Task Force Tells Banks How to Manage Volatile Ag Situation

August 6, 1999

A task force of the American Bankers Association believes agricultural bankers benefit most from the guaranteed loan program when trying to manage their loan portfolios in the current volatile farm economy. The report contains a series of recommendations for managing agricultural risk into the 21^st century.

USDA's guaranteed loan programs are "the most effective tools bankers have to deal with the current ag situation," said ABA. The task force emphasized that farmers need a crop insurance program that covers both crop losses and severe price fluctuations. The highest crop insurance coverage should receive the highest subsidies, not the lowest, as they do now."

Bank access to national capital markets also needs to be increased, according to the task force recommendations. Federal Home Loan Banks need to make their underwriting standards more appropriate for rural community development by increasing their expertise in agriculture, rural business and infrastructure financing.

USDA and the Small Business Administration should be allowed guarantees on Aggie Bonds – state industrial revenue bonds for agricultural borrowers. The 15 states that have Aggie Bond programs frequently have more demand than they can meet, says ABA.

Rural small business development centers should be created to give beginning farmers and rural entrepreneurs the business skills they need to run successful businesses, the report said.

The report is available at or by calling 202-663-5341.