ICBA Wants Two More Farmer Aid Years

March 30, 2000

The Independent Community Bankers of America wants Congress to approve two more years of emergency farm aid. The ICBA also outlined provisions for a new farm law that included countercyclical payment options for farmers.

"Future farm policy should incorporate policy tools that provide farmers enough income protection that future emergency aid packages are unnecessary," said Jim Caspary, chairman of ICBA's Agriculture-Rural America Committee, in testimony to the House Agriculture Committee.

The $6 billion farm income assistance in the House fiscal 2001 budget package for farm income assistance is helpful to farmers, said Caspary. However, passage of an additional year of farm aid now would give Congress lead time to begin writing the new farm bill next year, unencumbered by another debate over emergency farm aid. This would ensure new authorities are in place when the current farm bill expires in 2002.

Caspary urged members to consider countercyclical mechanisms in the next farm bill to pay producers more when markets or prices collapse. He suggested combinations of at least three options: 1) automatic supplemental income payments; 2) a special fund as part of the multiyear budget to be paid out in low-price years and replenished when prices rise; and 3) access to affordable and improved revenue insurance options.

Caspary suggested other farm policy ideas, including expanding Conservation Reserve Program acres and providing shorter contract periods; providing contingency funding to prevent interruption of FSA guaranteed loans; doubling deposit insurance; and pursuing an aggressive U.S. trade policy including passage of China Permanent Normal Trade Relations status.

Terry Hague, chief executive of Farmers Exchange Bank in Cherokee, OK, testifying for the American Bankers Association, told the committee that despite low commodity prices for key agricultural commodities and regional weather and disease problems, widespread negative effects on banks farm loan portfolios have not materialized.

But even with the positives, "continued low commodity prices and the uncertain nature of future federal assistance to agriculture has raised bankers concerns about their farm customers. While our members have done a good job of coping with the economic problems faced by their farm and ranch customers, the future is uncertain."

Hague said the ABA "strongly recommends" that Congress repeal the 15 year term limit on guaranteed loan eligibility. For many years the banking industry has worked with USDA to successfully graduate farm borrowers from direct USDA loans to guaranteed loans and then on to nonguaranteed bank credit.

"However, we are currently in a very difficult economic period and many of our farm borrowers, because of the eligibility term limits, are facing an unnecessary obstacle to credit," he said. By changing the law now, "Congress will be able to help a number of farmers and ranchers get the credit they need this spring. We do not believe that Congress envisioned the kind of economic situation that we currently face when it acted to place a limit on a borrowers eligibility. Clearly, economic realities justify an immediate change."

Jay J. Vroom, president, American Crop Protection Association, told the panel that the elimination of AMTA payments scheduled by 2003 will leave production agriculture without a "safety net" in the face of extremely low prices.

"Barring an unforeseen turnaround in commodity prices, Congress will likely face continued need to provide emergency assistance to growers," Vroom said. "We urge that you provide a broad underpinning to support our customers, including ensuring that all of a producer's production remains eligible for loan and that eligibility for income support not be determined by farm size or income. We also recommend that any alternative sources of farm support continue to recognize the importance of pesticides and biotechnology in crop management and as a pillar of (integrated pest management)."

Congress also has "additional opportunities to help improve the fundamental outlook for American agriculture. We encourage Congress to help increase exports, build domestic demand, reduce agriculture's regulatory burden, and provide affordable, workable risk management tools to growers," he added.