Wichita Extreme drought withered grain across the Great Plains. Flooding from the Mississippi and Missouri rivers drowned corn and other crops from Nebraska to Louisiana. A tropical storm on the East Coast submerged Carolina tobacco fields and New Jersey blueberry bushes.
When it comes to natural disasters, this has been a “monster” year for farmers, one agriculture official said.
Yet few farmers are taking advantage of a federal loan program aimed at helping them recover. Only six states have fewer than three-fourths of their counties covered by some type of disaster declaration. In nearly half of the states, every county has been officially designated a disaster area. That means thousands of farms could apply for emergency loans.
But an Associated Press review of disaster loans issued nationwide found the Farm Service Agency made fewer than 300, totaling just $32.6 million, for the fiscal year ending Sept. 30. To put that in perspective, Texas alone is estimated to have $1.5 billion in drought losses this year.
Some farmers say they aren’t taking out the loans because recent high crop prices have given them enough money to bounce back on their own. Others say they haven’t applied for loans because there are better aid programs available.
Both reasons call into question what should be done with the federal emergency loan program as members of Congress look at what to keep — and what to cut — in the next five-year farm bill. Many in agriculture say the emergency loan program should be preserved because it helps those who can’t get other credit. But if Congress wants it to be useful to most farmers, it needs improvement.
Vance Ehmke, who farms near Healy in west-central Kansas, said many farmers haven’t applied for loans because they don’t need them. Many have money saved after several years of high grain prices. And with the drought in the South creating a hay shortage, some corn and soybean farmers have been able to bale their failed crops to sell as livestock feed.
“This is fantastic, how much money they are making with failures,” Ehmke said.
Farmers in a belt from Texas to North Dakota also tend to have crop insurance, which Ehmke characterized as “real generous.” The federal government subsidizes farmers’ premiums, and crop insurance is available throughout the nation, although farmers in other regions tend to use it less.
“Crop insurance is a valuable program. That is one thing — with all this budget cutting that is going on — that we want to make sure we keep because it would be pretty difficult to farm in America without some kind of risk management program underneath you,” said Steve Baccus, president of the Kansas Farm Bureau.
But Baccus, who also farms, said he was still surprised that no emergency loans had been issued in Kansas when the state had been hit by both drought and flooding. (”This past year has been a monster,” said Arlyn Stiebe, the Farm Service Agency’s loan director for Kansas.)
Many farmers also hold out for grants, and — the clincher for those considering loans — FSA’s interest rate on emergency loans is higher than on its normal ones.
Along with emergency loans, FSA offers disaster grants under its Supplemental Revenue Assistance Program that don’t have to be repaid and are — not surprisingly — far more popular. The main problem with that program is farmers must wait more than a year to see any money. And, farmers can only apply for losses that happened before Sept. 30 because the program is ending next year.
Farmers, however, will still be able to get loans at lower interest rates through the FSA’s normal farm loan program. It’s at 1.75 percent now, compared to 3.75 percent for emergency loans. Usually, it’s the other way around, but interest rates overall have plunged. An FSA official said if the agency lowers its interest rate for emergency loans, however, less money will be available to make future loans.
But so few emergency loans have been issued to farmers that the agency has a two-year cushion of roughly $69 million in the fund, which unlike other FSA loan programs carries over into the next year’s budget. FSA has loaned between $30 million and $35 million in emergency loans annually for the past three years, said Bob Bonnet, loan branch chief at the Farm Service Agency in Washington.
In addition to emergency loans and supplemental revenue grants, farmers in designated disaster areas can also apply for eight other separate FSA disaster programs. One program pays growers to rehabilitate farmland, another compensates producers for the weather-related deaths of livestock, honeybees and fish. Still another program offers cash payments for grazing losses, while another pays orchardists and nursery tree growers for tree losses.
“If agriculture is any indication of government programs, if it ... is a good indication of what goes on with Social Security, Medicare, Medicaid, military spending and whatever, we are just so screwed,” said Ehmke, the farmer. “We are squandering just untold huge amounts of money.”
The solution to the lack of interest in emergency loans, however, isn’t to just have farmers apply for normal government farm loans. Borrowers who can’t find a commercial lender elsewhere can get those FSA loans for only seven years, or 10 if they are new farmers. Those farmers can take out both regular and emergency loans in disaster-designated counties. Farmers who’ve already maxed out on the government loans when a disaster strikes can still apply for FSA emergency loans.
“It is not a big program, but it is used,” Bonnet said. “We have not proposed that it be eliminated.”
Eddie Trevino, the FSA loan director in Texas, said the harvest isn’t done there and many farmers are still assessing whether they’ll need loans for next year.
“Historically, the program has been very useful. Is there room to improve it? Sure,” he said, suggesting emergency loan interest rates be set the same as for other FSA loans and the program be streamlined to make it easier to use.
All 254 counties in drought-plagued Texas have received disaster designations, but just six Texas farmers took out $467,540 in emergency loans in the fiscal year ending Sept. 30. That compares to the $169.5 million in federal disaster grants Texas farmers received for the 2009 crop year.