D26—Lancaster Farming, Saturday, November 10,1984
WASHINGTON, D. C. - Ac
cording to FmHA, the Farm Credit
Initiative, announced on Sept. 18, is
designed “to help farmers who
have demonstrated operating
skills but cannot repay existing
loans due to cash flow problems.”
The program provides for :
five-year deferrals on
collecting part of an FmHA farm
borrower’s debt so that required
payments will be within the means
of the borrower’s cash flow. FmHA
may set aside up to 25 percent-not
to exceed |lOO,OOO--of the
borrower’s total debt to FmHA.
Deferrals will be considered on a
case-by-case basis, but eligibility
includes all FmHA borrowers who
Farmers leaving ag
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commercial banks. Portfolios of
other lenders, such as federal land
banks and the Commodity Credit
Corporation, showed a smaller
percentage of high-risk loans.
“As the lender of last resort,
FmHA lends to farmers who
cannot obtain credit elsewhere. It
would be expected to have its loan
portfolio dominated by highly
leveraged operators,” Gabriel
maintains. Other lenders can shift
or refer marginal accounts to
FmHA to improve their risk
position or avoid additional risk.
From 1980 to the end of 1983, total
FmHA outstanding farm loans
grew at an annual rate of 11.7
percent, compared with a 6.1 rate
of increase for all other lenders.
Many lenders have postponed
foreclosures and liquidations on
their most distressed clients as
long as they can, according to
USDA analysts.
Land Values Stay Same
“Commercial lenders will be
extremely careful in evaluating
future loan requests,” predicts
Gabriel. “They will scrutinize
their applicants more closely, and
are “good managers” and are in
financial distress. No interest will
accrue on the set-aside portion of
the debt during the 5-year period.
about $630 million in loan
guarantees to be made available to
private-sector lenders to en
courage them to restructure debts
of distressed borrowers on a basis
within their ability to pay. The
lender must write off at least 10
percent of what the borrower owes.
Borrowers must meet the FmHA
statutory restriction of being “not
larger than family farms.”
local assistance by FmHA
professionals or contracted ex
perts in helping farmers develop
financial plans and restructure
they will compete aggressively for
the large pool of farmers with low
debt-to-asset ratios. They’ll be
looking for borrowers who are not
dependent on asset appreciation to
service their debts.”
Although there will be regional
variations, he says, U.S. farmland
values are not expected to change
significantly over the next few
years. In the 1970’5, rapid ap
preciation in the value of farm
assets, particularly land, allowed a
significant expansion in debt that
was backed up by the rising net
worth of borrowers.
“As long as interest rates
remain substantially higher than
the rate of return to farm assets,
and the prospect for growth in
asset values remains dim,
borrowing can be a hazardous
financial management strategy for
both farmers and lenders,”
Gabriel concludes.
“Obviously, a reduction in in
terest rates or an improvement in
returns would help borrowers.
However, most of those who have
been accumulating losses need to
restructure their balance sheets to
return to long-term profitability.”
Restructuring farm
their debts. FmHA can contract
with up to two local farm
management and farm credit
experts to provide such guidance.
This service will not be limited to
FmHA borrowers.
assistance to FmHA in
eliminating delays and backlogs in
handling paperwork and
processing related to loans. FmHA
will get this help by contracting
with local banks and other
financial institutions.
USDA officials emphasize that
this is a temporary debt
management program intended to
assist farmers through current
difficulties in handling large debt
obligations. FmHA expects the
debt
your county FmHA office. The
phone number is listed in your
telephone directory (white pages)
under United States Government-
Agriculture Department-Farmers
Home Administration.
Hort session on Nov. 20
program to be fully implemented
by the end of this year.
You can obtain further in
formation on eligibility and ap
plication procedures by contacting
SALISBURY, Md. - The
greenhouse-nursery session of the
Peninsula Horticultural Society’s
annual meeting will take place
Tuesday, Nov. 20, at the Wicomico
Youth and Civic Center in
Salisbury, Maryland. The
program, which is designed for
producers of commercial nursery
stock, will run from 9:15 a.m. to
3:30 p.m.
The morning session will cover
liner production, effective land
scape use of plants, keeping pot
plants healthy, and the economics
of growing pot plants.
For further information about
this meeting or the Dec. 6 session
for commercial vegetable
producers, in Delaware contact
county extension offices in Newark
(451-2506), Dover (736-1448) or
Georgetown (856-5250).
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