Independent Banker - May 2017 - 24

Grassroots
programs-which are fully or nearly
fully self-funding-allow community
banks to lend to higher-risk borrowers
with a guarantee of 90 percent
repayment.
For the next farm bill, ICBA
supports removing volume caps to
signifi cantly raise the total amount of
USDA-guaranteed farm loans that can
be made to meet the needs of family
programs may need a stronger safety
net as well.
Unlike the last farm
bill, the 2018 bill will
be written in an era
of low prices and
increasing fi nancial
stress among many
bankers' farm
customers.
farmers and ranchers. ICBA will also
urge Congress to increase the loan
limits for guaranteed loans contingent
on adequate funding provided
through the appropriations process if
additional funding is needed.
ICBA will also fi ght any attempt to
reimpose term limits on guaranteed
loans, as decisions on whether farmers
and ranchers need these loans are
best made between producers and
their lenders.
Meanwhile, the farm bill provides
billions of dollars through various
programs, including commoditysupport
programs such as Price Loss
Coverage and Ag Risk Coverage, that
circulate through the farm sector and
rural communities. The new farm
bill must provide a robust commodity
safety net. Congress will undoubtedly
look at enhancing the dairy program
and the cotton programs, but other
Sowing the seeds
Unlike the last farm bill, which was
written in an era of high farm prices,
the 2018 bill will be written in an era
of low prices and increasing fi nancial
stress among many bankers' farm
customers. The USDA's Economic
Research Service has forecast a 50
percent drop in net farm income
since 2013 due to a collapse in commodity
prices and is projecting an 8.7
percent decline in net farm income
this year. Farm asset values are forecast
to decline by 1.1 percent in 2017,
and farm debt is forecast to increase
by 5.2 percent. Farm sector equity,
the net measure of assets and debt, is
forecast down by $51.2 billion.
House Agriculture Committee
chairman Michael Conaway (R-Texas)
has warned of the potential for an
economic crisis in the heartland.
Meanwhile, Senate Agriculture Committee
chairman Pat Roberts (R-Kan.)
acknowledged in a fi eld hearing in his
home state that this farm bill journey
will not be like the last one. While
there will again be budgetary pressure
in the face of a $19 trillion national
debt, Roberts said, the debate will
allow policymakers to take a fresh
look at the agriculture safety net, regulatory
burdens and the core mission
of USDA programs. To head off the
potential for budget cuts amid these
conditions, Conaway's committee has
urged the House Budget Committee
to bear in mind the estimated $104
billion in savings from the current
farm bill, which is four times the projection
when it passed.
However, if the congressional budget
committees signifi cantly reduce
the budget baseline for the 2018 farm
bill, it will be extremely diffi cult to
write the next one given the many
competing demands for funding by
various interest groups. Nutrition
programs, which represent about 76
percent of the overall farm bill's costs,
have been reduced by more than
24 ICBA IndependentBanker May 2017
$80 billion under initial projections,
largely due to fewer people being
eligible as the economy has improved.
Nutrition programs will once again
represent a major battleground in
writing a new farm bill.
In addition, spending on crop
insurance represents 42 percent
of the farm bill budget if nutrition
programs are not included. There will
once again be several amendments
offered to cut crop insurance funds to
reduce subsidies of producers' premiums
and reimbursements of crop
insurance agents.
ICBA has urged policymakers to
oppose cuts to crop insurance. In a
joint letter to agriculture secretary
nominee Sonny Perdue, the Offi ce
of Management and Budget, and
congressional budget and appropriations
committees, the coalition said
the crop insurance program provides
fl exible products and is based on
market principles. The letter notes
that crop insurance is more than
$20 billion under budget from 2014
projections and should not be forced
to withstand further cuts.
Plowing ahead
Under a new administration and Congress,
there are many open questions
about how the farm bill debate will
proceed. But farm-state lawmakers
have demonstrated a clear focus on
advancing a bill that is mindful of
both budgetary constraints and severe
economic problems in rural America.
While the Sept. 30, 2018, expiration
date on the 2014 act might sound like
there is plenty of time for Congress
to act, farm bills are rarely passed
easily or on time. Through it all, ICBA
will be at the table to advocate policies
that support community bank
agricultural lending to farmers and
ranchers, sound rural development
programs and economic rejuvenation
in rural America.
Mark Scanlan (mark.scanlan@icba.org)
is ICBA senior vice president of
agriculture and rural policy.
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Independent Banker - May 2017

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