U.S. farmers rely more on government loan programs
BEAUTIFUL PLAIN, Kan. (AP) – Farmers across the country relied more on the federal government last year to fund their farming operations amid low commodity prices and trade disputes, and more of the the money they borrowed is now overdue.
Although the US Department of Agriculture has said it has not seen a significant change in loan default rates due to the coronavirus pandemic, it expects an impact if the economic fallout continues. .
Farm foreclosures have not increased and the ministry has taken a number of measures to prevent them, including more flexibility for borrowers to extend repayments for annual operating credits.
The ministry said in an email that it also temporarily suspended loan accelerations and non-judicial foreclosures and stopped referring new foreclosures to the Justice Ministry. The US attorney’s offices will determine whether to stop foreclosures and evictions on overdue accounts they already managed.
Nathan Kauffman, vice president and director of the Omaha branch of the Federal Reserve Bank of Kansas City, said he didn’t expect COVID-19 to have an immediate impact on farm loans in part because of the timing of the pandemic.
“It really started to escalate towards the end of March, but this is a time of year when many of the major planting and funding decisions… had already taken place. So a lot of things had already been triggered before the crisis, ”Kauffman said, adding that if the crisis persists for a few more months, borrowers will start thinking about these things again.
A state by state breakdown for the past two years of direct and government-backed delinquent loans that The Associated Press secured through an open case request from the USDA Farm Service Agency provides insight into the financial difficulties faced by growers which vary considerably depending on geography and industry.
The most vulnerable are start-up farmers and smallholder farms who usually get their funding through the agency’s direct loan program. These are usually the riskiest borrowers who cannot get financing elsewhere.
The agency directly loaned these farmers over $ 12.7 billion, and more than $ 639.4 million of that amount was past due as of April 30. This represents a $ 1.26 billion increase in direct loans under this program and a surge of over $ 8 million in defaults. compared to the same date a year ago. Nationally, 18.76% of direct government loans were in arrears.
“It’s just a tough time for growers,” said Allen Featherstone, professor of food at Kansas State University. “Overall, you’d like to see the total volume go down, but we’re adding volume that is ultimately supported by the federal government.”
Delinquency rates have exceeded 30% for direct government agricultural loans issued in several states, including Florida, New York, North Carolina, Rhode Island and Texas. Thirteen other states have agricultural delinquency rates above 20%. Hurricane-hit Puerto Rico was an outlier with an agricultural loan default rate of over 67%.
Only six states – Kansas, Missouri, Illinois, Indiana, Iowa and Hawaii – had single-digit direct farm loan default rates at the end of April.
A separate program in which the federal government guarantees that farmers will make payments on the loans they borrow from banks and other commercial lenders has also been more widely used. The government guaranteed $ 16.58 billion of these loans, and $ 270.65 million was in arrears on April 30. This represents a delinquency rate of 3.23%.
States heavily dependent on the struggling dairy industry – like Maryland, Michigan, New Mexico and Wisconsin – have all seen increased defaults on government guaranteed loans, Featherstone noted.
The US Department of Agriculture said it would begin accepting applications on May 26 under the Coronavirus Food Assistance Program, which will provide up to $ 16 billion in direct payments to farmers and ranchers affected by the pandemic. of coronavirus.