thing is budget driven and we haven't been told yet how much money we have to save," said Bill O'Conner, policy director for the House Agriculture Committee. "The budget resolution is going to require the programs to be cut. So it is irrelevant if they favor or disfavor the programs, they are still going to be cut."
Congressional staff members said that the appropriations subcommittees are likely to cut funding for the Farmers Home Administration, which offers direct loans and loan guarantees for farm operations, mortgages, and community development programs in rural areas through the Agriculture Department.
Among the options being considered to reduce the lending agency's budget are reducing the subsidy rate, freezing the agency's funding at this year's level, or ending direct loan programs. In 1993, the agency had a loan portfolio of $48 billion.
Mr. Burns said he makes Farmers Home Administration loans to 18 families, who would be hurt if the loan programs were curtailed.
"I understand the need for cuts, but it is important to remember those cuts affect real people," he said. "For each one of those families, it would be devastating."
Members of the House Agriculture Committee are also talking about a 25% cut in funds for Commodity Credit Corp. programs, which are estimated to cost $42 billion over five years, according to Joe Glauber, the USDA's principal economics counselor.
Commodity Credit Corp. programs include commodity price support programs, disaster assistance, and export promotions.
The commodity price support programs attempt to reduce the effect of changing crop prices on farmers' income. Once crop prices drop below the government's target price, the government pays farmers the difference between the market price and the target price. Cuts in the commodity price supports could mean reducing the target price for corn by 50 cents a bushel.
Dale Pohlmann, president of Revenna Bank in Revenna, Neb., said the government could phase out the subsidies over a 10-year period but should not eliminate price supports all at once.
"We, as lenders, have learned to rely on those guarantees. If the price floors were to be cut dramatically it could have a pretty disastrous effect," he said.
Funds for the Conservation Reserve Program, which pays farmers not to cultivate environmentally sensitive land, are also endangered. Currently 36.5 million acres are enrolled in the program at an annual cost of about $1.8 billion. Ten-year contracts on 24.5 million acres will expire by 1998.
In a preliminary review of the cost of the program, the Congressional Budget Office estimated $1.9 billion would be spent for new conservation reserve contracts from this year to 2000. However, individual farmers would receive less money for new contracts on their land because the Agriculture Department will base their payment on the rental value of the land rather than on inflated value estimates that previously were used.
Jim Moseley, former assistant secretary of agriculture, owns farmland in Indiana and said he and other farmers who want to renew their Conservation Reserve Program contracts will ask the government for smaller payments because they know the government will not accept inflated prices.
"I knew the U.S.D.A. was accepting bids at $70 per acre, so I bid my land at $68 and it was accepted," he said. "Now the government will look at the true value of farming it, which is around $40 to $50 per acre."
Previously, the Conservation Reserve Program focused it efforts on soil erosion problems in the Great Plains, but Mr. Glauber said new contracts may be directed toward wildlife preservation and water quality issues in Eastern states.
Ms. Oppenheim writes for Medill News Service.