U.S. Explores Options as Farm Loan Funds Deplete Cash Supply By Reuters

By P.J. Huffstutter

CHICAGO – The U.S. government’s $2.65 billion loan program aimed at assisting farmers has already exhausted its funds, as demand for federal support rises amid the most challenging agricultural downturn in over ten years. This situation was confirmed by U.S. officials on Monday.

In response, the U.S. Department of Agriculture (USDA) is seeking alternative funding sources to help address the shortfall in farm operating loans until more funds become available later this year or in the next fiscal year. However, the agency did not disclose specifics about potential funding sources.

Financial experts note that these loan guarantees and direct loans from the Farm Service Agency (FSA) are often the last resort for farmers. Without this financial assistance, many farmers may face severe difficulties until the next funding cycle opens in the fall, according to rural economy specialists.

Last month, the FSA acknowledged to the media that it anticipated the allocation for these loans or guarantees would be depleted before the program restarts on October 1.

As low commodity prices and increasing trade competition plagues the rural sector, U.S. grain farmers are increasingly depending on the FSA for financial assistance. Agricultural lenders are similarly turning to the agency for guarantees on the loans they extend to farmers for various operational and real estate needs.

Despite the depletion of funds for the operational loan program, requests for assistance from both farmers and their banking partners continue to rise. The FSA reported a backlog of tens of millions of dollars in Direct and Guaranteed operating loan accounts, with expectations that this figure will grow as the fiscal year comes to a close.

EMERGENCY FUNDS

Recently, the FSA notified Congress of its plan to utilize $500 million in emergency funding to bolster a related program, which is focused on a $2 billion guaranteed farm ownership loan initiative. However, such emergency funding avenues are not available for the operating loan programs.

Currently, the FSA’s Farm Loan Programs are either servicing or guaranteeing funds for operating costs and the purchase or refinancing of farmland for over 113,000 borrowers, amounting to nearly $23 billion. Traditionally, this type of lending targeted smaller or newer farmers with limited resources. However, as economic pressures continue to impact Midwest farmers and farmland values, more agricultural lenders are finding themselves relying on federal support.