The Independent Bankers Association of America is urging Congress and the Clinton administration to pledge more direct aid to struggling farmers.
The President is to unveil his budget for fiscal year 2000 this week, and the trade group is asking Congress to work with him to increase funding for agriculture.
Earmarking additional money to farmers up-front, the group argued, would supply peace of mind to bankers, who worry that farmers will not be able to repay their loans. It could also help avoid a repeat of last fall's political showdown, when Congress battled over an eventual $7 billion emergency aid package to farmers, said Mark K. Scanlan, a lobbyist for the IBAA.
"It would alleviate lenders' concerns in farm country if this was taken care of in advance," Mr. Scanlan said.
In a letter to Rep. Larry Combest, R-Tex., chairman of the House Agriculture Committee, IBAA president Bill McQuillan said the trade group expects crop prices to remain low this year due to crop surpluses and global turmoil that has cut demand for U.S. farm products.
To offset low prices, the IBAA wants Congress to pledge several billion dollars in payments to farmers, thus guaranteeing them cash flow. Without such an advance guarantee, it would be more difficult for bankers to extend credit to farmers, the letter said.
The Department of Agriculture's budget for this fiscal year is about $54.3 billion. Its proposed budget for next year will be announced today.
The IBAA is also asking Congress to increase funding for some popular loan guarantee programs. The Farm Service Agency programs, which guarantee both farm real estate loans and operating lines of credit, typically run out of funds each year, said Mr. Scanlan, the lobbyist.
Now that the agricultural economy has weakened, Mr. Scanlan said, he expects rural banks to rely on the programs even more.
"There was barely enough funding last year, and now we have all of these extra factors," he said. "It makes a lot of sense to have a better-funded program."
The IBAA also wants Congress to improve crop insurance laws so that policies better protect farmers from losses.
Many farmers do not buy crop insurance because it is too expensive and does not protect against low prices or consecutive years of bad weather.
Congress should also push for better export markets for U.S. crops and protect American farmers with additional payments should exports remain soft in 1999, the IBAA said.
One agricultural banker favors direct payments to farmers for the short term but said they would not solve the industry's long-term woes.
Gary Weirauch, president of Citizens State Bank of Loyal (Wis.), said improving the nation's crop insurance laws may be the best way to help farmers-and their lenders-in the long run.
"We need to get that up and moving so farmers can protect themselves," Mr. Weirauch said. "It's a better long-term solution than these gifting programs."
Whether Congress will grant the IBAA requests is uncertain. Mr. Scanlan said he expects lawmakers to set aside some funds to overhaul crop insurance programs. Congress may not, however, approve more direct payments to farmers, especially after the big emergency aid program in October, he said.