Carter testifies in D.C. on credit consolidation

WASHINGTON, D.C. – Yearly injections of federal financial assistance to agriculture have underwritten the apparent financial health of the nation’s agricultural credit system, but have created a “house of cards” that could collapse as easily as during the farm crisis of the 1980s, the president of the Denver-based Rocky Mountain Farmers Union (RMFU) warned the U.S. Senate Agriculture Committee Wednesday.

Testifying on behalf of the National Farmers Union, RMFU president Dave Carter warned, “There is a patent disconnect between the health of financial institutions and the realities of production agriculture today.” Noting that the number of commercial agricultural banks has declined by 25 percent since 1992, Carter said that traditional agricultural lenders are now focusing on serving primarily the largest producers while some of the banking corporations, that have swallowed up the former independent banks, seem intent on cleaning out the agricultural portfolios altogether.

He cited as an “alarming” trend the rise in agricultural credit provided by various suppliers of agricultural inputs. “Machinery companies, seed dealers and other input suppliers all seem willing to fill the vacuum and to provide farmers and ranchers with operating credit…at a price. They sometimes charge up to 17.5 percent interest, all collateralized with assets beyond the actual input. Across the American countryside, we are seeing the advent of a new version of the company store,” Carter said.

Carter noted that – unlike the mid 1980s – agricultural land values have remained steady despite the persistent drop in commodity prices. “The financial sector, and the value of ag land, have been underwritten by $69 billion in federal farm program payments since 1996. In many areas, urban growth and other non-agricultural development pressures have inflated land values, thus extending farmers and ranchers a line of credit they will never be able to repay growing wheat, corn or cattle.”

The RMFU president recommended that the credit title of the next farm bill provide adequate resources targeted to medium-sized producers, beginning farmers, and socially-disadvantaged producers. He also recommended that federal resources be directed to provide farmers and ranchers with the ability to invest in new value-added cooperatives and other producer-owned, locally based enterprises.