Bankers and Farmers Approve New Farm Bill’s Credit Title
With the new farm bill coming into law, one of the most immediate and long awaited for changes will be an increase to the Farm Service Agency loan guarantees and direct loans. Even with this long overdue fix, many would still like see the limits even higher in the future.
The higher limits provide more flexibility for the farmers. In an agriculture industry where the operation size is constantly getting larger and more complex, more flexibility means more opportunities for growth.
The Agriculture Improvement Act of 2018 will raise the FSA loan guarantees from $1.399 million to $1.75 million, and it also doubles the loan limit for direct farm ownership or real estate to $600,000. The limit on direct farm operating loans increases from $100,000 to $400,000.
Both bankers and farmers alike are excited for the higher limits. The higher limits will allow for community bankers to serve more borrowers.
“There’s been a slight decline in the demand for guaranteed farm loans in recent years for a variety of reasons, but one of those reasons is the payment limit. So this will help serve those types of farmers, particularly when we have this continued decline in farm income levels.” -Mark Scanlan, senior vice president of agriculture and rural policy at Independent Community Bankers of America
Farm incomes have continuously declined since reaching their peak in 2013. The USDA predicts that farm incomes will be down 12% for this year from 2017.
With the rising cost of raising a crop and lower grain prices, the higher loan limits will allow for some farmers to make it through what is predicted to be a tough few upcoming years.
“Bankers have a strong interest in farm bills because it provides business certainty in terms of their planning, both short term and for the next three to five years. Now we can move forward without the anxiety and apprehension that may have existed even if we would have just done an extension. It’s good to have it locked down and in place.” -Scanlan
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