Posted: Monday, August 21, 2006 7:00 pm
In a year in which about 60 of the state’s 93 counties fit the federal disaster profile, only eight of roughly 1,600 agricultural loans made through the Farm Service Agency are from the emergency category — a curious lack of demand, especially during a drought.
BY ART HOVEY | Lincoln Journal Star
Emergency loans for farmers are regularly promoted as the primary benefit of designating Nebraska counties as victims of weather extremes.
Residents of Lincoln and Omaha may feel relieved that help is on the way to hard-pressed rural areas.
But in another dry year in which about 60 of the state’s 93 counties fit the federal disaster profile, only 8 of the approximately 1,600 agricultural loans made through the Farm Service Agency are from the emergency category.
That’s the case even though “emergency” suggests urgency and even though emergency loans are typically made at lower interest rates. But the curious lack of demand is part of a pattern that extends through a succession of drought years.
In 2002, for example, one of the most severe departures from normal precipitation levels, there were no emergency loans at all in Nebraska.
Rich Barta, farm loan chief at Farm Service Agency headquarters in Lincoln, acknowledged low numbers of emergency loans again in 2006, despite a 3.75 percent interest rate.
“For all the publicity and so forth that goes out in connection with the designations, yes, it may be true that we don’t have large numbers of emergency loans,” Barta said Monday.
“But I think the thing we don’t want to overlook is that all the publicity we get does cause a lot of operators to come into our offices across the state.”
Farmers and ranchers making that lending trip help to regularly rank Nebraska at or near the top in total loan volume — both direct loans and others guaranteed at banks — for the agency.
The state was tops in the nation in that overall category as recently as 2003, second in 2004, and third in 2005. So far this fiscal year, Nebraska is first in overall agricultural lending from the federal level at $145.5 million.
“If the question is are we serving farmers and ranchers in Nebraska,” Barta said, “the thing I’d like to point out is how well we’re doing against other states.”
He also mentioned other possible factors that limit emergency loan applications here and elsewhere.
For example, the amount of money a producer can qualify for based on 30 percent crop losses may not be enough to resolve an emergency.
In a given case, “you really need to make a guaranteed loan to restructure their operation to get them on sound basis.”
As another limiting factor, most farmers wait until they’ve harvested all their crops to decide about applying for emergency financing, Barta said. But the 2003 state total of emergency loans, coming on the heels of the 2002 drought, was only 12.
Nobody seemed to suggest that a lack of emergency loans means a lack of an emergency.
Wheat yields this year in Kimball County, one of many under drought designation, were below average.
As the state’s Climate Assessment Response Committee prepares to meet today in Lincoln, precipitation remains far below normal in much of the state west of Grand Island.
Meanwhile, the Rural Response Hotline in Bancroft continues to average more than 350 calls per month, said paralegal Michelle Soll. Many of the callers face crop and livestock crises, Soll said.
“People are wanting to know their options. What else can they do?”
But in neighboring South Dakota, where drought had also been a big factor in 2006, Barta’s agency counterpart Arnie Claeys also reported few emergency applications.
The biggest reason, as Claeys sees it, is that many farmers wait to see if Congress will provide direct payments under its latest disaster relief bill.
Direct payments have yet to receive approval this year as lawmakers get ready to pause for the November election.
Others with an eye on Nebraska’s ag-lending sector said there may be other reasons why farmers in dire straits pass up federal emergency loans.
Dave Goeller, an agriculture transition specialist at the University of Nebraska-Lincoln, cited red tape and a requirement that the borrower be turned down for a loan from his or her regular, private-sector lender before seeking federal financial help.
“Theoretically, at least, you’re not supposed to be able to get credit elsewhere,” Goeller said. “And yet you’re supposed to have an acceptable credit history and be able to offer adequate collateral for a loan.”
Beyond that, he said, “often times, a loan is not the answer to a disaster. Sometimes it adds to the problem. Now you have another loan payment that you have to make next year.”
George Beattie, president of the Nebraska Bankers Association, said lenders are reluctant “to have to sign a letter saying you won’t finance that person. And, if you would (finance), obviously you can’t send the letter.”
John Hansen, president of the Nebraska Farmers Union, said farming and ranching customers are also reluctant to ask longtime lenders for a letter of rejection.
“It’s one thing when your wife files for divorce,” Hansen said. “It’s another thing when your bank says it’s over.
“When a relationship between a producer and a banker is severed, in most cases — not all, but in most cases — it’s the final straw.”
Reach Art Hovey at 523-4949 or ahovey@alltel.net.