In testimony before the U.S. Senate Agriculture, Nutrition and Forestry Committee last week, the American Bankers Association encouraged reforms to the 2018 Farm Bill.
Speaking on behalf of the ABA, Shan Hanes, president and CEO of First National Bank in Elkhart, Kansas, expressed concerns about the guaranteed farm loan programs.
“There is a need to consider reforms to the programs, specifically to raise the lending limit cap on guaranteed ownership and guaranteed operating loans due to the rising cost of agriculture,” Hanes said at the hearing, conducted by committee chairman U.S. Sen. Pat Roberts (R-KS) and ranking member U.S. Sen. Debbie Stabenow (D-MI). It was held at Kansas State University in Manhattan, Kansas.
“Additionally, there needs to be a more in-depth discussion on modernizing the programs and providing means for something as simple as electronic signatures,” Hanes added.
He also recommended changes to the Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) programs.
“With the significant changes we’ve seen in commodity prices, producers need to have the ability to make elections to their ARC and PLC farm programs yearly instead of a one-time election,” Hanes said. “Lastly, and most importantly, farmers currently do not receive their payments in the same marketing year. This has caused an issue for lenders as we cannot properly account for their payments as part of their loan repayment strategy.”
In addition, Hanes commented on the risks posed by the Farm Credit System, a government-sponsored entity.
“The most troublesome competitor I face is the taxpayer-backed and tax-advantaged federal Farm Credit System,” he said. “Congress created the FCS as a public option for farm finance 100 years ago when farmers were having trouble getting the credit they needed. Those conditions no longer exist, and yet we continue to have a government assisted, tax advantaged farm lender providing credit to customers who would be able to easily borrow from taxpaying institutions like mine.”
Hanes discussed the role banks play in the agriculture economy as a primary source of credit to the nation’s farmers and ranchers. He cited the successes of the 2014 Farm Bill including crop insurance, the conservation reserve program and the removal of term limits on USDA Guaranteed Farm Loan Programs.