record of racism and discrimination is fairly clear. I would suggest that this committee would be able to get to the bottom of that. I would like to see a more specific eligibility definition put forth in the limited resource borrower language so that we could get more limited resouce borrowers qualified there. I would hope that you would look into the question of why so much of the limited resource loan money was not spent last year. I am not going to detail that as I did in my testimony, since others have already done that, and I am sure you are aware of it. The other point I would like to stress here is the question of loan deferrals. There does seem to be a great deal of confusion among farmers as to what that process is, what they are eligible for, and how they find out about it. I would urge you to make that a strong part of the bill. We certainly support the fact that you are requiring notification of all farm borrowers and the right to appeal a decision that denies relief. As far as the farm operating loans go, while we support the idea that all farmers need more money at this State, we do question whether you need to raise the limit from $100,000 to $200,000. In our opinion that is likely to lead to fewer farmers getting more money. And I question whether that is the best use of money at this point. Finally, on the economic emergency loan program, we like the fact that you want to reactivate that. But in the past, we realize it has not included a family sized requirement, and that we would urge that you would put a ceiling on the total amount of EE funds that could be loaned by an individual borrower. In that way, we think that Farmers Home would continue to serve the family sized farm rather than the super-large farms. Thank you for your consideration and for allowing me to be here today. [The prepared statement of Ms. Waller appears at the conclusion of the hearing.] Mr. BEDELL. Thank you very much. Our next witness is Mr. Jack Kuiken, chairman, AgricultureRural America Committee and president, First National Bank, DeKalb, Illinois. STATEMENT OF JACK R. KUIKEN, CHAIRMAN, AGRICULTURERURAL AMERICA COMMITTEE, INDEPENDENT BANKERS ASSOCIATION AND PRESIDENT, FIRST NATIONAL BANK, DeKALB, ILL. Mr. KUIKEN. Thank you, Mr. Chairman. Since my comments are already very, very brief and very directly associated with H.R. 1190, I want to stick to my remarks. Mr. Chairman, members of the subcommittee, I am J. R. Kuiken, president of the First National Bank in DeKalb, Ill., and chairman of the Agriculture-Rural America Committee of the Independent Bankers Association of America. We commend this subcommittee for providing leadership in the Congress on agricultural credit problems, and it is a pleasure for me to appear before the subcommittee today on H.R. 1190. The IBAA urges you to increase the limitation on the size of FmHA's direct loans for farm operating purposes from $100,000 to $200,000 as provided in H.R. 1190. The FmHA operating debt requirements of a substantial and growing percentage of family farmers now exceeds $100,000, and a high priority should be placed on raising this ceiling. We also support giving FmHA more flexibility in the consolidation and rescheduling of operating loans as provided in H.R. 1190, by increasing the maximum repayment period and providing that the lower of the original interest rate or the current interest rate shall be applied by FmHA. We support the provision of H.R. 1190 which would assure the allocation of 20 percent of FmHA's farm operating and ownership loan funds for limited resource farmers. Serving these farmers is the primary responsibility of the agency. With regard to funds for direct FmHA farm production lending, we recommend that the amounts already available for 1983 should be supplemented to the full extent needed to give FmHA the capacity to meet the credit requirements of farmers who are eligible to borrow from FmHA. This should include both existing FmНA borrowers and new borrowers who qualify. In light of the currently depressed economic situation, we recommend that additional lending authority should be provided through the economic emergency program, which provide somewhat greater flexibillity than the regular operating loan program. Congress does not have time to approve more loan funds for 1983 after the need is clearly documented, and, therefore, additional funds needed this year must be approved now. We support the approval in H.R. 1190 of the requirement that the economic emergency loan program be implemented with regard to direct loans, at or near the $600-million level for direct loans. If this is done, we see no reason to add to the regular operating loan program the $200 million which is provided elsewhere in the bill. However, we recommend that the Congress stipulate a minimum amount of the $600 million of economic emergency funds-perhaps $200 million as provided in H.R. 1190-for new FmHA borrowers. We see no reason to authorize more FmHA guaranteed lending authority under the economic emergency program at this time, since $600 million of unused authority has already been enacted in the fiscal 1983 Agricultural Appropriations Act. In administering guaranteed loans, it may be useful for the FmHA to experiment with placing origination authority in State rather than substate offices as contemplated in the bill, in order to make the most efficient use of personnel and to expedite loan processing. The bill also includes a provision mandating the deferral of repayment by individual borrowers on various categories of FmHA farm loans if certain criteria are met by the borrower. We do not support that provision. We believe that providing ample loan funds, stipulating specific categories to be served such as limitedresource farmer and new qualifying FmHA borrowers, and encouraging the agency to fulfill its role as "lender of last resort" should be adequate guidance to the agency. Finally, I want to alert you to a pending regulatory issue which could have a very damaging effect on agriculture. The bank regulatory agencies have proposed a new requirement, which would go into effect June 30, 1983, making banks' past due and nonperforming loan information publicly available. The public disclosure of delinquent loans is certain to tighten the lending practices of banks to avoid the appearance of having too many "bad" loans, and it would also hamper normal workout procedures on existing delinquent loans. Although the proposal was not initiated by the regulators with agricultural banks particularly in mind, it would especially affect farm borrowers and agricultural banks because of the extended debt position of many farmers at the present time. Thank you for your attention, and I would be pleased to answer any questions. Mr. BEDELL. Thank you very much. Mr. Stenholm, do you want to introduce Mr. Lloyd Cline? I do want to take this opportunity to welcome Mr. Lloyd Cline. I had the privilege of representing him up until January of this year, but with the courts' redistricting in Texas, Dawson County is now in the 19th Congressional District. I would take this opportunity to welcome you to the committee, Mr. Cline. STATEMENT OF LLOYD CLINE, VICE PRESIDENT, NATIONAL COTTON COUNCIL Mr. CLINE. Thank you, sir. Mr. Chairman, my name is Lloyd Cline. I am a cotton producer from Lamesa, Tex., and currently serve as vice president of the National Cotton Council in whose behalf I appear. The National Cotton Council is the central organization of the U.S. raw cotton industry, representing cotton producers, ginners, warehousemen, merchants, cooperatives, cottonseed processors, and textile manufacturers from California to the Carolinas. We appreciate very much the opportunity to share with you the cotton industry's concerns regarding the credit situation facing agriculture today. For many in agriculture, including cotton, the situation is critical. Larger than expected crops, combined with weak demand in the midst of a global recession, have resulted in mounting surpluses and continued low commodity prices. Our own industry has been especially hard hit by the effects of the recession. Last year, for example, U.S. mill consumption of cotton fell to a post World War II low of just 5.3 million bales, and is expected to improve only marginally this year. Exports are also down considerably this year, reflecting the twin effects of the recession and the relative strength of the dollar which has made it difficult for cotton to compete in world markets. At the same time, due to record yields across the belt, cotton production in 1982 was much greater than anticipated. The net result is that carryover stocks are expected to rise to 8.4 million bales or more at the end of this season-the highest level since 1967, and three times higher than just 2 years ago. Faced with low commodity prices and continued high production costs, many cotton producers today are under severe economic stress. Because of their reduced cash flow, the question of adequate financing has become a serious concern. This concern, however, is not limited to producers. Other segments of the cotton industry are also very much interested in the availability of credit. In order to identify these needs and to develop specific recommendations, the National Cotton Council recently established a special task force on credit. The 11-member task force includes representatives from a broad cross-section of the cotton industry. The task force met last week in conjunction with the National Cotton Council's annual meeting in Phoenix, Ariz. It adopted the following recommendation: Strongly support efforts to strengthen the farm credit system, the Farmers Home Administration, the Small Business Administration, and other lenders to agriculture and agribusiness to insure that the credit needs of the cotton industry are adequately met at lowest possible interest rates and the industry's vital infrastructure is maintained while supply is being adjusted through the Federal payment-in-kind program. As chairman of the Special Task Force on Credit, I am pleased to say that this recommendation was also unanimously adopted by the Council's board of directors and its delegate body, representing all seven segments of the industry. Mr. Chairman, the credit policy of the National Cotton Council reflects two very basic concerns. First is the need to provide adequate credit at reasonable terms and conditions for the production of food and fiber, and to help alleviate the financial stress many producers are now experiencing. Second, any restructuring of credit policies and programs should include recognition of the critical importance of maintaining the industry's vital processing and handling segments while the payment-in-kind, or PIK, program is in effect. We, of course, are strongly supportive of the PIK program as announced by the administration. At the same time, however, we recognize that there may be some related industry segments, including cotton gins, warehouses, and cottonseed crushers, who will be adversely affected. Clearly, there is an overwhelming need to bring cotton supplies into better balance with demand. During this difficult period of adjustment, however, every effort must be made to avoid major disruptions. We believe it may be necessary, therefore, to provide loan guarantees or other assistance to help these industry segments with their interim financing. In doing so, this will insure that they will be in place and able to process and handle anticipated increased production once the farm economy fully recovers. The administration, we believe, is making every effort to meet the credit need of agriculture. We have been encouraged by those efforts and the Secretary's actions in directing the Farmers Home Administration to work closely with local banks, production credit associations, and for the private lenders to assist producers. If the Farmers Home Administration is to be able to continue to meet the needs of agriculture, however, additional flexiblity in its various loan programs may be necessary. In this regard, we respectfully recommend the following: First, the existing $100,000 limit on FmHA operating loans and the $200,000 limit on guaranteed loans should be increased to reflect the size of today's farming operations and sharply higher production costs. Second, eligibility for supplemental operating loans under the emergency disaster loan program should be extended for 2 additional years for borrowers who experienced a natural disaster after December 15, 1979. Under existing law, such borrowers are no longer eligible for those loans, while borrowers prior to December 15, 1979, continue to be eligible for 2 more years through fiscal year 1984. Providing fair and equal treatment of both sets of borrowers will not only remove this inequity, but greatly assist those producers who have suffered recent disasters such as the one experienced last year on the High Plains. Third, the period of time over which FmHA may reschedule or reamortize existing loans should be extended from the current 7 years to possibly 15 years or longer. Not only will this increase FmHA's flexibillity, it will better enable borrowers to repay existing loans as well as obtain additional financing. Finally, through the business and industry [B&I] loan provisions of the Consolidated Farm and Rural Development Act, or other appropriate authority, additional provisions should be included to assist related agribusinesses, such as cotton gins, warehouses, and cottonseed crushers, with their interim financing needs during implementation of the payment-in-kind program in order to maintain the industry's vital infrastructure. Mr. Chairman, many of these provisions which we have recommended are included in legislation recently introduced by you and Mr. Coleman, the ranking minority member of this subcommittee, entitled the "Emergency Agricultural Credit Act of 1983." We, of course, would like to take this opportunity to endorse those provisions as included in the Jones-Coleman bill, and to commend you for your continued strong leadership on behalf of agriculture. Further, we would urge that this subcommittee and the Congress move forward as rapidly as possible with the development of legislation that can be signed into law to insure that agriculture's credit needs in 1983 will be met. This means legislation must reach the President's desk within the next 30 to 45 days. Otherwise, it may be too late for many producers to arrange financing for the 1983 crop. Again, Mr. Chairman, we appreciate your leadership in this regard, and we look forward to continuing to work with you and your fine staff. Mr. BEDELL. Thank you very much, Mr. Cline. Mr. Coleman? Mr. COLEMAN. Thank you, Mr. Chairman. Ms. Thatcher, I hope that the organization, the voice of agriculture, is not laboring under the assumption that this is a mandatory deferment bill? Yet, I see it twice in your testimony. I hope you will reexamine the bill and go back to the office and point out that it is not mandatory and that there are some criteria in it that must be met by the borrower before the deferral provison goes into effect. So perhaps the Farm Bureau might want to reexamine its position in light of a more careful reading of the bill. I don't support a mandatory, total blanket deferral. I would not introduce a bill to do that, and I have not. So I respect your organi |