Ag Bankers Testify On Ag Credit Conditions In The U.S.

The American Bankers Association (ABA) said that the banking industry is well positioned to continue meeting the credit needs of their farm and ranch customers, AgriMarketing reported.

Testifying on behalf of ABA before the Subcommittee on Department Operations, Oversight, and Credit of the House Committee on Agriculture, ABA Vice Chairman, Matthew Williams, chairman and president of Gothenburg State Bank in Gothenburg, NE, said that banks in every state of the country are actively looking for good farm and ranch loans to make, and that farm and ranch lending actually increased from 2007 through 2010 by over $13 billion.

However, Williams said that concerns over an asset bubble in this sector are overblown. “It is clear that farm land prices have escalated in some areas of the country,” said Williams. “But there is no evidence that this is being fueled by credit. Farmers are responding to market signals, and those signals are extremely positive.”

Williams noted the “resounding success” of guaranteed farm loan programs offered by the USDA’s Farm Service Agency (FSA), but urged Congress to support extending the deadline on FSA guaranteed loan term limits, which restrict the period during which farmers and ranchers are eligible for such programs.

Williams also said that bankers are concerned about the potential risk the Farm Credit System (FCS) poses to the rural economy and pointed to the FCS’ Investment Bond pilot program as an example. He noted that it has been used to divert capital owned by farmers and ranchers into commercial projects which have no direct connection to the farmer-owners of the FCS.

“This puts farmer owned capital in jeopardy,” he said. “If Congress intended for the FCS to finance hotels, dental clinics, and general manufacturing, it would have provided that authority to the FCS.”

Williams urged the Committee to terminate the program. ◆