Tuesday, July 26, 2016

U.S. depletes loan guarantee fund

The United States’ U.S. government's $2.65 billion operating loan program to help farmers keep their businesses going has already run out of cash for this fiscal year that ends Sept. 31.

That happens as requests for federal financial assistance grow amid the worst agricultural downturn in more than a decade, U.S. officials said Monday.

As a result, the U.S. Department of Agriculture is looking for other money sources "to help bridge the gap in farm operating loans as much as possible until additional funds are made available, either this year or in the next fiscal year," the agency said.

Such loan guarantees and direct loans through the USDA's Farm Service Agency are often considered loans of last resort, say bankers and economists.
Without the financial support, some farmers may struggle to survive until the next cash injection in the fall.

As the rural sector struggles with low commodity prices and mounting trade competition, U.S. grain farmers are increasingly relying on the FSA for loan assistance. Agricultural lenders, too, are turning to the agency to help guarantee the loans they are issuing to farmers - whether for operational or real estate needs.

Even with the operational loan program funding depleted, the applications from farmers and bankers continue to grow.

"At this time, there are already tens of millions (of dollars) in backlog in Direct and Guaranteed operating loan accounts, and that number is expected to increase through the end of the fiscal year," the FSA told News Max Monday.