Don’t Bank on It: Farmers Face Significant Barriers to Credit Access During Economic Downturn
Farmers Face Delays, Denials and Bureaucratic Roadblocks in Accessing Farm Loans
The economic downturn and Wall Street-driven banking crisis have undermined the security of all Americans. Rising unemployment, household debt and a significantly constrained credit market continue to compromise the financial health of all households and small businesses, but the impact on farmers has been widespread and largely ignored in discussions of the economic downturn.
Farmers of any scale rely on credit to keep their operations running. Most farmers take out annual operating loans to buy inputs like seeds, fertilizer and livestock in order to plant their crops and maintain their herds. Farmers who cannot access timely credit for operating loans face economic uncertainty that can threaten the viability and survival of their farms. Rising unemployment, health care costs and consumer debt loads have further endangered farm households — half of whom already rely on off-farm jobs to supplement their farm income.
To assess this situation, Farm Aid, Food & Water Watch, the National Family Farm Coalition and the Rural Advancement Foundation International-USA surveyed farm credit counselors and farm advocacy organizations across the country. These organizations provided direct or indirect financial counseling services to an estimated 2,700 farmers in 2010 — either seeking loans from private lending institutions or negotiating with the U.S. Department of Agriculture (USDA) Farm Service Agency. Respondents overwhelmingly reported that it has been harder for farmers to obtain loans and that farmers have faced unique credit and debt burdens during this economic downturn.
Eighty-five percent of surveyed respondents reported that farmers have had more difficulty accessing farm loans since 2009 than in previous years, more than half reporting that farmers have had significantly more difficulty accessing credit. Seventy percent of surveyed respondents reported that more farmers were being rejected for commercial farm loans than in prior years. The great majority of those surveyed (86 percent) reported that demand for Farm Service Agency (FSA) direct loans was higher since the start of 2009. FSA direct loans are generally the last resort for farmers looking to secure credit when other lenders have turned them down. The survey also found that farmers were having difficulty accessing operating loans promptly enough to keep their farms operating smoothly and that household financial issues, such as credit card debt and unemployment, undermined the financial stability of family farms.