Working Around the Clock – Farmers & Legislators

According to Doane advisory services, farms in the Midwest states managed to plant 43% of the estimated corn acreage during the third week of May.  This is quite an accomplishment and is clearly a testament to the efficiency of modern farm operations today. Having talked to many clients over the last week farmers have been working around the clock to get corn in the ground and clearly they are making much progress.  Perhaps legislators in Washington, D.C. are taking a cue from their constituents as Congress is working once again to push through a new 5 year Farm Bill.

On May 21, Sen. Debbie Stabenow (D- MI), Chairwomen of the U.S. Senate Committee on Agriculture, Nutrition and Forestry, penned an op-ed published in The Hill calling for passage of the Farm Bill as a job creator and tool to reduce the deficit.

• Stabenow wrote, “There can be no more kicking the can down the road. We must pass a farm bill this year to provide certainty to the 16 million Americans whose jobs rely on agriculture.”
• “Passing this year’s farm bill will yield over $24 billion in total agriculture savings.”
• “We finally eliminate direct payment subsidies, which pay farmers even in good times when they’re already doing well.”
• “It’s time for reform. It’s time for bipartisanship to win out over gridlock. It’s time to create jobs. It’s time for Congress to finish the Farm Bill.”

Today in a procedural vote the U.S. Senate voted 75-22 to take a step towards passage of the new Farm Bill legislation.  According to  the Associated Press there are more than 150 amendments to the bill.  The legislation is aimed to make nominal cuts to the food stamp program and some subsidy payments paid to producers whether they grow crops or not at a rate of $400 million a year for a program which costs over $80 billion annually to the federal budget.  The last Farm Bill that passed in 2008 was estimated to cost $604 billion over ten years. The last 10 year cost projections predicted by the Senate and House calculated the 2008 Farm Bill will ultimately cost between $950 billion and $963 billion respectively.  Recently, there has been much debate in Congress and the country about components of the Farm Bill like food stamps and certain subsidies for producers that may or may not grow crops.  Much of this rhetoric is not new as the debate over farm subsidies remains ongoing.  Outside of the farm subsidy component of the Farm Bill are important programs which assist beginning farmers in gaining access to capital to purchase land and increase the capacity of their operations.

The Farm Bill recently voted on by the Senate supports the much needed beginning farmer loan program and will maintain higher loan funds reserved for direct farm ownership loans while also strengthening the down payment loan program.  The Title V : Credit section of the bill additionally recognizes the importance and success of the Department of Agriculture loan programs as it reauthorizes all Farm Service Agency loan authorization levels through 2018.  The down payment assistance component of this loan that can be used by a farmer for a down payment on the land is often not required by FSA to be in a first lien position.  I have used this program with farm buyers where additional capital from a partnering bank can be the primary lender in the first lien holder position thus making the down payment loan in a second position.  The flexibility in this for a beginning farmer is critical as the barrier to entry into growing their operation is often limited by financial liquidity.  This is clearly a good financial tool used by the Farm Credit system and other specialized financial institutions engaged in agricultural lending.

The ultimate future of the Farm Bill or Agriculture Reform, Food and Jobs Act of 2013 as it is called in the Senate remains in the balance but most sources appear confident that the Farm Bill will pass this year.