Updating FSA Loans in the Farm Bill

OMAHA (DTN) -- Farmers, rural bankers and Farm Credit institutions are increasingly turning to USDA's Farm Service Agency loan programs, but they all want higher credit limits, more flexibility on guarantees and faster approval times.

Congress will look to make some adjustments to USDA's loan programs when lawmakers get around to writing several sections of the farm bill, such as credit, that were not addressed in the "One Big Beautiful Bill" signed into law earlier this month.

Bankers, a Farm Credit lender and a Montana farmer testified about farm loans Wednesday before the House Agriculture Subcommittee on General Farm Commodities, Risk Management and Credit on changes they would like to see in FSA farm loan programs.

Rep. Austin Scott, R-Ga., who chairs the subcommittee, said loan limits don't reflect the realities of today's farms. Loan limits are outdated, and the lending process is often slow and burdensome.

FARMER PERSPECTIVE

John Wicks, a Montana farmer, representing the National Farmers Union (NFU) in the hearing told lawmakers he received his first FSA loan when he was 14 years old to buy cattle, and that eventually helped finance his college costs. He also was able to buy a combine quickly with an FSA Beginning Farmer loan when the farm's combine broke down at the start of harvest. At the time, he said his bank was unable to extend another line of credit.

"That not only saved our harvest but also helped me build equity in our operation," Wicks said.

Talking about succession, Wicks said an FSA Farm Ownership Loan made it easier to take over his family farm and the generational debt tied to it "to a relatively safe loan option." Still, the farm ownership loan took months even though the seller was his mother, Wicks said. He didn't have to worry about losing the land but that would not work trying to buy land from outside the family. "In another case you might have somebody outbid you while you are going through all the loan approval," he said. "Preapproval would be great."

Wicks called on Congress to adjust loan limits and make it more feasible for farmers to restructure their debt. He also felt it's important to accelerate the speed of loan approvals.

In his written testimony, Wicks also said NFU members of the group are "deeply disappointed" in USDA's decision this month to remove the "socially disadvantaged" definition for numerous farm programs, including loans. NFU supports providing special assistance to beginning and socially disadvantaged farmers, citing the designation "socially disadvantaged" doesn't discriminate against anyone, but provides support for people who have faced historic disadvantages.

As DTN has reported, this new USDA rule could affect as much as 20% of USDA's farm loan volume.

COMMUNITY BANKS AND FARM LOANS

Brian Gilbert, vice president and ag banking manager at First National Bank of Sioux Falls, South Dakota, testified on behalf of the Independent Community Bankers of America. He told lawmakers that his bank relies on FSA's loan guarantees, especially for beginning farmers. He said that allows producers to lower down payment amounts for those lines of credit.

"Our partnership with them has really expanded in the last couple of years where some of our more sophisticated younger borrowers utilized joint financing where they'll finance a portion -- 45% and we'll finance 50%," Gilbert said.

Two things have helped younger farmers enter the market -- livestock and agribusiness. Gilbert said his bank helps work with livestock producers to secure NRCS conservation funds to build deep pits for a cattle barn or hog operations. Gilbert also said his bank has focused on bringing in more agribusinesses because younger producers also need a job.

"A lot of these young farmers have to have something other than just the farm to tide them over," Gilbert said.

Gilbert also reiterated nonpreferred lenders face longer delays getting FSA approval, which is too slow in today's lending environment for agriculture.

"When a piece of land goes to auction, and we want to finance it through FSA, it's very difficult," Gilbert said.

Independent Community Bankers of America (ICBA) has proposed a USDA Express Loan Program that would require FSA to approve guaranteed loan application within a couple of days in exchange for having a lower guarantee amount of 50% to 75% levels for loans up to $1 million.

"I think we would be OK reducing the level of the guarantee if we can [get] an answer quicker in some cases so the banks or Farm Credit would take more of the burden," Gilbert said.

Gilbert also suggested FSA should consider allowing banks to issue bridge loans that could then be converted to FSA loans as one way to speed up the process. He suggested there is some inconsistency because FSA allows bridge loans in some areas but not others.

FARM CREDIT

Mandy Minick, senior vice president for stakeholder relations at AgWest Farm Credit in Spokane, Washington, said AgWest provided more than $31.35 billion in loans across seven states in the first quarter of 2025. AgWest also relies on USDA commodity and crop insurance programs to make lending decisions. A farmer's ability to buy crop insurance and the strength of that coverage is a key factor in deciding how much credit to extend to a producer.

AgWest Farm Credit has a lot of "high risk" specialty crop farmers who face short windows to harvest and market those crops because of perishability, she explained.

She also agreed it would be important if FSA could find a way to pre-qualify producers ahead of time when it comes to loan guarantees. "Tell us what we need to do to qualify more and come back and look at those loans if you need to," Minick said.

Minick talked about the volume of specialty crops in AgWest's portfolio. Those crops are being affected by a shortage of labor and uncertainty around exports. She also said crop insurance programs around specialty crops are limited, often by region.

VALUE OF CROP, LIVESTOCK INSURANCE TOOLS

Gilbert also said his bank owns a crop insurance agency and offers Livestock Risk Protection (LRP) policies. He told the committee, "LRP has been huge."

LRP removes the risk of daily margin calls that are expensive given the high prices in cattle markets right now. Producers don't have to pay an LRP premium until the end of the period and the cattle are sold. Gilbert said LRP "will stop a huge decline in profitability" among livestock producers.

"The cattle market is so high right now and without a risk protection/price protection there could be a severe loss of money, so this program has been awesome for that," he said.

Minick also reiterated a common theme when it comes to specialty crop producers and others trying to buy whole farm and micro farm crop insurance policies. "Those tools are important, but they are very complex and hard to understand."

Other crop insurance companies have come to AgWest asking them to take over their whole farm insurance portfolios because of the complexity, she said. Agents don't want to take the time to learn about them or they don't know how to work with those customers. Anything to streamline those whole farm programs would be helpful, she added.

SOME AG LENDING NUMBERS

In the grand scheme of farm loans, FSA remains a relatively small lender overall, accounting for $5.39 billion in total loans in FY 2024. FSA issued 24,555 loans in FY 2024.

DTN's Katie Dehlinger this week reported farm banks issued $115.1 billion in agricultural loans in 2024. Farmland-secured lending rose 4.7% to $65.9 billion, while agricultural production loans climbed 8.9% to $49.3 billion.

The Farm Credit System also reported in May that it had $432 billion in total loans on the books, of which $186.8 billion were real-estate mortgage loans and $75.7 billion were production and intermediate-term loans.

2024 HOUSE FARM BILL CREDIT PROVISIONS

The House Agriculture Committee's version of the farm bill drafted last year proposed an array of improvements to FSA loans.

-- FSA direct ownership would go from a $600,000 limit to $850,000.

-- Guaranteed farm ownership loan limits would increase from $2.24 million to $3.5 million and indexed for land values.

-- FSA direct operating loans would go from a $400,000 limit to $750,000.

-- Guaranteed operating loan limits would increase from $1.75 million to $3 million and indexed for inflation.

-- Microloans would increase from $50,000 to $100,000.

-- Allow for refinancing of distressed guaranteed loans into direct loans.

-- Expands EZGuarantee Loan Program to allow for faster approval times.

-- The eligibility requirements for FSA direct real estate loans would be lowered to one year of experience.

To watch the full hearing, go to https://agriculture.house.gov/….

See, "Demand for Operating Loans Grows as Delinquency Rates, Bankruptcies Edge Higher," https://www.dtnpf.com/…

Also see, "USDA Ends Programs, Policies Supporting 'Socially Disadvantaged' Farmers and Ranchers," https://www.dtnpf.com/…

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on social platform X @ChrisClaytonDTN

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