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STATEMENT OF MFA INCORPORATED

RECOMMENDATIONS FOR IMPROVING FARM CREDIT PROGRAMS

Farmers are facing a fourth consecutive year of depression-level income. As a result, more and more farmers are in a survival situation. Indeed, the major objective of the low-equity farmer is to just survive. For the higherequity farmer, the major objective is to minimize the erosion of his net worth. The foremost solution to the economic problem faced by farmers is improved market prices for their commodities. If prices would rise to above cost-ofproduction levels, then loans would be considered merely as tools of production instead of being the only means of short-term survival for farmers.

As capital investments have become a greater part of a farmer's operation, farm credit, both public and private, must play a greater role in helping him remain in business. It is essential that farm credit programs be both adequate for today's expanded need for credit and equitable for all borrowers. In testimony in February, 1982, before the House Agriculture Subcommittee on Conservation, Credit and Rural Development, we urged "Congress to encourage USDA to use extensively the discretionary Economy Emergency Loan Program to help prevent foreclosures on farm ownership loans. If the Administration should be unresponsive to operating this program at realistic levels, then Congress should mandate it." Clearly, such a mandate is long overdue. We support the Economic Emergency loan provision of H.R. 1190 which would make the program mandatory through September, 1984, and which would provide for $600 million in insured credit and $600 million in guaranteed credit.

We also urged Congress to increase FmHA programs for 1982 through 1985 to assure that qualified farmers would be able to continue putting in their crops and maintain an adequate livestock base. Therefore, we strongly urge

Congress to increase the insured farm operating loans by $200 million as called for in H.R. 1190. We also support raising the limit on FmHA-insured operating loans from the current $100,000 to a new ceiling of $200,000, and raising the limit on guaranteed loans from $200,000 to $400,000.

MFA has long advocated that a greater portion of FmHA funds be used to help young farmers in getting started rather than to assist established farmers with undue expansion. Therefore, we support those provisions of H.R. 1190 which require that at least 20 percent of FmHA's operating and ownership loans in fiscal 1983 be made to low income, limited resource farmers who qualify for reduced interest rates. Furthermore, we advocate that this

policy be extended for as long as it is clear such benefits are needed. By making ownership loans available to the young, beginning farmer, at reasonable rates, we can assure an orderly transfer of farmland from one generation of farmers to the next.

Major inequities have existed in the FmHA Disaster Emergency loan programs. We support provisions of H.R. 1190 which would allow farmers who got disaster emergency loans after December 15, 1979, to get follow-up loans during fiscal 1984 and 1985. We also urge that disaster loans be made available to any farmer who has experienced a natural disaster, regardless of whether his county has been designated a disaster area.

We recognize that the farmer needs to adjust his operations to today's economic conditions, and cut out any unnecessary costs. Neither private industry nor the federal government should continue to make loans to those farmers who have a history of poor management. But, at the same time, we recognize that adverse weather, governmental policies (especially embargoes or de facto embargoes), and economic conditions over which farmers have no control place restraints upon farmers which they cannot overcome on their own. We strongly believe that the government must assist the farmer through these difficult times. By continuing his operating monies, to those who qualify, it will permit the farmer to pull himself out of his economic bind.

STATEMENT OF

NATIONAL FARM AND POWER EQUIPMENT

DEALERS ASSOCIATION

BEFORE THE

SUBCOMMITTEE ON CONSERVATION, CREDIT AND RURAL DEVELOPMENT

COMMITTEE ON AGRICULTURE

U.S. HOUSE OF REPRESENTATIVES

February 14, 1983

Mr. Chairman:

The National Farm and Power Equipment Dealers Association, an organization representing over 10,000 businessmen and women who sell and service the equipment which runs the farms and industries of this nation. We appreciate this opportunity to express our views in support of H.R. 1190, the Emergency Agricultural Credit Act of 1983. We urge you to enact this important legislation which will make available extra funds in operating loans and loan guarantees to farmers, and which will establish objective criteria and advantageous terms for consolidation, rescheduling and deferral of certain loans.

The increase in the amount available for operating loans by $200 million to $1.66 billion and the earmarking of this additional allocation for new borrowers will greatly benefit those farmers who are facing tight commercial credit, yet need to borrow funds.

For those farmers who have previously borrowed in order

to finance operations, the additional provisions of H.R. 1190 relating to existing loans are imperative. The increase in the limits on operating loans and loan guarantees, as well as restructuring of the the period from seven to fifteen years for rescheduling, will give the farmer the time needed to regain financial stability and assure his continuation as a producer. Similarly, the guarantee that the new interest rate will be the same or lower than the rate of the present loan prevents a situation in which farmers "snowball" themselves into nonrecoverable positions.

It is not only under circumstances in which the Secretary of Agriculture declares an entire county eligible for disaster loans that farmers with limited resources and individual farmers require emergency aid. These emergency funds must be made available on an individual basis. In addition, the enactment of objective criteria for loan deferrals so that they are heard on a case-by-case basis will prevent blanket or group rejections of deferral requests.

The present status of the farming industry is unquestionably at a critical point. The federal government must provide greater relief and on more realistic terms than presently exist not only to enable the farmer to help himself, but, more importantly, so that the farmer can survive. In view of the prevailing feeling that the Department of Agriculture has not taken those steps which are available to help the farmer in this

emergency situation, it is important that the Congress act and require that the Economic Emergency Loan Program, and the

$600 million in direct loans and $600 million in guaranteed loans, be implemented.

The farm equipment dealer, perhaps better than any other individual, recognizes the need for this legislation. We have supported the farmer through the past several difficult years when he was turned away by other institutions, even, the Federal Government, as a bad credit risk. We have strongly advocated in the past before this Subcommittee that the equipment dealer not be placed in the position of protecting himself because federal funds are cut off or made unavailable. Your proposed bill would go a long way toward removing this dilemma for the dealer and this would provide a means by which the farmer can overcome these most difficult times. Again thank you for the opportunity to be heard on this

subject.

John Mullenholz

Legislative Director

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