Opening Statement: Subcommittee Chairman Austin Scott: Commodity Exchanges, Energy, and Credit Subcommittee Hearing: The Next Farm Bill: Credit Programs
Remarks as prepared for delivery:
Good afternoon, and welcome to today’s subcommittee hearing.
Over the past several weeks, the Agriculture Committee has held a series of hearings in preparation for crafting the next farm bill. Through this, the Committee has examined the overall farm economy, reviewed the safety and soundness of the Farm Credit System, and heard from a broad constituency on nearly all aspects of the farm bill.
These hearings have shown that producers nationwide have been experiencing a steady decline in net farm income over the past four years. Due to the current state of the rural economy, access to credit is even more essential to keeping farmers and ranchers producing a safe, affordable, and abundant supply of food and fiber for America and the rest of the world.
Thankfully we have a network of commercial and community banks, USDA loan programs, and the Farm Credit System that each play a crucial role in providing that access.
In addition to providing access to credit, we must ensure that the agricultural credit policies currently in place are working and providing the liquidity producers need to meet day-to-day operating expenses.
Given the downturn in the farm economy and the erosion of cash reserves, securing credit has been a challenge for many, but especially for producers just getting their start. These younger farmers have not been farming long enough to build up reserves for the lean times that inevitably come in production agriculture. The Agricultural Act of 2014 included several provisions to provide opportunities for young, beginning, and socially disadvantaged farmers, including permanent authorization of a microloan program and cooperative lending pilots to meet the needs of smaller projects. For these producers, the Farm Service Agency (FSA) is a lender of first opportunity and has targeted funding for meeting their credit needs.
More generally, the farm bill authorizes direct and guaranteed loans through FSA that enable farmers and ranchers to gain or continue financing despite volatile commodity markets. The last farm bill eliminated term limits on guaranteed operating loans, which has given FSA and lenders the certainty they need to work together to graduate participants to commercial lending institutions.
However, many farmers and ranchers have been unable to access credit through traditional loans, and FSA loan requests have increased dramatically. According to USDA, as of September 2, 2016, FSA had a backlog of 1,900 approved but unfunded loans, projecting a 30% shortfall of funds for the end of the fiscal year.
As we approach farm bill deliberations, we need to prioritize access to credit. Along with a strong farm safety net—including crop insurance—credit availability is a tool we cannot afford to lose. Modern farming requires modern financing. I look forward to a great discussion on the program changes necessary to keep pace with the needs of producers of all sizes.
I thank each of our witnesses for being here today, and I look forward to hearing your testimony. I will now yield to the ranking member for any remarks he wishes to make.