As lawmakers on Capitol Hill are finally moving closer to an updated version of the Farm Bill after a few years of postponement and extensions, ABA’s agriculture thought leaders provide insight into what the next few months may hold and what ag lenders should be looking out for as legislative efforts move forward. Participating in this Q&A are Ed Elfmann, ABA’s SVP of agricultural and rural banking, and David White, chair of ABA’s Agriculture and Rural Bankers Committee and senior commercial relationship manager, commodities and correspondent banking, at Intrust Bank.
1. ABA Banking Journal: At present, we’re still getting by on a few years of extensions of 2018’s Farm Bill. What is the timing for the next iteration? Where are we at this point in the legislative process?
Ed Elfmann: In the House, bill text has been released and there was a markup hearing the week of March 4. The House could have the Farm Bill up for a vote in April, but they have not scheduled floor time yet. On the Senate side, they have indicated that they want the House process to go first, but we could see a markup in the Senate in the next two months.
2. What is the current mood in Washington, the overall appetite for getting a new Farm Bill passed, particularly after so many extensions? What are lawmakers pushing for in an updated Farm Bill?
Elfmann: As we are all aware, the margins in the House are very tight, so every vote matters to pass a Farm Bill. Congress is very aware of the struggles in rural America and the need to get a Farm Bill passed. Politics, however, could get in the way of needed policy. The Farm Bill will have ABA-backed priorities to increase the limit of guaranteed loan programs — guaranteed farm ownership would increase to $3.5 million, guaranteed farm operating loans would go to $3 million, and the would be beginning farmers loan program eligibility changes. Ultimately, they are including ABA priorities that help bank customers. [Editor’s note: The cap in the 2018 Farm Bill both for operating and ownership loans was $1.75 million and has been adjusted for inflation in subsequent fiscal years. The current cap is $2.34 million.]
3. What are ABA’s priorities for the next Farm Bill and how do they align with current updates being discussed?
David White: The updated Farm Service Agency guaranteed loan limits that Ed mentioned are at the top of the list, as well as having these limits indexed for inflation — CPI for operating and land value index on ownership. These loan limit updates are important to meet the current capital needs of farmers as well as reflect higher costs of production and land values.
Improving beginning farmer programs is another critical goal — updating the definition of a bona-fide operator and allowing business entities to qualify. We have to enhance the availability and effectiveness of these programs for young and beginning farmers.
Third, we need changes to Farmer Mac, particularly removing old acreage-based limitations.
4. How has agriculture and farming changed since the last Farm Bill and how is that driving what farmers expect from the next Farm Bill iteration?
White: Input costs have elevated significantly compared to the 2018 Farm Bill cycle, while grain prices are in roughly the same range. The result is compressed profit margins and early signs of credit stress. Some farm groups would like to see the Title I farm support programs — Price Loss Coverage and Agriculture Risk Coverage — modified to account for costs to protect crop production margins, not just revenues.
In addition, maintaining or enhancing the crop insurance/livestock risk protection programs are important for producers to be able to mitigate against market volatility.
Elfmann: The cost of agriculture continues to increase. The Farm Bill reflects those increases. Additionally, this Farm Bill is taking the first steps toward reforming the USDA loan programs — reforms that have been needed for quite a while. There are real efforts by Congress to drive down costs for farmers in the loan programs and crop insurance. Congress would like to back off of payments to farmers, and reducing costs would be a longer-term way to reduce payments.
5. What should ag lenders be aware of/prepared for as negotiations progress? What’s in their best interests/what are they advocating for?
White: Some concerns to watch are attempts by Farm Credit to expand their authority on rural home lending making the Farm Credit Administration their sole regulator. The expansion to rural housing was successfully excluded from the House version but should be monitored as the Farm Bill works through the process.
Elfmann: Ag lenders should be aware that negotiations are ongoing and the House and Senate versions of the Farm Bill may look very different. There will be many opportunities to promote additions and subtractions throughout the process. ABA has been heavily involved in the Farm Bill process, and we continue to advocate for the best outcomes for both bankers and their customers.
