By Ryan Hanrahan
Reuters’ Leah Douglas and P.J. Huffstutter reported that “farm loan employees at the U.S. Department of Agriculture’s Farm Service Agency will now need approval from billionaire Elon Musk’s Department of Government Efficiency to issue loans over $500,000, according to a memo seen by Reuters on Wednesday.”
“The April 29 memo sent by Houston Bruck, deputy administrator for farm loan programs, said that the new policy requiring clearance from the Office of the Secretary and DOGE for some lending is in compliance with an executive order on government cost efficiency,” Douglas and Huffstutter reported. “Under the policy, which went into effect on Wednesday, all loans and guarantees of $500,000 or more and to ‘formal entities’ like corporations will need to be approved by the two offices, the memo said.”
“Direct farm loans made to farmers by the FSA have a borrowing cap of $600,000. Guaranteed farm loans, which are financed by commercial banks with FSA backing, are capped at $2.2 million,” Douglas and Huffstutter reported. “‘We recognize the potential impact that this effort may have on our customers, lending partners, and FSA staff, and are committed to ensuring minimal disruption to service delivery,’ said USDA’s Farm Service Agency administrator Bill Beam in a note sent along with the memo.”
“DOGE has led President Donald Trump’s effort to slash the federal workforce and cut spending. Several programs for farmers, such as for local food purchasing and climate-smart farming, have been frozen or cut in the administration’s first 100 days,” Douglas and Huffstutter reported. “Farmers rely heavily on loans to pay for operational expenses including seeds, fertilizers and pesticides, or to buy land. The USDA typically offers loans to farmers who have trouble accessing credit through traditional lending institutions.”
How Many Loans Might be Affected?
Progressive Farmer’s Chris Clayton reported that “a USDA report to Congress by the Biden administration detailed farm loans in Fiscal Year 2023. FSA that year provided 22,600 direct and guaranteed loans to producers totaling $4.7 billion. A review of that report by DTN showed more than $1.7 billion in loans to nearly 2,200 producers would have been forced to undergo added reviews by the Office of the Secretary and DOGE.”
“Nearly two-thirds of direct loans to producers are operating loans, according to FSA. Direct loans are capped at $600,000,” Clayton reported. “In FY 2023, FSA approved 997 direct loans to producers for $500,000 or larger, or about 5.4% of all direct loans to producers. In terms of dollar figures, the larger loans take up a bigger slice of FSA’s loan portfolio. Direct loans over $500,000 amounted to $572 million, or more than 20% of all direct loan dollars issued by FSA that year.”
“An FSA spreadsheet breaking down direct loans by state shows Iowa, Oklahoma, Nebraska, Kansas and Arkansas, in that order, had the most direct loans in FY 2023 that topped $500,000,” Clayton reported.
“Guaranteed loans are backed by USDA but are issued by banks or Farm Credit institutions. The majority of guaranteed loans are used to buy a farm property, but they can also be used for operating loans. Guaranteed loans have a $2.2 million cap,” Clayton reported. “FSA approved 1,190 guaranteed loans to producers over $500,000 in FY 2023. Guaranteed loans over $500,000 totaled $1.17 billion, or nearly 59% of all loan guarantees approved by FSA.”
“Corn and soybean producers are the biggest sector for guaranteed loans, though USDA statistics show the guaranteed loan volumes are more balanced by sector than direct loans. Established farmers also take up a larger share of guaranteed loans instead of beginning farmers, according to FSA data,” Clayton reported. “FSA data shows producers in Arkansas, Missouri, Ohio, Louisiana and Minnesota, in that order, were the largest users of guaranteed loans over $500,000 in FY 2023.”
Lawmakers React
Clayton reported that “a spokeswoman for Sen. John Boozman, R-Ark., chairman of the Senate Agriculture Committee, responded to DTN on Thursday that committee staff were still trying to get information from USDA about the change in loan approvals.”
“Sen. Amy Klobuchar, D-Minn., ranking member of the Senate Agriculture Committee, issued a statement questioning why the Trump administration would make it more complicated for farmers to get USDA loans,” Clayton reported. “‘With rising input costs and trade chaos already creating uncertainty for farmers, making it more difficult to access federal loans could mean the difference between survival and being forced to shut down. These producers often have no other options for credit, and delays in approving operating loans could prevent farmers from getting crops in the ground or animals fed. I urge the administration to ensure the personal information of farmers is protected and that this doesn’t lead to unnecessary delays or denials for our farmers.'”
Douglas and Huffstutter reported that Zach Ducheneaux, the FSA administrator under the Biden administration, said that ‘what this says to me is we’re adding another layer of bureaucracy and clearance to one of the most efficient programs in the federal government.’ Ducheneaux said the approval requirement will delay lending decisions, which can have significant impact for farmers.”
Source : illinois.edu