A farmer and USDA official inspecting crops in a hoop house | USDA
Here at Greenhouse Grower, we previously covered the current state of the 2024 Farm Bill, its contents, and its path through both the U.S. Senate and House.
In its most recent entry in a multi-part series covering aspects and challenges of the Farm Bill, the National Sustainable Agriculture Coalition (NSAC) highlighted the issue of expanding credit access to farmers, allowing them to purchase equipment, supplies, and labor needed to ensure a successful crop.
Here are the improvements and changes that can come to this issue based on proposals for the farm bills from the House and Senate.
Senate Proposals for the New Farm Bill
Debbie Stabenow (D-MI), Chairwoman of the Senate Committee on Agriculture, Nutrition, and Forestry, has proposed the Rural Prosperity and Food Security Act. This proposal offers provisions to address existing barriers that otherwise make it more difficult for farmers to access capital and grow their operations.
Regarding farm ownership loans, the Rural Prosperity and Food Security Act would:
- Expand loan limits for individual direct farm ownership loans, from $600,000 to $850,000
- Expand loan limits for guaranteed farm ownership loans, from $2.2 to $3 million
- Expand loan limits for direct operating loans, from $400,000 to $750,000
- Expand loan limits for guaranteed operating loans, from $2.2 to $2.6 million
- Increase the maximum loan amount from a microloan, from $50,000 to $100,000
- Reduce the requirement for farming experience, from three years to one year
According to NSAC, “additional provisions of the Senate bill are specifically designed to help distressed borrowers or those with limited financial stability.” That includes providing the USDA authorization to refinance “distressed guaranteed loans into direct loans” and restoring loan eligibility to farmers who previously benefited from loan assistance.
House Proposals for the New Farm Bill
In contrast, the Farm, Food, and National Security Act of 2024, the House bill, adds additional provisions to allow for farmers to access credit. However, NSAC raises concerns that the House bill, more than the Senate bill, runs the risk of “exacerbating inequitable access to capital and obscuring the distribution of those resources.”
For example, the House Bill would establish a pilot program for farmers to receive pre-approval for farm ownership loans. The purpose of this pilot program is ostensibly to support farmers by offering an easier process to purchase land for farm use. However, as in the case of the Senate bill, it reduces the required amount of farming experience needed to apply for the loan.
Additionally, like the Senate bill, the House bill authorizes the USDA to “refinance guaranteed loans into direct loans.” However, unlike the Senate bill, this would only happen in the event ” the borrower is in default and the lender has initiated liquidation or foreclosure action.” This would prevent farmers from seeking relief unless put in a much more dire and precarious set of financial circumstances.
Like the Senate bill, the Farm, Food, and National Security Act of 2024 expands loan limits, but it does not authorize a higher funding total for USDA loans. Providing higher limits to individual loans but preventing a higher overall funding budget “all but ensures that bigger loans would be made to fewer farms.”
Lastly, the House bill proposes exempting the Farm Credit System from Rule 1071 of the Consumer Financial Protection Bureau (CFPB). Rule 1071 requires that “all business lenders, including agricultural lenders, report the demographic information of borrowers to CFPB, to facilitate transparency toward equitable lending to women-owned, minority-owned, and small businesses.” Without the public documentation of this data, there is a larger risk of discrimination towards certain businesses.
However, despite many issues taken with the House bill, NSAC does note one important improvement of it in comparison to the Senate bill. That would be a reform to the National Appeals Division (NAD), which is the appeals process for farmers who have been denied loans. This reform moves the responsibility from the farmer to the USDA to provide proof regarding a denied loan application. Where previously, the farmer would have to provide evidence that the USDA wrongfully denied their application, this change requires the USDA to instead provide proof, defending their decision to deny the loan.
For more information and insights into the issue of credit access for farmers and how they’re addressed within the U.S. Senate and House farm bill proposals, the original article from the National Sustainable Agriculture Coalition can be found on the NSAC blog in addition to previous entries in the “Path to the Farm Bill” series.
