Capital and Credit Needs

Capital and Credit Needs — Both the Farm Credit System and commercial banks compete aggressively to provide capital to low risk borrowers. This practice, however, leaves behind many borrowers, who are highly leveraged, are recovering from economic or production losses, or are beginning farmers. Financial tools that assist beginning and financially distressed producers should be developed and enhanced through a combination of federal, state, and private resources.

Modern agriculture’s capital needs continue to increase and beginning farmers and ranchers often lack the equity or cash reserves necessary to enter the competitive ag sector, even as the average age of our nation’s farmers and ranchers continues to increase. NASDA supports efforts and policies that seek to retain these future generations of agricultural producers.

NASDA also supports policies that provide beginning/limited resource farmers and ranchers with access to low interest credit through state, federal and private sources. In particular, NASDA supports a definition of “substantial real estate” in the IRS Code that reflects a realistic modern farm size. NASDA also supports increasing and indexing the loan and bond limit on depreciable property in the IRS Code.

NASDA considers the capitalization of beginning farmers, and retention of entry-level, socially disadvantaged and small, existing farmers as priority capital and credit needs. Given the typical financial position of a beginning farmer, comprehensive capital must be available. Establishing a successful farm or ranch operation requires capital for land ownership or lease payments, equipment and breeding livestock, operating, marketing and risk management costs, retained ownership of grains and livestock, and living expenses.

Moreover, retention programs for socially disadvantaged, small existing and entry level farmers should be designed for producers that generate between $100,000 and $500,000 annual gross income. Retention programs should be based on some of the same foundations as beginning farmer programs; namely providing adequate financial resources at affordable rates with cross-collateralization capabilities. Farmer retention efforts should also include programs to help producers acquire marketing skills and avail themselves of value-added opportunities.

NASDA believes the FSA beginning farmer down payment program should be improved by extending the program's current loan amortization from 15 to 30 years and that all FSA loan programs be maintained with adequate funding.

USDA's Rural Development Agency should consider guaranteed loans for producers who have organized as Limited Liability Companies or other business entities for the purpose of value driven marketing programs. The Rural Development agency should not be limited, however, to "brick and mortar" assistance programs with market enhancement programs. NASDA urges the IRS tax code be changed to allow livestock feeding programs (including dairy and egg producers) to be considered as grain processing (biological processing) which would make some Rural Development programs available for value-added marketing alternatives.