WASHINGTON, March 29 (Reuters) - A third year of low grain prices will weaken the financial footing of many U.S. farmers unless Congress intercedes again, agricultural lenders said on Wednesday.
Since 1998, lawmakers have enacted more than $15 billion in farm-rescue packages after prices slumped under the weight of a global grain glut and economic turmoil in key export markets. Farm-sector recovery remains at least a year away, according to government forecasts.
Some $6 billion in additional farm supports would go to farmers this year under budget plans being developed by the House and Senate. Lenders welcomed that prospect.
In testimony before the House Agriculture Committee, they said farmers were increasingly at risk of financial difficulty, despite figures that suggest little overall stress at present. The committee is reviewing U.S. farm policy for potential changes.
"We see more and more farmers unable to cash-flow their operations" and forced to borrow money to stay in business, said Jay Penick of the Farm Credit Council, which speaks for the federally chartered Farm Credit System, a major lender.
The Independent Community Bankers of America urged lawmakers to approve additional aid for two years, not just the one year now being considered, to provide more certainty farmers and bankers of an adequate income.
ICBA also supported expansion of the Conservation Reserve, which pays farmers to idle environmentally sensitive land for 10 years, to as much as 50 million acres. The reserve now is authorized for 36.4 million acres.
Jim Caspary, chairman of ICBA's agriculture committee, said the farm program should be modified to provide additional aid automatically to farmers when prices are low.
Payments could be apportioned to restore income toward the five-year average price for a crop, he said, or a special fund could be created for aid to farmers during hard times.
Terry Hague of the American Bankers Association said emergency aid in 1998 and 1999 "helped avert what could have become a serious and extended period of economic disruption and financial ruin for many farmers and ranchers" but the future remained uncertain. Like other lenders, the ABA endorsed steps to make federal loan guarantees easier to use.
At present, only a small portion of farm loans were in trouble. Of its $70 billion in loans, the Farm Credit System reported 1.36 percent were in serious trouble at the start of this year. By comparison, 10 percent of loans were nonaccruing in 1987, the depths of the last agricultural recession.
ABA said its members listed $1 billion, or 2.2 percent, of farm operating loans as 30 days or more past due in September 1999. Loans more than three months past due amounted to 1.4 percent. In addition, $700 million, or 2.3 percent, of real estate loans were delinquent, meaning 30 days past due.
The American Seed Trade Association backed "counter-cyclical" aid to increase farm supports when prices go down as well as keeping the Conservation Reserve at maximum enrollment.
Copyright 1999 Reuters Limited.:
