As conversations over the next Farm Bill intensify in the coming months, all corners of the farming economy will watch the debate very closely for a variety of reasons.
Ed Elfmann is the Senior Vice President for Ag and Rural Banking Policy for the American Bankers Association in Washington, DC. He says they will watch the Farm Bill debate to understand how the new legislation will impact farm loans.
Some have expressed concerns that because of the large amounts of Ad hoc payments went out over the past couple of years– because of COVID-19 and supply chain disruptions– future Ad hoc payments could be limited.
Elfmann says moving away from Ad hoc payments doesn’t worry him.
“You can’t determine an ad hoc payment, right? So, farmer suddenly gets a check for $64,000 or whatever, you can’t write that into your cash flow. It just comes out of nowhere. All you can do is help manage that you know asset acquisition and make sure that it fits into the overall plan. So, what we’re watching more is what the overall programs look like, right. So if you change reference prices on ARC or PLC, what would that do to cash flow statements? That’s more of the way we look at it.”
Elfmann says because the actual government payments popping in and out are Ad hoc, bankers don’t rely on them too much.
“It’s actually funny when direct payments went away, that was something, in hindsight, we didn’t realize how much how easy it made it for us because we knew what a producer was guaranteed to receive. Now we have producers that, I mean they’ll get a check in September that was not an anticipated part of what we were doing. So, I think lending has changed a quite a bit since the 2018 Farm Bill went in place, because we had to adhere to the kind of these new rules. And then banking regulations require us not to just pick a number and hope it works right we’ve got to work through that process. Are we watching? Are we worried? In a way I’d probably say we’re more worried about if there are any potential cuts to crop insurance, we’d worry about that a lot more than some program changes.”
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