"Financing Farm Operations: The Importance of Credit and Risk Management"

1[House Hearing, 119 Congress]2[From the U.S. Government Publishing Office]34                     FINANCING FARM OPERATIONS: THE5                      IMPORTANCE OF CREDIT AND RISK6                               MANAGEMENT78=======================================================================910                                HEARING1112                               BEFORE THE1314                SUBCOMMITTEE ON GENERAL FARM COMMODITIES,15                      RISK MANAGEMENT, AND CREDIT1617                                 OF THE1819                        COMMITTEE ON AGRICULTURE20                        HOUSE OF REPRESENTATIVES2122                    ONE HUNDRED NINETEENTH CONGRESS2324                             FIRST SESSION25                               __________2627                             JULY 16, 202528                               __________2930                           Serial No. 119-103132               [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]3334          Printed for the use of the Committee on Agriculture35                         agriculture.house.gov3637                                ______3839                   U.S. GOVERNMENT PUBLISHING OFFICE404161-434 PDF                 WASHINGTON : 20254243                        COMMITTEE ON AGRICULTURE4445                 GLENN THOMPSON, Pennsylvania, Chairman4647FRANK D. LUCAS, Oklahoma             ANGIE CRAIG, Minnesota, Ranking48AUSTIN SCOTT, Georgia, Vice            Minority Member49  Chairman                           DAVID SCOTT, Georgia50ERIC A. ``RICK'' CRAWFORD, Arkansas  JIM COSTA, California51SCOTT DesJARLAIS, Tennessee          JAMES P. McGOVERN, Massachusetts52DOUG LaMALFA, California             ALMA S. ADAMS, North Carolina53DAVID ROUZER, North Carolina         JAHANA HAYES, Connecticut54TRENT KELLY, Mississippi             SHONTEL M. BROWN, Ohio, Vice55DON BACON, Nebraska                  Ranking Minority Member56MIKE BOST, Illinois                  SHARICE DAVIDS, Kansas57DUSTY JOHNSON, South Dakota          ANDREA SALINAS, Oregon58JAMES R. BAIRD, Indiana              DONALD G. DAVIS, North Carolina59TRACEY MANN, Kansas                  JILL N. TOKUDA, Hawaii60RANDY FEENSTRA, Iowa                 NIKKI BUDZINSKI, Illinois61MARY E. MILLER, Illinois             ERIC SORENSEN, Illinois62BARRY MOORE, Alabama                 GABE VASQUEZ, New Mexico63KAT CAMMACK, Florida                 JONATHAN L. JACKSON, Illinois64BRAD FINSTAD, Minnesota              SHRI THANEDAR, Michigan65JOHN W. ROSE, Tennessee              ADAM GRAY, California66RONNY JACKSON, Texas                 KRISTEN McDONALD RIVET, Michigan67MONICA De La CRUZ, Texas             SHOMARI FIGURES, Alabama68ZACHARY NUNN, Iowa                   EUGENE SIMON VINDMAN, Virginia69DERRICK VAN ORDEN, Wisconsin         JOSH RILEY, New York70DAN NEWHOUSE, Washington             JOHN W. MANNION, New York71TONY WIED, Wisconsin                 APRIL McCLAIN DELANEY, Maryland72ROBERT P. BRESNAHAN, Jr.,            CHELLIE PINGREE, Maine73Pennsylvania                         SALUD O. CARBAJAL, California74MARK B. MESSMER, Indiana75MARK HARRIS, North Carolina76DAVID J. TAYLOR, Ohio77                                 ______7879                     Parish Braden, Staff Director80                 Brian Sowyrda, Minority Staff Director81                                 ______8283 Subcommittee on General Farm Commodities, Risk Management, and Credit8485                    AUSTIN SCOTT, Georgia, Chairman8687DAVID ROUZER, North Carolina, Vice   SHARICE DAVIDS, Kansas, Ranking88  Chair                              Minority Member89ERIC A. ``RICK'' CRAWFORD, Arkansas  DAVID SCOTT, Georgia90DOUG LaMALFA, California             SHONTEL M. BROWN, Ohio91MIKE BOST, Illinois                  DONALD G. DAVIS, North Carolina92DUSTY JOHNSON, South Dakota          NIKKI BUDZINSKI, Illinois, Vice93MARY E. MILLER, Illinois             Ranking Minority Member94BARRY MOORE, Alabama                 ERIC SORENSEN, Illinois95BRAD FINSTAD, Minnesota              KRISTEN McDONALD RIVET, Michigan96JOHN W. ROSE, Tennessee              ------97MONICA De La CRUZ, Texas             ------98ZACHARY NUNN, Iowa                   ------99MARK HARRIS, North Carolina          ------100DAVID J. TAYLOR, Ohio101102                                  (ii)103104                             C O N T E N T S105106                              ----------107                                                                   Page108Davids, Hon. Sharice, a Representative in Congress from Kansas,109  opening statement..............................................     3110    Prepared statement...........................................     4111Scott, Hon. Austin, a Representative in Congress from Georgia,112  opening statement..............................................     1113    Prepared statement...........................................     2114115                               Witnesses116117Hood, J. Clint, Senior Vice President and Head, Agriculture and118  Timber Division, Synovus Bank, Dublin, GA; on behalf of119  American Bankers Association...................................     5120    Prepared statement...........................................     6121Minick, Mandy, Senior Vice President, Stakeholder Relations,122  AgWest Farm Credit, Rockford, WA; on behalf of Farm Credit123  Council........................................................    13124    Prepared statement...........................................    14125    Submitted questions..........................................    49126Gilbert, Brian, Senior Vice President, Ag Banking Manager, First127  National Bank in Sioux Falls; Member, Rural America and128  Agriculture Committee, Independent Community Bankers of129  America, Sioux Falls, SD.......................................    19130    Prepared statement...........................................    20131    Submitted question...........................................    52132Wicks, John R., Owner/Operator, Tiber Ridge Inc.; President,133  Liberty/Toole Local Farmers Union, Ledger, MT; on behalf of134  National Farmers Union.........................................    27135    Prepared statement...........................................    28136137                     FINANCING FARM OPERATIONS: THE138                     IMPORTANCE OF CREDIT AND RISK139                              MANAGEMENT140141                              ----------142143                        WEDNESDAY, JULY 16, 2025144145                  House of Representatives,146Subcommittee on General Farm Commodities, Risk Management,147                                                and Credit,148                                  Committee on Agriculture,149                                                   Washington, D.C.150    The Subcommittee met, pursuant to call, at 2:02 p.m., in151Room 1300, Longworth House Office Building, Hon. Austin Scott152of Georgia, [Chairman of the Subcommittee] presiding.153    Present: Representatives Austin Scott of Georgia, Rouzer,154Crawford, Bost, Finstad, Harris, Taylor, Davids of Kansas,155Brown, Budzinski, Sorensen, and McDonald Rivet.156    Staff Present: Laurel Lee Chatham, John Hendrix, Harlea157Hoelscher, Sofia Jones, Joshua Maxwell, Thomas Newberry, Sam158Rogers, John Konya, Suzie Cavalier, Joshua Lobert, Clark159Ogilvie, and Jackson Blodgett.160161         OPENING STATEMENT OF HON. AUSTIN SCOTT, A162          REPRESENTATIVE IN CONGRESS FROM GEORGIA163164    The Chairman. All right. The Committee will come to order.165Welcome, and thank you for joining today's hearing entitled,166Financing Farm Operations: The Importance of Credit and Risk167Management. After brief opening remarks, Members will receive168testimony from our witnesses today, and then the hearing will169be open to questions.170    In consultation with the Ranking Member and pursuant to171Rule XI(e), I want to make Members of the Subcommittee aware172that other Members of the full Committee may join us today.173    Today, we will hear from lenders representing diverse174regions across the country, along with a producer, all of whom175bring firsthand insight into the challenges farmers face when176seeking the capital necessary for success.177    The reality is that farming is getting tougher every year.178Input costs are up, and market prices are down. If we don't179support today's farmers, there won't be a next generation ready180to step in. We must ensure the resources available to those who181provide capital to our producers can meet the moment.182    This is why farm bill programs matter. They form the183foundation of affordable, reliable credit for our producers.184Lending tools and risk management programs like crop insurance185and commodity programs work hand in hand to help farmers186withstand downturns and sustain their operations. From loan187programs to the safety net, it is critical that producers and188their lenders have as many tools in the toolbox as possible to189ensure dependable access to capital. It is essential to190maintain the safest, most abundant food supply in the world.191    Over the past 6 years, we have seen nearly $130 billion in192ad hoc assistance flow to producers, many of that in my193district. While that support was necessary in times of crisis,194it is no substitute for a durable, predictable safety net. We195owe it to farmers and lenders alike to build a system that196doesn't rely on ad hoc assistance every time a disaster197strikes. And I might add, the ad hoc assistance in many cases198takes well over a year to get to the producers.199    That is exactly what the One Big Beautiful Bill (Pub. L.200119-21, To provide for reconciliation pursuant to title II of201H. Con. Res. 14.) does. We have strengthened the farm safety202net, increased reference prices, expanded access to crop203insurance, and the opportunity to add additional base acres are204just a few of the real improvements that will bring more205certainty to producers and reduce risk for lenders.206Additionally, the bill significantly raises the Federal estate207tax exemptions and makes it permanent in the Tax Code, allowing208farmers more clarity to plan for their future.209    We know our work cannot stop there. Today, our loan210programs don't reflect the realities of the modern family farm.211Loan limits are outdated, and the lending process is often slow212and burdensome. We must ensure that the credit programs at the213Farm Service Agency are improved to serve both producers and214lenders. That is why today's hearing is so important. The215discussion today will help guide the next steps in our farm216bill reauthorization process and ensure that the credit title217complements the changes we made in the One Big Beautiful Bill.218It will also underscore the need to support our producers who219take the risk to grow the food, fiber, and fuel our country220depends on.221    I want to thank our witnesses for being here and for all of222the work that you do every day. Your insight is critical to223helping this Committee get it right.224    [The prepared statement of Mr. Austin Scott follows:]225226 Prepared Statement of Hon. Austin Scott, a Representative in Congress227                              from Georgia228229    This hearing of the General Farm Commodities, Risk Management, and230Credit Subcommittee will now come to order. Today, we will hear from231lenders representing diverse regions across the country, along with a232producer, all of whom bring firsthand insight into the challenges233farmers face when seeking the capital necessary for success.234    The reality is that farming is getting tougher every year. Input235costs are up and market prices are down. If we don't support today's236farmers, there won't be a next generation ready to step in. We must237ensure the resources available to those who provide capital to our238producers can meet the moment.239    This is why farm bill programs matter. They form the foundation of240affordable, reliable credit for producers.241    Lending tools and risk management programs--like crop insurance and242commodity programs--work hand in hand to help farmers withstand243downturns and sustain their operations.244    From loan programs to the farm safety net, it is critical that245producers and their lenders have as many tools in the toolbox as246possible to ensure dependable access to capital. This is essential to247maintaining the safest, most abundant food supply in the world.248    Over the past six years, we've seen nearly $130 billion in ad hoc249assistance flow to producers. While that support was necessary in times250of crisis, it's no substitute for a durable, predictable safety net. We251owe it to farmers and lenders alike to build a system that doesn't rely252on ad hoc assistance every time disaster strikes.253    That is exactly what the One Big Beautiful Bill does. We've254strengthened the farm safety net--increased references prices, expanded255access to crop insurance, and the opportunity to add additional base256acres are just a few of the real improvements that will bring more257certainty to producers and reduce risk for lenders. Additionally, the258bill significantly raises the Federal estate tax exemptions and creates259permanence in tax codes, allowing farmers more clarity to plan for260their future.261    But we know the work cannot stop there. Today, our loan programs262don't reflect the realities of the modern family farm. Loan limits are263outdated, and the lending process is often slow and burdensome. We must264ensure that the credit programs at the Farm Service Agency are improved265to serve both producers and lenders.266    That is why today's hearing is so important. The discussion today267will help guide the next steps in our farm bill reauthorization process268and ensure that the credit title complements the changes we made in the269One Big Beautiful Bill. It will also underscore the need to support our270producers who take the risk to grow the food, fiber, and fuel our271country depends on.272    I want to thank our witnesses for being here and for all the work273you do every day. Your insight is critical to helping this Committee274get it right.275    With that, I yield to Ranking Member Davids, for any opening276remarks she would like to make.277278    The Chairman. With that, I would like to welcome the279distinguished Ranking Member, the gentlelady from Kansas, Ms.280Davids, for any opening remarks she would like to give.281282       OPENING STATEMENT OF HON. SHARICE DAVIDS, A283          REPRESENTATIVE IN CONGRESS FROM KANSAS284285    Ms. Davids of Kansas. Thank you, Chairman Scott, for286convening this important hearing.287    Kansas is home to more than 55,000 farms, and agriculture288remains the number one economic driver in our state. When I289speak to Kansas producers, one issue consistently rises to the290top, and that is the importance of the farm safety net.291    Since Congress last passed a full bipartisan farm bill in2922018, the landscape for producers has changed dramatically.293Farmers and ranchers are facing high input costs, rising294interest rates, supply chain disruptions, and market volatility295driven by global uncertainty, including tariffs. These296pressures make programs like crop insurance and access to297affordable credit, especially through USDA's credit programs,298that much more critical. That is particularly true for299beginning farmers and those in under-served communities who are300trying to break into agriculture at a time when the average age301of a Kansas producer is nearly 60 years old.302    Kansas producers have always been resilient, adapting to303challenges that are immense, the Dust Bowl, droughts, climate304change. But resilience is in the DNA of Kansans, but it does305take partnership. And it is our job on this Committee and in306the Congress to be that partner, to ensure that the risk307management tools that farmers rely on are strong, that they are308accessible, and that they are responsive to the needs of the309folks making use of them.310    And I want to thank you, our panel today, for being here,311for sharing your insights and expertise. Your experiences are312certainly critical to this Committee, to our ability to ensure313that Federal agricultural policy works for all farmers, and314that includes new ones, inexperienced, experienced farmers,315large and small, and folks in every corner of our country. So I316look forward to hearing your testimony, and I appreciate the317time.318    Thank you, Mr. Chairman, and I yield back.319    [The prepared statement of Ms. Davids of Kansas follows:]320321Prepared Statement of Hon. Sharice Davids, a Representative in Congress322                              from Kansas323324    Good afternoon, and thank you, Chairman Scott, for convening this325important hearing.326    Kansas is home to more than 55,000 farms, and agriculture remains327the number one economic driver in our state.328    When I speak with Kansas producers, one issue consistently rises to329the top: the importance of the farm safety net.330    Since Congress last passed a full, bipartisan farm bill in 2018,331the landscape for producers has changed dramatically.332    Farmers and ranchers are facing high input costs, rising interest333rates, supply chain disruptions, and market volatility driven by334tariffs and global uncertainty.335    These pressures make programs like crop insurance and access to336affordable credit--especially through USDA's credit programs--more337critical than ever.338    That's particularly true for beginning farmers and those in under-339served communities who are trying to break into agriculture at a time340when the average age of a Kansas producer is nearly 60 years old.341    Kansas producers have always been resilient--adapting through342challenges like the Dust Bowl, droughts, and now climate change.343    But resilience requires partnership.344    It's our job to be that partner and ensure the risk management345tools farmers rely on are strong, accessible, and responsive to their346needs.347    I want to thank today's panel of witnesses for being here and348sharing your insight.349    Your experiences are critical to helping this Committee ensure that350Federal agriculture policy works for all farmers--new and experienced,351large and small, in every corner of the country.352    With that, I look forward to your testimony. Thank you again,353Chairman Scott, and I yield back.354355    The Chairman. Thank you, Ranking Member Davids.356    The chair would request that other Members submit their357opening statements for the record so the witnesses may begin358their testimony and ensure that there is ample time for359questions.360    Please limit your statements to approximately 5 minutes.361You have a marker in front of you, red, yellow, green. Green is362good, yellow is getting close, and red means blue light is363coming.364    Our first witness today, Mr. Clint Hood, is from my home365State of Georgia. With almost 4 decades of experience, Clint366has an extensive background in banking. He currently serves as367Senior Vice President and the Director of the Ag and Timber368Group at Synovus Banking Company.369    Our next witness is Ms. Mandy Minick, the Senior Vice370President of Stakeholder Relations at AgWest Farm Credit.371    Our third witness, and let me say this, my fellow372Subcommittee Chairman, Mr. Johnson, Justice Johnson, is on the373Floor of the House of Representatives right now. Our next374witness is Brian Gilbert of South Dakota from his home state.375Mr. Gilbert is Senior Vice President and the Ag Banking Manager376at First National Bank in Sioux Falls, South Dakota.377    And our final witness is Mr. John Russel Wicks, the owner378and operator of Timber Ridge Organics in Ledger, Montana.379    Thank you all to all of our witnesses for joining us today.380We will now proceed to your testimony. As I said, you each have3815 minutes. I am sure you understand the timer.382    Mr. Hood, please begin when you are ready.383384    STATEMENT OF J. CLINT HOOD, SENIOR VICE PRESIDENT AND385     HEAD,  AGRICULTURE  AND   TIMBER  DIVISION,  SYNOVUS386     BANK,  DUBLIN,  GA;  ON  BEHALF  OF AMERICAN BANKERS387     ASSOCIATION388389    Mr. Hood. Thank you, Chairman Scott, Ranking Member Davids,390and Members of the Subcommittee. My name is Clint Hood, and,391yes, I am a Senior Vice President with Synovus Bank down in392Dublin, Georgia. I am the Head of our Ag and Timber Division,393where we finance production agriculture, agribusiness, and394forest industries.395    I have worked in agricultural finance for over 37 years for396banks of all sizes. Prior to banking, I farmed with my father397in east central Georgia on a very diverse row crop and398livestock family farm. My wife and I now live on our farm in399Dublin, and I have enjoyed instilling farm values in our400children and our growing number of grandchildren. I am a proud401Georgia Bulldog, Go Dawgs, and I have always been lucky, felt402lucky, to be around agriculture my entire life.403    I believe my story is somewhat similar to other404agricultural bankers. I have passion for agriculture that405extends well beyond the bank. All my career, I have been406involved with many agricultural organizations, including407Georgia Farm Bureau, Georgia Agribusiness Council, Georgia FFA408Foundation, and the Georgia Cattlemen's Association. My409favorite organization of those is the FFA, and this is the410reason. It strives, the FFA strives, to teach kids values and411disciplines of agriculture through its youth programs.412    As an agricultural banker, I believe it is vital that we413are working closely with our agriculture producers and414agricultural groups. I appreciate this opportunity to present415the views of agricultural banking at this hearing.416    Banks continue to be one of the first places that farmers417and ranchers look for when they are trying to find agricultural418loans, and over 80 percent of the banks in the United States419have agriculture in their portfolio. Bankers finance all types420of agriculture in every part of the country. Agricultural421lending is noble, but it is a tough profession. We work with422our customers to improve their businesses, their livelihoods,423both in the long- and the short-term.424    The current state of the agricultural economy is not425healthy right now. However, the Emergency Commodity Assistance426Program payments, better known as ECAP, have been very helpful427not only to the farmers and ranchers but to the ag bankers as428well, and we thank Congress and the USDA for getting those429payments out quickly.430    But ECAP payments are a short-term solution to a long-term431problem. All the farmers in my area continue to struggle432financially due to low commodity prices and high input costs. I433recently had to have a discussion with a farmer who does not434borrow any working capital. He and his brother needed to cash435out a long-term CD, a CD that had been in their family for436years, but they had to cash it out in order to pay their437shortfall in their operating costs because their margins438continue to be upside down. Farmers are trying to find439solutions to keep their operations going as working capital440lines dry up and without taking any unnecessary extra debt.441    Congress took the first steps to provide new economic442relief to our farmers and ranchers by increasing reference443prices for commodities and by increasing the cost-share for444crop insurance in the recent tax legislation. Our farmers and445ranchers have badly needed those provisions to be modernized to446reflect where agriculture is now, not where it was 12 to 15447years ago.448    I still believe we need a long-term farm bill to help our449rural communities. To me, the farm bill is really a food bill,450as it supports the financial stability of our nation's food451producers, but it also guarantees the consumer's access to that452food. We need to get a farm bill done now, or we are going to453see the demise of American farmers and ranchers, the454agricultural lenders that support them, and the rural455communities where they live.456    ABA has a list of priorities that bankers would like to see457in the next farm bill that I have highlighted in my written458testimony. This includes increasing FSA-guaranteed and direct459loan programs. Additionally, changes to eligibility for460beginning farmers and ranchers is vital to bringing the next461generation of farmers and ranchers. Last, Farmer Mac is a462tremendous partner, and we support efforts to modernize Farmer463Mac to meet the needs of rural America.464    Beyond the farm bill, bankers continue to work on465additional solutions to help our customers during these tough466times. I would like to thank Congressman Randy Feenstra,467Congressman Don Davis, and the additional cosponsors of the468Access to Credit for our Rural Economy Act of 2025 (H.R.4691822),\1\ better known as the ACRE Act, which recently passed470into law. In rural communities across this country, and471especially the five-state footprint of my employer, Synovus472Bank, farmers and ranchers will see real benefit from the ACRE473Act, and lowering costs for farmers and ranchers is vital at474this time.475---------------------------------------------------------------------------476    \1\ Editor's note: the bill was included in Pub. L. 119-21 under477Title VII--Subtitle A--Part V--Chapter 4--Subchapter D--Sec. 70435.478Exclusion of interest on loans secured by rural or agricultural real479property.480---------------------------------------------------------------------------481    Bankers are proud of the work that we do to support our482nation's farmers and ranchers. The agriculture community is a483critical part of our economy, and America's banks remain484committed to serve it through good times and bad.485    Thank you, and I will be happy to answer any questions.486    [The prepared statement of Mr. Hood follows:]487488 Prepared Statement of J. Clint Hood, Senior Vice President and Head,489  Agriculture and Timber Division, Synovus Bank, Dublin, GA; on Behalf of490  American Bankers Association491492    Chairman Scott, Ranking Member Davids, and Members of the493Subcommittee, my name is Clint Hood. I am a Senior Vice President for494Synovus Bank in Dublin, Georgia and I currently lead our multi-state495Agriculture and Timber Division. I have over 37 years of experience in496financial services, and I have been in many different positions with497banks of all sizes. Prior to my career in banking, I farmed with my498father on our family farm in east central Georgia, and I continue to499live on a farm in central Georgia. At Synovus Bank, the Agriculture and500Timber Division provides lending to a wide variety of commodities from501row crops, including cotton and peanuts, to fruits, vegetables and502nuts, to livestock including cattle and poultry. Additionally, our503portfolio includes timber and sod operations. I am proud of the team of504bankers in our Agriculture and Timber Division and our scope of lending505in our rural communities.506    Agricultural bankers have a deep appreciation for the important507role producers play in our economy and the unique challenges they face.508I appreciate the opportunity to present the views of the ABA for the509hearing titled ``Financing Farm Operations: The Importance of Credit510and Risk Management''.511    The American Bankers Association (ABA) is the voice of the nation's512$24.5 trillion banking industry, which is composed of small, regional513and large banks that together employ approximately 2.1 million people,514safeguard $19.5 trillion in deposits and extend $12.8 trillion in515loans. ABA is uniquely qualified to comment on agricultural credit516issues as banks have provided credit to the agriculture industry since517the founding of our country. At year-end 2024, 3,725 banks--82 percent518of all banks nationwide--reported agricultural loans on their books519with a total outstanding portfolio of more than $205 billion.520    Over the past year, ABA has strongly supported the passage of a521long-term farm bill. Bankers were in constant conversation with both522the House Committee on Agriculture and the Senate Committee on523Agriculture during the development of a 2024 Farm Bill. In addition to524the 2024 Farm Bill, bankers worked with Members of Congress to provide525market data highlighting he need for economic assistance for our526farmers and ranchers. Bankers continue to monitor the agricultural527economy, and we are very cognizant of how economic headwinds affect our528customers. Congress has several tools to help the farm economy--529starting with the passage of a strong and durable farm bill.530Additionally, outside this Committee's jurisdiction, would like to531thank Congress for including a partial version of the Access to Credit532for our Rural Economy (ACRE) Act of 2025 in H.R. 1, the One Big533Beautiful Bill Act. ACRE is a solution that will provide another form534of economic relief for farmers and ranchers by lowering the cost of535credit and making credit more widely available for these customers.536    To ABA, fostering the next generation of producers goes further537than a program--it's part of what drives our bankers in our rural538communities every day.539540Introduction541    In May of 2024, the House Committee on Agriculture held a full542Committee markup of the Farm, Food, and National Security Act of 2024543(H.R. 8467), commonly known as the ``2024 Farm Bill.'' This legislation544included comprehensive risk management tools for farmers and ranchers,545loan guarantees for agricultural loans, rural development programs,546nutrition support and investments in conservation. Banks play a547critical role in rural America, and this legislation provided a vehicle548for the banking industry to help meet the financial needs of farmers,549ranchers, and agricultural communities across the country. The550meaningful changes proposed in the 2024 Farm Bill would allow bankers551to better serve their customers and ensure they have high levels of552credit availability in the years to come.553    ABA commends the House Committee on Agriculture for including many554of our priorities in the 2024 Farm Bill,\1\ * including modernizing the555USDA's Farm Service Agency (FSA) loan guarantee limits, clarifying bona556fide operator rules for beginning farmer programs, modernizing and557raising limits for the down payment assistance program, and providing558robust risk management tools that allow our customers to have greater559stability and predictability for each growing season. We look forward560to working with the House Committee on Agriculture developing farm bill561this year that will potentially include many of the same banker-562supported provisions as the 2024 House Farm Bill.563---------------------------------------------------------------------------564    * Editor's note: Mr. Hood's prepared statement contains footnote565references, but does not contain footnotes or endnotes. The statement566has been reproduced herein as submitted.567---------------------------------------------------------------------------568    In addition to the farm bill, bankers were supportive of the569economic assistance measures enacted for farmers and ranchers. Bankers570joined commodity groups to have meetings on Capitol Hill with571Congressional offices to push for the Emergency Commodity Assistance572Program (ECAP) payments that became part of Congressional573appropriations legislation. Farmers and Ranchers are still struggling574throughout the country, and bankers work with these customers every day575to create solutions to ease economic challenges. Even with ECAP576payments, farmers and ranchers continue to have cash-flow issues that577have adversely affected their operations. As the agricultural economy578continues to struggle, bankers stand ready to work with their customers579through this economic downturn.580    Banks continue to be one of the first places that farmers and581ranchers turn when looking for agricultural loans. Agricultural credit582portfolios among banks of all types are very diverse--banks finance583large and small farms, urban farmers, beginning farmers, women farmers584and minority farmers. To bankers, agricultural lending is a productive585way to serve our communities the right way: we make credit available to586all who can demonstrate they have a sound business plan and the ability587to repay. With our deep connection to farmers and ranchers, banks are588often the first to see changes within balance sheets and cash flows on589farm operations, often due to changing economic conditions--and to help590them manage those changes.591    In 2024, farm banks--banks with more than 14.27 percent of their592loans made to farmers or ranchers--increased lending by 6.4 percent to593meet the rising needs of farmers and ranchers and now provide $115594billion in total farm loans. Farm banks are an essential resource for595small farmers, holding more than $45.3 billion in small farm loans,596with $9.1 billion in micro-small farm loans (loans with origination597values less than $100,000). Farm banks are healthy, well-capitalized,598and stand ready to meet the credit demands of our nation's farmers,599large and small.600    In addition to our commitment to farmers and ranchers, thousands of601farm-dependent businesses--food processors, retailers, transportation602companies, storage facilities, manufacturers, etc.--receive financing603from the banking industry as well. Agriculture is a vital industry to604our country, and financing our agricultural economy is an essential605business for many banks.606    Banks work closely with the FSA to make additional credit available607by utilizing the Guaranteed Farm Loan Programs. The increased loan608limits on FSA guaranteed loans is the right policy to ensure more609credit availability to farmers and ranchers. Additionally, entities610like Farmer Mac provide another avenue for banks to increase credit611availability. By purchasing guaranteed loans from banks, Farmer Mac612allows banks to lower interest rates for their customers and provide613better loan products.614    Our nation's farmers and ranchers are a critical resource to our615broader economy. Ensuring that they continue to have access to adequate616credit to thrive is essential for the well-being of our whole nation.617America's banks remain well equipped to serve the borrowing needs of618farmers of all sizes.619    In my testimony today, I will elaborate on the following points:620621   Banks are a primary source of credit to farmers and ranchers622        in the United States.623624   The agricultural economy is experiencing headwinds and625        economic assistance will provide some relief.626627   Agricultural provisions in H.R. 1, the One Big Beautiful628        Bill Act provide a strong backstop for agricultural producers,629        but a long-term farm bill is still needed630631   The 2025 Farm Bill provides an opportunity to make needed632        changes to the Credit Title including increased limits for the633        FSA Guaranteed Loan Programs, changes to the bona fide operator634        definitions, and modifications to Farmer Mac eligibility.635636   The passage of the Access to Credit for our Rural Economy637        (ACRE) Act as part of H.R. 1, the One Big Beautiful Bill Act638        will provide more competition for agricultural lending and639        lower the costs for producers.640641I. Banks Are a Primary Source of Credit to Farmers and Ranchers in the642        U.S.643    For many of ABA's members, agricultural lending is a significant644component of their business activities. ABA has studied and reported on645the performance of farm banks for decades and, we are pleased to report646that the performance of these highly specialized agricultural lending647banks continue to be strong. ABA defines a farm bank as one with more648than 14.27 percent farm or ranch loans (to all loans).649    At the end of 2024, there were 1,398 banks that met this650definition. Farm lending posted solid growth over the year. Total farm651loans at farm banks increased by 6.4 percent to $115 billion in 2024 up652from $110 billion for these banks in 2023. Approximately one in every653three dollars lent by a farm bank is an agricultural loan.654Farm Banks Exhibit Continued Farm Loan Growth655656[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]657658          Source: Federal Deposit Insurance Corporation & American659        Bankers Association analysis.660661    Farm production loans grew at a faster rate than farm real estate662loans. Outstanding farm production loans rose by 8.9 percent to $49.3663billion, whereas farm real estate loans grew at a pace of 4.7 percent664to a total of $62.9 billion. Farm banks are a major source of credit to665small farmers--holding more than $45.3 billion in small farm loans666(origination value less than $500,000) with $9.1 billion in micro-small667farm loans (origination value less than $100,000) at the end of 2024.668The number of outstanding small farm loans at farm banks totaled669676,181, and over \1/2\--406,698 loans--have origination values less670than $100,000. Farm banks are healthy, well capitalized, and stand671ready to meet the credit demands of our nation's farmers large and672small.673Equity Capital Continues To Increase at Farm Banks674675[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]676677          Source: Federal Deposit Insurance Corporation & American678        Bankers Association analysis.679680    Equity capital at farm banks increased 8.1%, or $3.7 billion, to681$49.6 billion in 2024. Meanwhile, tier 1 capital increased by 6.7%, or682$3.5 billion, to $55.7 billion.\2\683    Aggregate tier 1 leverage ratios \3\ increased 6 basis points (bps)684in 2024 to 10.7%. Aggregate tier 1 capital ratios (assessed on risk-685based assets) increased slightly to 14.3%, down 1 bps from 2023686indicating that farm banks are still well capitalized.\4\ Farm banks'687median tier-1 leverage ratio remained 71 bps above where it was before688the start of the Great Recession (2007).689    In 2020-2021, banks experienced an unprecedented influx of690deposits, alongside a pullback in loan demand. This led many banks to691increase their holdings of long-term assets such as Treasury692securities. When the Federal Reserve began rapidly raising the Federal693funds rate over the course of 2022, the market value of those bonds694fell in the rising interest rate environment. Under tangible capital695calculations, unrealized gains and losses are recorded as though the696bank intends to sell those securities immediately at market value. This697volatility in market valuations can distort assessment of a bank's698financial health; post Dodd-Frank, regulatory capital has replaced699equity capital as a reliable measure of the capital available at banks700to absorb shocks.701    Farm banks have built strong, high-quality capital reserves and702remain liquid and prepared to manage potential economic headwinds.703704II. The Agricultural Economy is Experiencing Headwinds705    The agricultural economy is in a position it has not been in for706many years. There is a return to the cyclical agricultural conditions707that were present before the surge of government support during the708COVID-19 pandemic. Despite ever rising input prices, the USDA Economic709Research Service has forecasted a 29.5 percent increase in farm income710in 2025 that will be mostly driven by ECAP payments.711U.S. Net Farm Income and Net Cash Farm Income, Inflation Adjusted,712        2004-25F713Billion 2025 Dollars714715[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]716717          Note: F = forecast; data for 2024 and 2025 are forecasts.718        Values are adjusted for inflation using the U.S. Department of719        Commerce, Bureau of Economic Analysis, Gross Domestic Product720        Price Index (BEA API series code: A191RG) re-based to 2025 by721        USDA, Economic Research Service.722          Source: USDA, Economic Research Service, Farm Income and723        Wealth Statistics.724          Data as of February 6, 2025.725          [https://www.ers.usda.gov/data-products/chart-gallery/chart-726        detail?727        chartId=82240]728          [Net farm income, a broad measure of profits, is forecast to729        increase in 2025 after declining in 2023 and 2024 from a record730        high in 2022. Forecast at $180.1 billion for 2025, net farm731        income would be $41.0 billion (29.5 percent) higher than in732        2024. Net cash farm income is forecast at $193.7 billion for733        2025, an increase of $34.5 billion (21.7 percent) relative to734        2024 (not adjusted for inflation).]735736    With rising input costs and lower commodity prices, farmers and737ranchers have worked through the liquidity and working capital they738built over the past few years at a more rapid pace than anticipated. As739a result, farmers and ranchers are naturally turning to credit to740finance their agricultural operations. This has resulted in increased741debt levels for agricultural producers across the country.742Agriculture Commodities Fall from 2022 High743744[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]745746          Key agricultural commodity prices are off their recent highs.747        Fertilizer prices were a big concern after the invasion of748        Ukraine; while prices have softened, reflecting weakness in the749        agriculture sector, farmers' margins are under pressure from750        lower crop prices and higher overall price inflation.751          * Week ended Friday.752          Source: Bloomberg.753          [https://bankingjournal.aba.com/2024/07/aba-data-bank-754        agriculture-commodities-fall-from-2022-high/]755756    The ECAP payments that were included in last year's continuing757resolution will help provide some relief for farmers and ranchers.758Bankers had many conversations with Members of Congress on the need to759push economic assistance out to agricultural producers. Bankers were760pleased with the work by USDA to push the ECAP payments to producers in761a timely fashion. These payments have provided some relief, but a long-762term farm bill is vital for rural America.763764III. The One Big Beautiful Bill Act Provided Needed Agricultural765        Provisions, but a 2025 Farm Bill is Vital to Rural America.766    The farm bill provisions included in H.R. 1, the One Big Beautiful767Bill Act (OBBB) are a meaningful first step in providing an economic768backstop for agricultural producers. Bankers commend the inclusion of769increased reference prices and increased cost share for crop insurance770programs, among the many other positive provisions. However, changes771are still needed in the credit space to provide farmers and ranchers772with the credit they need to work through the current downturn in the773agricultural economy.774    Bankers look forward to working with the House Committee on775Agriculture to develop a new farm bill in 2025. Many provisions in the7762024 House Farm Bill provided a blueprint for policy changes to the777credit title that will improve credit availability for rural America.778The most significant change bankers would like to see in the next farm779bill is an increase in the FSA Guaranteed Farm Ownership Loan Program780to $3.5 million and the FSA Guaranteed Farm Operating Loan Program to781$3 million. As the cost of agriculture continues to increase, it is782vital to have the FSA loan programs keep pace with modern agriculture.783These new limits will achieve that goal. We thank Representative Brad784Finstad (R-MN) and Ranking Member Craig (D-MN) for their work on H.R.7851991, the Producer and Agricultural Credit Enhancement (PACE) Act. We786believe this legislation is a step in the right direction for787modernizing FSA loan programs.788    FSA loan programs, and the FSA employees that administer the789program, play a critical role in the agricultural economy particularly790during times of economic uncertainty. Bankers will continue to work791with FSA at all levels to ensure credit is available when it is needed792most. However, the need for technology to improve FSA programs793continues to be an issue. For too long, USDA has ignored the need for794new technology within the FSA loan programs. ABA has provided795information to the [] House Agriculture Committee and USDA on potential796changes in the technology space that would improve the loan making797process. The 2025 Farm Bill is a great opportunity to improve FSA loan798programs through technology and create greater efficiency for loan799origination.800    For beginning farmers and ranchers, credit availability is vital to801their survival. For this reason, ABA supports re-examining the 10 year802eligibility limits for FSA Beginning Farmer and Rancher programs.803Beginning farmers and ranchers are often starting to get their footing804when their eligibility runs out. Collectively, we need to do everything805we can to help beginning farmers and ranchers succeed.806    Bankers support a change to the down payment assistance program by807removing arbitrary cap on the size of the loan. Instead, we support a808cap on down payment loans at 45 percent of the lesser of acquired price809or appraised value. Senator Tuberville has legislation that provides a810revised definition of owner-operator that allows various business811structures to increase eligibility to beginning farmer guaranteed loan812programs to more producers and customers. This should be included in813the next farm bill.814    Bankers endorse allowing Farmer Mac to support all USDA guaranteed815loan programs financing. Farmer Mac is a valuable tool for agricultural816bankers because it provides another avenue for banks to increase credit817availability. By purchasing guaranteed loans from banks, Farmer Mac818allows banks to lower interest rates for their customers and provide819better loan products. Further, ABA continues to recommend the removal820of the cooperative lender requirement for energy loans to be sold to821Farmer Mac. This requirement limits the ability of banks to participate822in rural energy projects, limiting available credit in rural America.823    Additionally, the next farm bill must include provisions that will824speed up the USDA loan approval process while making it easier for825producers to use USDA loan programs. USDA loan programs are likely to826provide lifelines to agricultural producers through this economic827downtown. There are many innovative approaches that could be828implemented at USDA and all options should be on the table.829    Crop, livestock, and dairy insurance continue to be extremely830important for bankers. Our customers know these programs well and831heavily use them. We appreciate the inclusion of insurance programs in832the One Big, Beautiful Bill Act to assist in the cost share for833insurance.834    Finally, we note that the language to modify the Consumer Financial835Protection Bureau's 1071 Final Rule reporting requirements for the Farm836Credit System is problematic for the banking industry. ABA supports837efforts to provide relief from the 1071 Final Rule, but that relief838should be equal across all lenders.839840IV. The Access to Credit for our Rural Economy Act841    ABA is a proud supporter of H.R. 1822, the Access to Credit for our842Rural Economy Act (ACRE Act) of 2025 led by Rep. Randy Feenstra (R-IA)843and Rep. Don Davis (D-NC). Bankers across the country are thankful for844the inclusion of the ACRE Act in H.R. 1, the One Big Beautiful Bill845Act.846    The ACRE Act will be beneficial to both new and existing farmers by847lowering interest rates on agricultural real estate. However, access to848credit can be much more difficult for ``Beginning Farmers and849Ranchers'' and ``Socially Disadvantaged Farmers and Ranchers'' due to a850lack of preexisting land ownership and access to other sources of851capital. 54 percent of young farmers say they need more land. ACRE will852help new farmers and ranchers by lowering their cost to acquire land,853which is the most capital intense portion of any farming operation and854a critical asset to achieve long-term, reliable access to credit.855Lastly, ACRE will reduce the need for farmers and ranchers to find off-856farm income by reducing interest payments, which increases the cash-857flow from their operation and reduces the need for off-farm income.858859Conclusion860    The banking industry is well positioned to meet the needs of U.S.861farmers and ranchers. Rising input prices and declining commodity862prices, however, have resulted in lower net farm income for863agricultural producers. Moreover, debt levels have been increasing, and864bankers are concerned that without changes to government policy,865agricultural producers may experience a tightening of credit866availability. The 2025 Farm Bill and the ACRE Act provide opportunities867to make the changes necessary to provide the credit needed for farmers868and ranchers to successfully navigate tougher economic times. Bankers869continue to see great opportunities in agriculture and will continue to870stand with farmers and all our partners in agriculture going forward.871We will also continue to work constructively with the Committee and872your colleagues in Congress on the 2025 Farm Bill and ACRE Act to help873ensure that farmers have the credit they need to be a successful and874strong part of the U.S. economy.875    Thank you for the opportunity to express the views of the American876Bankers Association. I would be happy to answer any questions that you877may have.878879    The Chairman. Ms. Minick, please begin when you are ready.880881      STATEMENT OF MANDY MINICK, SENIOR VICE PRESIDENT,882       STAKEHOLDER   RELATIONS,   AgWest  FARM  CREDIT,883       ROCKFORD, WA; ON BEHALF OF FARM CREDIT COUNCIL884885    Ms. Minick. Chairman Scott, Ranking Member Davids, and886Members of the Committee, thank you for hosting this hearing887today to discuss the importance of the farm bill on lending and888credit. My name is Mandy Minick. I hold the position of Senior889Vice President, Stakeholder Relations with AgWest Farm Credit,890located in Spokane, Washington.891    The Chairman. Could you bring your microphone a little892closer, please?893    Ms. Minick. Is that better? Okay. AgWest Farm Credit offers894dependable credit, crop insurance, and business resources895supporting farmers, ranchers, fishermen, foresters, and rural896residents in Alaska, Arizona, Idaho, Montana, Oregon,897Washington, and parts of California. This includes support for898growers that produce traditional crops, as well as many crops899categorized as specialty by the USDA. We are a member-owned,900locally governed cooperative and a proud member of the Farm901Credit System. Along with 58 other farm credit institutions, we902share a critical mission to support rural communities and903agriculture with reliable, consistent credit and financial904services today and tomorrow.905    As a cooperative, Farm Credit profits are used in only two906ways, either retained in the institution to build financial907strength and support more lending to our customers or returned908to our customers via patronage dividends. Annually, our board909approves the distribution of cash dividends to customers910through our patronage program. Representing 54 percent of our911total earnings in 2024, this equated to $414 million returned912to eligible customers last year.913    While patronage benefits help to effectively reduce the914total borrowing costs for our customers, today's producers in915the western U.S. are facing down markets across most crops. It916is troubling when specialty crops, which are mainly influenced917by market demand at home and abroad, are incurring multiple918years of loss. The struggle in today's ag economy are serious,919and what makes this economic downturn unique is the widespread920impact across most commodities. Price declines, higher input921costs, shrinking margins, tariff volatility, ag labor,922environmental and regulatory pressures, and farm bill923uncertainty are impacting not only business viability but also924the mental health in rural communities. Farmers and ranchers925are managing today's problems under the 2018 Farm Bill926solutions, which served agricultural well then but no longer927adequately address current challenges. And the longer this928takes, the more problems elevate.929    One thing that we can control in the current ag environment930is advocating for the certainty that a strong farm bill will931bring our customers. Important to AgWest producers is the932passage of a strong farm bill to advance multiple important933tools and programs. Federal crop insurance is a vital risk934mitigation tool for our customers. AgWest is committed to935serving all producers regardless of size, complexity, or936commodities that they grow. Whole Farm Revenue Protection and937micro farm policies are successful risk tools for traditional938crops like apples in Washington, grapes in California, and939nontraditional crops like wasabi and kiwi berries that they940grow in Oregon. We are grateful to Congress for their ongoing941investment and improvements in this program.942    AgWest supports the Producer and Agricultural Credit943Enhancement of 2025 (H.R. 1991/S. 899), PACE Act that would944modernize FSA loan programs through increased loan limits that945reflect current costs of production agriculture. Full details946are included in my written testimony in which I share how947strong FSA-guaranteed loan programs assist agricultural lenders948in providing opportunities, particularly for young and949beginning farmers.950    The Fishing Industry Credit Enhancement Act of 2025 (H.R.9512518/S. 1217) would allow farm credits to provide commercial952fishing-related businesses access to Farm Credit loans, just953like other farm businesses do. Reliable credit sources for954fishing-related businesses, such as tinder boats or diesel955mechanics, in the communities that count on fishing to survive956is a much-needed resource.957    In my written testimony, I have included additional items958for the farm bill that would benefit agriculture and rural959communities.960    AgWest Farm Credit appreciates the farm and farm-related961tax legislation included in the recent budget reconciliation962package. Passing a strong farm bill remains a top priority to963provide safety, certainty, and much-needed support to our964producer-owners in these very uncertain and challenging times.965    Thank you for having us today, and I look forward to your966questions.967    [The prepared statement of Ms. Minick follows:]968969Prepared Statement of Mandy Minick, Senior Vice President, Stakeholder970 Relations, AgWest Farm Credit, Rockford, WA; on Behalf of Farm Credit971 Council972    Chairman Scott, Ranking Member Davids, and Members of the973Committee, thank you for convening this hearing today to discuss the974importance of the farm bill on lending and credit. My name is Mandy975Minick. I hold the position of Senior Vice President--Stakeholder976Relations with AgWest Farm Credit, located in Spokane, Washington.977    AgWest Farm Credit is a lending cooperative serving the agriculture978industry. We offer dependable credit, risk management tools, and979business resources to help farmers, ranchers, and rural residents980succeed. For more than a century, we have provided financing expertise981and support for rural communities located in Alaska, Arizona, Idaho,982Montana, Oregon, Washington, and parts of California. As of March 31,9832025, we have provided more than $31.35 billion in loans throughout984seven states, where we operate in 59 locations.985    AgWest is part of the Farm Credit System, a nationwide network of986cooperative lending institutions. Our mission is to support rural987communities and agriculture with reliable, consistent credit and988financial services today and tomorrow. Together, Farm Credit989associations provide approximately 46 percent of commercial990agricultural credit.991992The Farm Credit System993    Farm Credit lenders were assigned a vital mission by Congress a994century ago.995    Our mission is to ensure rural communities and agriculture have a996reliable, consistent source of financing irrespective of cycles in the997economy or vagaries of the financial markets. As this Committee has998heard, there are numerous challenges facing U.S. agriculture. However,999hundreds of thousands of farmers around the country developed a farm1000operating plan this year knowing that Farm Credit has the financial1001strength to finance that plan and the strong desire and ability to help1002them succeed. As margins have tightened for farmers across the country,1003our mission to serve all of agriculture in good times and bad is1004especially important.1005    Although Congress created Farm Credit in 1916, we do not receive1006any government funding or tax dollars. Instead, Farm Credit reverses1007the traditional flow of funds by raising money on Wall Street and1008bringing it back to rural communities.1009    Like AgWest Farm Credit, all Farm Credit institutions rely on the1010availability of certain USDA programs to make credit decisions. A1011customer's ability to purchase crop insurance and the strength of the1012coverage available is a key factor in determining if and how much1013credit to extend to a borrower. The Farm Service Agency guarantee and1014direct lending programs help Farm Credit institutions to work with1015customers that may have higher risk profiles, particularly young and1016beginning producers. The availability of the many types of indemnity1017programs is essential to the survival of farm operations who suffer1018during natural or other disasters and ensure those borrowers can pay1019down existing debt and access credit for future years. The many1020commodity programs, such as ARC and PLC that are administered through1021USDA provide a level of certainty for the producer and gives lenders1022assurances that in difficult price environments customers have tools to1023manage their risk.1024    Finally, Farm Credit member institution, CoBank, provides1025significant financing to rural infrastructure providers. Their1026customers provide water and waste services, electricity,1027telecommunications, and broadband to rural communities across the1028country. The USDA Rural [Utilities] Service is not only a partner to1029CoBank in order to help make electricity costs more affordable for1030people living in rural America, but their loan guarantee programs are1031an essential tool for rural utility providers. Their programs help1032CoBank address the unique credit needs in the hardest to reach places.1033    As a cooperative, Farm Credit is owned and governed by our1034borrowers. Nationally, Farm Credit returned over $3 billion in1035patronage (cash dividends) to our customers, representing 40% of total1036earnings in 2024. Since 2012, Farm Credit has returned $24 billion in1037patronage to our customers.1038    As a Farm Credit institution, the AgWest Farm Credit Board of1039Directors consists of agriculture producers who are invested in1040supporting local communities and agriculture. Annually, our board1041approves the distribution of patronage (cash dividends) to customers1042through our patronage program, representing 54.4% of our total earnings1043in 2024. This equated to $414 million returned to borrowers.10441045The Farm Economy1046    Farmers operate in a cyclical, unpredictable, and sometimes risky1047environment. AgWest is proud to be a trusted resource for producers by1048sustaining and strengthening their operations through these dynamic1049cycles and supporting a thriving future for agriculture.1050    AgWest serves a remarkably diverse portfolio, financing hundreds of1051specialty crops and bulk commodities, with the most significant loan1052volume last year concentrated in dairy, tree nuts, cattle and1053livestock, diversified crops, tree fruit, grains, wine, and forest1054products. We also serve fisheries and aquaculture markets in our1055coastal regions.1056    AgWest offers tailored financial products based on the needs of our1057customers. Our lending programs consist of real estate mortgages,1058intermediate-term and revolving lines of credit, equipment leasing,1059crop insurance and appraisal services. This range of products allows1060AgWest to respond to borrowers' needs and market changes. A strong1061capital base is critical in our ability to provide steady lending1062capacity during this cyclical downturn.1063    The current agricultural economy is encountering substantial1064challenges affecting numerous commodities. It is unusual to observe1065such widespread economic pressures simultaneously influencing multiple1066sectors within agriculture. In nearly all areas, farmers are grappling1067with price declines, rising input costs, shrinking margins, and1068financial strain.1069    Additionally, trade policy and tariff volatility, labor shortages,1070environmental and climate pressures and uncertainty surrounding the1071farm bill are exacerbating these issues.10721073Specialty Crops1074    USDA defines specialty crops as ``fruits and vegetables, tree nuts,1075dried fruits, horticulture, and nursery crops (including1076floriculture).'' This includes many items you might find on your dinner1077table. Specialty crop growers encounter challenges not faced by bulk1078commodity producers. These crops have shorter harvest periods, are1079vulnerable to weather and pests, often require manual harvesting, and1080must be quickly delivered to market due to their perishability. It is1081not uncommon for tomatoes harvested in the morning to be canned in the1082afternoon. Cherries are often harvested in the field, meticulously1083washed, and sorted, then immediately cold packaged for export, and1084shipped by air freight to foreign markets on the same day. Market1085availability, trade restrictions, and shipping container access are1086critical for fresh, perishable products. Labor shortages in any part of1087the supply chain, delays in shipping, or issues with customs can1088significantly reduce marketability.1089    The health of the specialty crop economy depends on product type1090and is mainly influenced by market demand at home and abroad. Export1091markets are crucial. Shifting trade dynamics have created uncertainty.1092Drought and extreme weather continue to challenge growers in all the1093states that we serve. Additionally, increased expenses related to1094labor, energy, transportation, compliance with new regulations,1095litigation and water are substantial factors. These numerous headwinds,1096along with other barriers to entering agriculture, continue to1097contribute to the increasing number of farm consolidations.10981099AgWest Commodity Overview1100    At the end of 2024, almond producers were slightly unprofitable yet1101remained hopeful that conditions would improve during 2025. Recently,1102pricing has increased as demand has improved. Pistachio producers ended11032024 slightly profitable. With minimal inventory carry-over from 20241104and strong demand, prices should continue to support profitability.1105Pistachio trees are alternate bearing, suggesting that 2025 crop will1106be larger than 2024, which may reduce pricing for the 2025-26 marketing1107season.1108    Conventional apple prices are holding flat, while input costs and1109water allocations are ongoing concerns. Organic apples (13% of the1110total supply) are maintaining stronger pricing. California leads the1111nation in citrus production, yet growers have reported escalating input1112costs (fuel, fertilizer, labor), increased regulatory burden and rising1113packaging and marketing expenses. Lemon markets remain weak, and1114production capacity is likely to exceed demand over the next year.1115According to a recent report by California Citrus Mutual, the average1116cost to grow navel oranges in the state has risen by 28% over the past1117five years. Reduction in tree fruit imports may help domestic prices;1118however, the benefits may not be enough to offset the current1119challenges.1120    Falling wine demand, excess inventory and production capacity are1121pressuring prices and margin. Declining export demands may further1122challenge this industry.1123    Ending in 2024, wood product mills were slightly profitable, a1124trend expected to continue in 2025. The industry is reliant on the1125growth of the housing market to increase demand for wood products.1126Potential tariffs on imported lumber may also support prices.1127    Regional topography and unique climates across the states AgWest1128serves makes the production of specialty crops possible--and nowhere is1129that more evident than in California. The state produces more than 4001130commodities and represents over a third of the country's vegetables and1131over \3/4\ of the country's fruit and nut production. Like the rest of1132the nation, California producers have experienced substantial increases1133in expenses. Exacerbating these rising costs is continual1134implementation of new regulations. In a recent study, California1135Polytechnic University, San Luis Obispo professors Dr. Lynn Hamilton1136and Dr. Michael McCullough report that growers have experienced a11371,366% increase in costs solely to comply with regulations in 2024 when1138compared to 2006. This environment has produced extreme barriers to1139entry and agricultural sustainability, impacting producers in the state1140and potentially threatening our nation's food supply.1141    While not specialty crops, substantial volume of beef and dairy1142products are produced in the western United States. The livestock1143industry is navigating a complex but cautiously optimistic landscape1144shaped by evolving market dynamics, regulatory pressures, and strategic1145outreach efforts. According to USDA, beef production is projected to1146rise in 2025, buoyed by heavier slaughter weights and increased cattle1147placements. However, the overall cattle herd remains historically1148tight, keeping prices firm.1149    Dairy margins have improved over the past year due to expanded1150processing capacity, stronger milk prices and lower feed costs, but1151Federal reforms to milk pricing formulas are likely to hurt prices1152received by Western dairies. Challenges loom for producers as strong1153beef prices have reduced availability of replacement dairy heifers.11541155Input Costs1156    Headwinds in this current environment for producers include input1157costs. We are seeing crop input costs rise with ocean freight and1158fertilizer pricing. Container rates started to accelerate in the first1159week of June. Companies are once again front-loading goods to the U.S.1160in anticipation of higher tariffs in July and August. A rapid increase1161in import volumes could lead to temporary port congestion and trucking/1162rail bottlenecks over the next month or two.1163    Fertilizer prices rose across the board over the last month due to1164increased demand from spring applications and global supply1165constraints. It remains unclear as to how much urea China plans to1166export in 2025, though the consensus is that it will keep shipments1167well below average.11681169Specialty Crop Challenges1170    Price declines, rising input costs and shrinking margins, credit1171access and financial strain, trade policy and tariff volatility, labor1172shortages, environmental and climate pressures and farm bill1173uncertainty are impacting not only business viability but also mental1174health in rural communities. Farmers and ranchers are managing today's1175problems under the 2018 Farm Bill solutions, which served agriculture1176well then, but no longer adequately addresses current challenges. We1177need a new farm bill to help mitigate these rising challenges.1178    The struggles in today's agricultural economy are serious. Unique1179to this downturn is the widespread impact across most commodities1180AgWest serves. Agriculture Risk Coverage (ARC) and Price Loss Coverage1181(PLC) programs offer price support for 22 covered commodities. The1182recently enacted improvements to these programs will greatly help our1183grain producers, but our specialty crop growers do not have access to1184these programs.11851186Serving Young and Beginning Producers1187    Congress assigned Farm Credit a mission to serve all sectors of1188agriculture, and we fulfill that mission every day. From the largest1189producers to the more specialized local producers, Farm Credit offers a1190wide range of loan products to support specific needs across all 501191states and Puerto Rico.1192    Congress also directs Farm Credit specifically to serve the needs1193of young and beginning farmers and ranchers. In 2024, Farm Credit made1194just over 129,000 loans to YBS producers which is about 57% of the1195total of new Farm Credit loans made during the year. The chart below1196details Farm Credit loans made last year to Young, Beginning, and Small1197producers.11981199          [Note: The numbers above cannot be combined. A single loan to1200        a 25 year old rancher in her third year of ranching with annual1201        sales of $100,000 could be counted in the young, beginning, and1202        small categories. We report this way for two reasons: our1203        regulator requires it and, more importantly, it is the most1204        accurate portrayal of who we serve.]12051206    With this mission as our focus, AgWest has developed a unique and1207robust program focused exclusively on serving young, beginning and1208small producers grow and sustain their operation. With the average age1209of U.S. farmers just over 58, there is a need to develop the next1210generation of producers to ensure the sustainability and viability of1211the agriculture industry for years to come.1212    The AgWest AgVision program offers qualified producers loan options1213with modified underwriting guidelines, preferred interest rates, fee1214waivers, FSA guarantee fee coverage and financial incentives for1215producers to further their education and invest in their operation.1216AgWest also supports these producers with in-depth financial and1217business training opportunities to help them grow and refine their1218business management skills.1219    Eligible participants in this program are 35 years old or younger,1220have farmed for 10 years or less or generate under $350,000 in annual1221gross agricultural income. AgWest has offered the AgVision loan1222products and programs for over 25 years, during which time we have seen1223many producers develop their farming, ranching, and aquatic production1224operations into viable businesses. These operations have grown to be1225both successful and sustainable, reflecting the effectiveness of the1226program's approach.1227    Tighter financial conditions in the broader economy have impacted1228businesses and consumers. Borrowing costs and stricter credit standards1229may increase barriers to obtaining credit. This is especially1230problematic for new producers.12311232FSA Lending Programs1233    AgWest supports and participates in Farm Service Agency lending1234programs, including guaranteed loans and direct lending, to serve1235producers. We use joint financing structures that combine FSA and1236AgWest programs for greater support, particularly for our AgVision1237customers.1238    We support the Producer and Agricultural Credit Enhancement (PACE)1239Act to modernize Farm Service Agency loan programs, including increased1240loan limits that reflect current costs of production agriculture. A1241strong FSA Guaranteed Loan Program assist agriculture lenders in1242working with farmers and ranchers dealing with these challenges and1243provides opportunities for young and beginning farmers and ranchers.1244    Farmland values and input costs have soared in recent years, making1245it more expensive for farmers and ranchers to finance land and their1246agricultural operations. FSA-guaranteed loan limits must keep pace with1247the increased costs of production agriculture.12481249Crop Insurance1250    Federal crop insurance is a vital tool in stabilizing access to1251credit, sustaining farming communities and protecting the nation's food1252supply, making it a sound investment for taxpayers. The Federal Crop1253Insurance Program works as intended by Congress when coverage is1254available and purchased. Crop insurance allows producers to customize1255risk mitigation plans that protect our national food supply from1256unforeseen disasters. Federal crop insurance is a cost-share investment1257between taxpayers and producers, and as such, farmers and ranchers pay1258premiums. In contrast, ad hoc disaster relief programs are 100% funded1259by taxpayers, unpredictable and subject to political gridlock.1260    Recent ad hoc disaster programs have delivered billions in relief,1261but their ad hoc nature creates uncertainty, distribution delays and1262often gives very little consideration to specialty crops. Ad hoc1263disaster relief programs are most effective when complementing1264structured crop insurance plans and should not be used to substitute1265for producers properly planning to mitigate impacts of a disaster. For1266maximum success, ad hoc disaster programs must be anchored in crop1267insurance and support program distribution to include specialty crop1268producers.12691270America Needs a Strong Farm Bill1271    We appreciate the efforts in both chambers of Congress throughout1272the Budget Reconciliation process that have led to key reforms in crop1273insurance and agriculture policy. Further improvements need to address1274coverage gaps for under-served and uninsurable commodities. Passing a1275strong farm bill this year would give America's farmers and ranchers1276much needed stability and prioritize farmers in the bill.1277    Farmers and ranchers need a new farm bill to help mitigate1278unprecedented challenges in a difficult economic environment. Farm1279Credit encourages Congress to pass a strong, five year farm bill, and1280we have highlighted several of our priorities in this testimony.1281    In addition to the PACE Act, we also encourage Congress to support1282rural communities and agriculture by:12831284          Allowing U.S. commercial fishing related businesses to access1285        Farm Credit--just as related farm businesses do--to support the1286        industry, as proposed in the Fishing Industry Credit1287        Enhancement Act (S. 1217/H.R. 2518);1288          Authorizing Farm Credit institutions to voluntarily collect1289        customer demographic data with the Farm Credit Administration1290        as their primary regulator, as outlined in H.R. 1063, the Farm1291        Credit Administration Independent Authority Act;1292          Enhancing the development of essential rural community1293        facilities--including hospitals, rural clinics, and skilled1294        nursing facilities--by clarifying the authority of Farm Credit1295        institutions to finance such projects and promoting1296        collaborative partnerships with community banks, as1297        demonstrated by H.R. 1246, the Investing in Rural America Act;1298          Allowing more time between examinations for low-risk1299        institutions, like the 118th Congress's H.R. 6564, the Farm1300        Credit Adjustment Act;1301          Modestly increasing Farm Credit's rural home lending1302        population limit, like the 118th Congress's S. 3497, the FARM1303        Home Loans Act;1304          Expanding access for rural businesses to equity capital1305        investment by eliminating unnecessary restrictions on Rural1306        Business Investment Companies (RBIC) and allowing RBICs to1307        access Federal leverage funding, similar to how small business1308        investment companies operate;1309          Improving the transparency and safety and soundness of the1310        Federal Agricultural Mortgage Company (Farmer Mac) by requiring1311        the company to obtain and maintain public ratings on its debt1312        securities.13131314    Thank you very much, Chairman Scott and Ranking Member Davids, for1315allowing me to testify today. Farm Credit is committed to fulfilling1316the mission Congress charged us with 109 years ago, and we look forward1317to working with you as you reauthorize the farm bill.13181319    The Chairman. Perfect. Mr. Gilbert, please begin when you1320are ready. Thank you, ma'am.13211322     STATEMENT OF BRIAN GILBERT, SENIOR VICE PRESIDENT, AG1323      BANKING  MANAGER,   FIRST  NATIONAL  BANK  IN  SIOUX1324      FALLS;   MEMBER,   RURAL   AMERICA  AND  AGRICULTURE1325      COMMITTEE,    INDEPENDENT   COMMUNITY   BANKERS   OF1326      AMERICA, SIOUX FALLS, SD13271328    Mr. Gilbert. Chairman Scott, Ranking Member Davids, and1329Subcommittee Members, thank you for the opportunity to discuss1330financing farms. I am Brian Gilbert, Senior VP and Ag Banking1331Manager at the First National Bank in Sioux Falls, representing1332Independent Community Bankers of America. I own and operate a1333family farm that raises cow-calf pairs, finishes approximately1334750 head of cattle each year, and I also raise corn and1335soybeans.1336    Our nation's more than 4,000 community banks make nearly 801337percent of all ag loans made by commercial banks, or $1511338billion. Community banks have deep roots in their communities.1339More than 1,000 banks are more than 100 years old and have1340survived the Great Depression, the Great Recession, and are1341still standing by their customers through good times and bad.1342Community banks are relationship lenders that fund local loans1343with local deposits.1344    First National Bank in Sioux Falls started 140 years ago in13451885. We are a $2 billion bank heavily involved in ag lending1346and risk management with a bank-owned crop insurance agency.1347Several of our bank's one dozen ag lenders own family farms. We1348want to help producers buy that next parcel of ground, add to1349their herd, or figure out how to make their operations more1350efficient and productive. As a farmer myself, I can attest that1351agriculture can often be difficult and have great uncertainty1352due to extreme fluctuations in prices, weather, markets,1353diseases.1354    Our bank works with farmers to prepare them for a wide1355variety of challenges. We look at whether producers can cash-1356flow, and crop insurance is a very important tool. We have an1357insurance agency called First Ag Risk Management, or FARM. Due1358to the unpredictable weather, financial risks are always1359present. Drought, hail, floods, and other weather events put1360farmers and ranchers and their crops and livestock in danger.1361Crop insurance enables producers to repay bank loans and1362qualify for credit. Crop insurance fits into the bigger system1363of inputs, marketing, risk mitigation. Our FARM agency1364solutions help producers build a customized risk management1365plan.1366    USDA's Livestock Risk Protection Program is also quite1367important, and we have many producers that utilize that1368program.1369    We offer education through our Farmers and Bankers Program.1370Topics include farm financials, crop insurance, marketing,1371trust and estate planning, and taxes. Having strong marketing1372skills can generate profits.1373    USDA loan guarantees allow banks to work with borrowers who1374cannot qualify for conventional credit or who are beginning1375farmers. A USDA express loan program requiring USDA to approve1376guaranteed loan applications within a couple days in exchange1377for a lower guarantee amount for loans up to $1 million is1378needed.1379    SBA's Express Loan program works well. To have real impact,1380the USDA Express concept should apply to standard and certified1381lenders.1382    We appreciate the Committee's higher USDA guaranteed farm1383loan limits: $3.5 million for ag real estate loans, and $31384million for guaranteed operating loans are necessary given1385today's land values and production costs. I purchased my first1386farm ground, 240 acres, with USDA's down payment loan program.1387It is a great program for a beginning farmer.1388    The Farm Credit System has major proposals that would fuel1389tens of billions of dollars or more in new non-farm financing1390for the FCS at the expense of taxpaying community banks. As a1391government-sponsored enterprise, FCS' effective tax rate in13922024 was only 2 percent, far below what community banks pay.1393The FCS' essential community facility proposal to finance1394schools, fire stations, health clinics, et cetera, without1395regulators' pre-approval considerably broadens their scope. FCS1396should at most be a supplemental source of credit once the1397private sector lenders have committed to providing the majority1398of funds. FCS proposes expanding housing loans in towns of139910,000, a 300 percent increase. Seventy-five percent of all1400towns are below or at 5,000 population. The Farm Credit Act1401should be tightened to limit FCS deposit-taking activities,1402which is draining community banks of deposits.1403    In conclusion, we appreciate the Committee's work, and we1404thank Congress for the $10 billion in economic loss payments,1405$20 billion in disaster aid, and higher reference prices and1406continued crop insurance protections. We appreciate the1407inclusion of the ACRE Act in H.R. 1 but encourage the 251408percent tax exemption to be raised to 100 percent. Thank you.1409    [The prepared statement of Mr. Gilbert follows:]14101411Prepared Statement of Brian Gilbert, Senior Vice President, Ag Banking1412 Manager, First National Bank in Sioux Falls; Member, Rural America and1413 Agriculture  Committee,  Independent  Community  Bankers  of America,1414 Sioux Falls, SD14151416Introduction1417    Chairmen Scott, Vice Chair Rou[z]er, Ranking Member Davids and1418Members of the Subcommittee:14191420    Thank you for the opportunity to appear before you today and share1421my views on Financing Farm Operations: The Importance of Credit and1422Risk Management.1423    I am Brian Gilbert, Senior Vice President and Agriculture Banking1424Manager of the first National Bank in Sioux Falls, S.D. I am here today1425representing the Independent Community Bankers of America (ICBA) and I1426serve on ICBA's Rural America and Agriculture Committee.1427    I also am an operator of a family farm. Our farm runs a significant1428cow/calf operation. I finish about 500-750 head of cattle per year in1429South Dakota and Nebraska. Additionally, I own 300 cows personally and1430another 900 cows in a partnership. I am pleased to serve on the Board1431of Directors of the South Dakota Cattlemen's Foundation. The South1432Dakota Cattlemen's Foundation facilitates the generosity of the beef1433industry to educate and build trust with the state's consumers,1434ensuring the industry's long-term viability and provides educational1435opportunities to develop future leaders in our industry. I also own1436several hundred acres of crop land producing corn and soybeans.1437    In addition to operating a family farm, for the past 20 years I1438have worked as an ag banker at the First National Bank in Sioux Falls.1439First National is a $2 billion asset bank heavily involved in1440agricultural lending and risk management with a bank-owned crop1441insurance agency.14421443Commitment to Farmers and Ranchers1444    As SVP/Agriculture Banking Manager, I work with over a dozen ag1445lending specialists. Several of our lenders are also involved in their1446own family farms. Our Ag Bankers are ready to help producers buy that1447next parcel of land, add to their herd, or figure out how to make their1448operations smarter, more efficient, and more productive. When producers1449grow with us, they have a partner who will weather the ups and downs1450with them.1451    Our ag banking staff takes pride in helping farmers achieve their1452financial goals and we understand the importance of keeping the family1453farm's legacy strong through both calm times as well as challenging1454times. Our ag lender team members are industry leaders and experts that1455understand family farm ownership and the cyclical nature of1456agriculture.1457    Before commenting further on the role that First National Bank1458plays in meeting the needs of our farm and ranch customers, I'd like to1459briefly mention the role that community banks serve in meeting the1460needs of America's agricultural sector.14611462Community Banks Service to Farmers and Ranchers1463    Community Banks with under $10 billion in assets make approximately146478 percent of all agricultural loans made by commercial banks. This1465amounts to $150.7 billion of the $193 billion in ag loans from the1466commercial banking sector.\1\1467---------------------------------------------------------------------------1468    \1\ How the Composition of U.S. Commercial Banks Participating in1469Agricultural Lending has Changed Since 2007, farmdoc Daily, June 14,14702024, Table 2.1471---------------------------------------------------------------------------1472    There are over 4,000 community banks in this country with 45,0001473locations. Community banks have deep roots in the communities they1474serve, often for many generations. More than 1,000 community banks are1475more than 100 years old and have survived the Great Depression, the1476Great Recession, and numerous other systemic shocks, standing by their1477customers in catastrophic times and good times. Others are de novo or1478new bank charters, that are poised for growth. When Congress considers1479adopting new legislation, it is important to ensure these policies do1480not disadvantage community banks by granting non-bank competitors who1481have favorable tax and regulatory policies competitive advantages over1482community banks.1483    In community banks, local deposits are reinvested back into local1484credit needs, not exported to distant markets. Community banks often1485serve communities overlooked by larger, out-of-market lenders. In one1486in three counties, community banks are the only on-the-ground banking1487option.1488    These points have been affirmed by the Federal Reserve Bank of1489Kansas City which stated, ``Community banks are often known as1490`relationship bankers.' Community banks serve businesses and consumers1491throughout the country, in both rural and urban areas, and are leading1492providers of credit to small businesses, often with strong1493relationships in their communities. At the core, community banks1494primarily rely on relationship lending, funding local loans with local1495deposits.'' \2\1496---------------------------------------------------------------------------1497    \2\ The Critical Role of Community Banks, Federal Reserve Bank of1498Kansas City. August 2024, https://www.kansascityfed.org/banking/1499community-banking-bulletins/the-critical-role-of-community-banks/.1500---------------------------------------------------------------------------1501    The Kansas City Fed added that community banks ``can offer1502personalized service and maintain greater connection to their1503customers. Community bankers are able to develop relationships,1504understand the needs of customers, and maintain vast knowledge of their1505local market. Community banks are typically locally owned and managed1506and are staffed by individuals that live in the communities they serve.1507This contributes to the health of the local economy through employment1508and provides close connections and understanding of community needs. In1509serving local markets, community banks have a heavily vested interest1510in the success of their communities. Given a primary purpose of a1511community bank is to serve the credit needs of the community, these1512activities facilitate the growth and prosperity of local businesses.''1513\3\1514---------------------------------------------------------------------------1515    \3\ Ibid.1516---------------------------------------------------------------------------1517    Unlike other institutions, community banks take the time and care1518to customize products and services based on the unique needs of our1519customers. Commoditized products are poor fit for many rural1520communities.15211522First National Bank in Sioux Falls Serves Farmers and Ranchers1523    The First National Bank in Sioux Falls began its long-term1524commitment to the Sioux Falls area in 1885. The oldest bank founded in1525Sioux Falls owes its longevity to a combination of service, stability,1526innovation, and family involvement.1527    For 140 years, The First National Bank in Sioux Falls has worked1528diligently to promote the growth and vitality of our city and the1529surrounding area. The Bank strives to continually be recognized as a1530community leader by reinvesting financial resources back into the1531communities it serves and encouraging active employee involvement in1532community volunteer organizations.1533    The First National Bank in Sioux Falls retains its 140 year1534commitment to be the principal locally owned, independent community1535bank in Sioux Falls and the communities it serves in the upper Midwest.1536    As a farmer myself, I can attest that agriculture can often be1537difficult and have great uncertainty due to the extreme fluctuations in1538prices, weather, domestic and foreign markets and disease outbreaks to1539name a few challenges. Our bank works with our farm customers to1540prepare them for a wide variety of challenges to ensure they will have1541viable farming operations well into the future. We look at several1542criteria to help farmers qualify as credit worthy.1543    Can the Producer Cash-Flow? First, we want to ensure that producers1544can cash-flow to see if their income will cover their expenses. If not,1545we may need to work with producers to restructure their operations or1546their loan. This could include selling some assets, extending loan1547terms and similar steps. We also want to see if the producer has1548positive working capital.1549    Over the past several years many crop producers have faced lower1550prices and higher production costs for items like seed, fuel, and1551fertilizer. This has led to many producers losing money each year on1552their operations. Community banks have tried to work with many of these1553producers. Some producers have decided to retire as a way to maintain1554their equity and prevent higher debt loads.1555    The $10 billion in economic loss payments Congress passed in1556December was a lifeline for many farmers. The higher reference prices1557ranging from 10-20 percent increases will also be beneficial to the1558financial condition of many producers and will enhance their credit1559worthiness. However, some lenders will tell you that producers could1560use additional economic assistance this year.1561    If producers have very thin profit margins and do not qualify for1562standard bank loans, we may turn to USDA's guaranteed loan programs.1563First National Bank is a preferred lender, which allows us to get1564quicker loan approvals. I have made several recommendations on USDA1565guaranteed loans below.1566    Does the Producer Have Crop Insurance or Livestock Insurance? One1567of the most important tools lenders use to help producers is crop1568insurance. First National has an insurance agency to assist producers1569called First Ag Risk Management or FARM.1570    Due to the unpredictable weather in the Midwest, financial risks1571are always present in ag production. Drought, tornadoes, hail, and1572everything in between put farmers and ranchers and their crops and1573livestock in danger, often without advance notice. Having this1574protection better enables producers to repay their bank loans and1575enhances their ability to qualify for credit going forward.1576    Lenders across the nation and their farm and ranch customers1577greatly appreciate Congress providing up to $20 billion as part of the1578American Relief Act of 2025 to assist producers who suffered from1579severe natural disasters in 2023 and 2024.1580    To keep farmers protected and prevent immense financial loss in1581their operations due to circumstances beyond their control, First Ag1582Risk Management offers a variety of crop insurance and risk management1583services for producers.1584    One lesson we've learned is that crop insurance shouldn't be a one-1585size-fits-all or nuisance expense. It should be a custom-tailored1586solution that provides each producer with exactly what they need, and1587it should come from specialists who are producers themselves, who1588understand the coverage levels and who know the right questions to ask,1589which is what our FARM agency is all about.1590    For livestock producers, the Livestock Risk Protection program1591offered by USDA is quite important, although there'll be a number of1592changes as we move from 2025 into 2026. Producers will need to keep up1593with the evolution of the LRP program.1594    Now more than ever, a sound risk management plan will be key to1595maintaining profitability should margins become compressed. There are1596many ways to manage risk through futures, options, and the Livestock1597Risk Protection program.1598    Our experts understand how crop insurance fits into a bigger system1599of inputs, marketing, and risk mitigation for producers' bottom line.1600Why? Because we're producers too. Our FARM solutions help producers1601build a customized risk management plan that's optimized for their1602operation's goals and needs.1603    Nationally, the Federal Crop Insurance Program (FCIP) covers1604approximately 540,000 acres with producers holding 2.3 million1605policies. Approximately \1/2\ of this total is for forage crops, which1606have low indemnity rates. Keep in mind that farmers and ranchers pay160735-40 percent of the cost of premiums for their crop insurance1608protection.16091610Farmers ['N] Bankers Education1611    As the ag industry continues to change and develop, it's important1612for South Dakota family farms to grow and adapt their operations1613accordingly. Through our Farmers 'N Bankers program, we bring together1614area producers for interactive sessions, excursions, and leadership1615experiences that will give them the additional tools they need to1616succeed while preparing them to meet today's challenges while ensuring1617they'll one day be able to pass their operation on to the next1618generation.1619    This program offers producers sessions throughout the year. For1620example, we all know that death and taxes are two guarantees in life,1621and planning for these events can be easy to move down the ``To Do''1622list. Because of this, we give participants the opportunity to hear1623from industry professionals on why these topics are important and what1624can be done to simplify the process.1625    During the ``Farmers 'N Bankers'' sessions throughout the year, we1626discuss topics in key areas to strengthen producers financial and risk1627management skills. These include:16281629   Financials16301631   Crop insurance16321633   Marketing16341635   Trust and estate settlement16361637   Taxes16381639    We also give producers the opportunity to tour local ag-related1640businesses and learn more about how they operate.1641    I mentioned the importance of producers having sound financials and1642enrolling in adequate crop insurance programs. In addition, having1643strong marketing skills can enable a producer to have a profitable year1644whereas their neighbors with similar operations but without good1645marketing skills may encounter losses. The education and skills that1646successful producers need in the current farm economy are multi-faceted1647and a lifelong learning experience.16481649USDA Guaranteed Loan Programs1650    USDA loan guarantees allow banks to work with borrowers who cannot1651qualify for conventional credit. As mentioned above, our bank is a1652preferred lender, allowing us to get quicker loan approvals. However,1653not all banks can qualify for this status due to insufficient demand or1654other factors.1655    Express Loan Program. Lenders who do not have the preferred status1656can face significant delays in their loan approval times. Some loan1657applications face considerable delays of 30 to 60 days or more. This1658can be a long time for producers to wait on their financing during1659critical junctures of the production cycle.1660    ICBA has proposed a USDA Express loan program to require USDA to1661approve guaranteed loan applications within a couple of days in1662exchange for a lower guarantee of 50-75 percent for loans up to $11663million. The SBA's Express loan program has worked well as applicants1664quickly obtaining financing. The language in the 2024 Farm Bill version1665from the House Agriculture Committee is a good first step but only1666applies to preferred lenders, which basically adopts current USDA1667procedures. With banks taking much more risk due to the lower1668guarantee, there is little risk in extending the Express program to1669certified and standard lender categories.1670    USDA needs some accountability on this issue. The language could1671have benchmarks that USDA should meet during the life of the farm bill1672as they work to improve application approval timeframes. Under the1673Express loan program, lenders are shouldering a much greater level of1674risk due to the lower guarantee level. The program should also reduce1675USDA staff hours since banks will determine eligibility and do the1676underwriting on these loans, which they will need to do in order to1677minimize the bank's losses. We can provide the Committee with1678recommended legislative changes.1679    Increase Loan Limits. The House Agriculture Committee's farm bill1680language setting higher guaranteed loan limits at $3.5 million for1681agricultural real estate loans and $3.0 million for guaranteed1682operating loans is quite necessary given the rise in land values in1683recent years. Cropland values now average $4,000 per acre. However,1684cropland in several states are three to five times that number.1685    Converting Guaranteed Loans to Direct Loans. This provision should1686have tight limitations to ensure that the USDA doesn't end up competing1687with private sector lenders on good quality loans. Limitations should1688include only allowing conversions when the guaranteed loan is in1689foreclosure or bankruptcy.1690    Streamlining USDA Guaranteed Loan Applications. USDA's guaranteed1691loan applications should be streamlined similarly to how direct loan1692applications were streamlined by USDA.1693    USDA guaranteed farm loans are an important backstop for many1694producers especially when times are tough in agriculture. Guaranteed1695loans can also be used to help beginning farmers get started. For1696example, I used the USDA's Down Payment loan program in which producers1697put down five percent of the loan, USDA provides up to 45 percent and a1698commercial lender provides the remainder of the funding. Commercial1699lenders can receive a 95 percent guarantee of the loan. I used the1700program to purchase my first farm ground, buying 240 acres of farmland.1701I subsequently purchased the adjacent 80 acres using a traditional1702community bank loan. This was a great loan to have available when I was1703getting my farm started.1704    We need to ensure the USDA guaranteed loan programs are efficient,1705with streamlined applications and adequate USDA staff levels and1706quicker approval times. We appreciate the work of the Committee and1707Members of Congress in helping improve these programs and look forward1708to working with you.17091710Farmer Mac Proposals1711    Farmer Mac, the secondary market for ag real estate loans, has1712proposed four additional solutions for the farm bill which we support.1713For example, allowing Farmer Mac to purchase all types of USDA1714guaranteed loans, including loans from programs established outside of1715the Consolidated Farm and Rural Development Act of 1971 (Con Act),1716would provide additional liquidity to all lenders in rural America.1717Allowing Farmer Mac to purchase infrastructure loans from lenders that1718are not cooperatives would also be helpful in supplying more capital1719and liquidity to the marketplace.17201721Block the FCS's Expanded Powers Push1722    The Farm Credit System (FCS) apparently intends to use the new farm1723bill as their own Christmas tree arrayed in the ornaments of many new1724powers for non-farm lending purposes. They have presented to Congress a1725half dozen major expansion and regulatory proposals. As is the case1726whenever the farm credit system proposes expansive new powers, they are1727couched in the terminology of ``technical corrections or minor1728adjustments,'' and ``ways to assist their borrowers.'' In reality,1729these proposals if granted could provide the FCS with tens of billions1730of dollars, or more, of new lending authority with the worst part being1731almost all of it coming at the expense of tax paying community banks.1732    The FCS is a government sponsored enterprise or GSE and therefore1733has tremendous tax and funding advantages, and other benefits not1734afforded to the private-sector. Traditionally, the purpose of GSE's is1735to fill gaps in specific credit markets or compliment private-sector1736lending, as is the case with Fannie Mae and Freddie Mac. But the FCS1737competes directly with private sector tax paying community banks which1738is why Congress limited FCS's lending authorities.1739    The FCS pays no taxes on interest income from real estate loans.1740FCS lenders also do not pay taxes on their retained earnings, which1741they use to grow their business. The FCS utilizes their tax advantages1742to under-price loans in local markets. This ultimately drives out1743private sector lenders like community banks from many markets and1744market segments. How can this be a good recipe for serving the credit1745needs of rural America? It's not. These proposals are simply a way to1746grant FCS more and more latitude to take away loans from the private1747sector.1748    It is clear what happens when the FCS is allowed broad entry into1749specific credit markets. The chart below shows that while the FCS and1750banks had roughly the same amount of ag real estate loans as recently1751as 2003, the FCS now has $40 billion more in ag real estate loans than1752banks.1753    The FCS, quite frankly, raids the best customers of community banks1754by offering below market pricing, pricing that is below any other1755private-sector lender in the local area.17561757Real Estate Debt by Lender, 1960 to 202317581759[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]17601761    Many Members of Congress recognized that offering banks a reduced1762tax rate on their interest income on ag real estate loans would help1763banks' farm and ranch customers. This is why the OBBB included the ACRE1764legislation (S. 838/H.R. 1822), although the tax exemption was limited1765to 25 percent. The 25 percent tax reduction on interest income will1766help producers, particularly less credit worthy producers, qualify for1767credit and thus remain viable in their operations. However, it is not a1768full 100 percent exemption which the FCS enjoys, and we urge Congress1769to further increase the exemption under ACRE for the benefit of1770producers.1771    These FCS proposals, such as the `essential community facilities'1772(ECF) proposals, or the proposal to allow FCS to own up to 75 percent1773of a Rural Business Investment Corporation (RBIC) involved in FCS1774ineligible activities for equity investments, are not tailored to1775filling credit gaps. In the case of RBICs, what would prevent FCS from1776using RBICs to engage in non-farm business lending all across rural1777America? While the RBICs may have a few banks as partners, they would1778be able to take away financing that is already being provided by1779community banks and other lenders.1780    Key Question on FCS Expansion Proposals--A question that applies to1781each of the expanded powers proposals the FCS seeks is what prevents1782the FCS from using their tax advantages to take away loans that are1783already being made by tax-paying, private-sector lenders? Such FCS1784expansion would not be ``cost free.'' In addition to siphoning away the1785best loans from community bank portfolios, these expansions will siphon1786away enormous sums of revenue from states and local governments,1787forcing them to increase taxes to maintain services.1788    Analyzing FCS's Essential Community Facilities (ECF) Proposal--For1789example, we analyze the FCS proposal to finance ECFs.17901791  1.  Need for Blocking and Limiting FCS Authorities--FCS seeks non-1792            farm financing of ``essential community facilities''1793            without the current case-by-case approval of their1794            regulator, the Farm Credit Administration (FCA). The FCS's1795            proposal does not define ``essential community facilities''1796            other than referencing the Con Act. The Con Act allows1797            financing of essential community facilities that serve1798            rural businesses and other rural residents. This language1799            should prohibit FCS from financing rural businesses and the1800            general public.18011802  2.  FCS's description of these loans as being health care related is1803            misleading as the ``etc.'' and ``and more'' used in their1804            descriptions means many other types of loan could be made.1805            If `health care' facilities are the intended focus, limit1806            the authority to just health care facilities.18071808  3.  Questions that Need to be Asked--Would restaurants, grocery1809            stores, accounting firms, lawyers offices, funeral homes,1810            car dealers, ``etc.'' and ``and more'' be eligible?18111812  4.  The text in last year's farm bill requires FCS to offer the loan1813            as a participation with a community bank first, a step in1814            the right direction, although we have additional concerns.1815            Due to FCS's tax advantages, they can offer rates1816            significantly below community banks' rates and could forego1817            community bank involvement using the justification the1818            bank's loan rate, which would be higher than the FCS's loan1819            rate, is not ``at terms acceptable to the customer,'' since1820            the customer will only want the FCS's lower rate. To be1821            workable, any such proposal needs to be based on a blended1822            rate offered to the customer. Also, does ``an offer'' mean1823            the FCS loan officer quickly phones the bank loan officer1824            and before moving on to a large national lender?18251826  5.  As a GSE, FCS institutions should not be the driving force for1827            ECF financing. FCS should be restricted to being a1828            supplemental lender when additional credit is needed and1829            once private sector lenders have committed to a majority of1830            the financing. This would ensure private sector financing1831            to the maximum extent.18321833  6.  No Accounting for FCS's Minimal Tax Rate--Will FCS be required to1834            pay taxes on interest income from loans made under this1835            authority like all other lenders? If not, why not?1836            Community banks would not be able to compete on these deals1837            due to the tax-exempt lending status of the FCS, which had1838            only a 2.0 percent effective tax rate in 2024. FCS could1839            undercut community banks on these loans.18401841  7.  What Proof Exists that FCS Needs These Authorities? Community1842            banks, either individually or jointly through loan1843            participations, already finance essential community1844            facilities. FCS points to a `study' showing a need of $891845            billion in rural America, but this `study' has no1846            substantive data disclosed. Did the FCS fund the study?18471848  8.  Removes the FCA from Close FCS Oversight, Increasing Risks--FCA's1849            pre-approval review of FCS investments for this broad1850            category of lending would be eliminated. FCA's pre-approval1851            was designed to ensure a modicum of rationale for an FCS1852            entity to engage in this type of non-farm financing. By1853            removing the regulator's oversight with case-by-case1854            approvals of such loans, this proposal raises FCS's safety1855            and soundness risks and opens the floodgates for non-farm1856            lending. FCS would grant themselves the ability, with no1857            regulatory pre-approval, to determine who qualifies for1858            these loans.18591860    Congress should reject these proposals and have substantive1861hearings to reform and refocus the FCS. We are happy to continue to1862make available our full set of concerns on all of the FCS's proposals:1863ECFs; RBICs; residential mortgages; businesses serving aquaculture;1864etc.18651866FCS's Deposit Equivalent Accounts1867    While the FCS and their regulator, the Farm Credit Administration1868(FCA), claims the FCS does not take deposits, this is a dubious line1869given FCS's ongoing collection of uninsured deposits. FCS institutions,1870for example, operate `Funds Held Account' programs (aka, ``advanced1871payment accounts'' or ``future prepayment accounts'') which allow1872deposits from customers equal to the amount of a loan a borrower has.1873FCS promotes these accounts as:18741875   Paying interest up to the amount of the loan rate.18761877   Offering unlimited number of withdrawals.18781879   Allowing disbursements to pay down the loan or ``for other1880        purposes.''18811882   Providing gains that are not taxed at the state or local1883        level.18841885    In essence, FCS institutions are operating like banks that collect1886deposits that, although `uninsured,' are backed by a government1887sponsored enterprise. These ``FCS banks'' offer cash management1888services that compete with the cash management services offered by1889community banks. My bank, for example, has lost over $25 million of1890deposits to these programs.1891    If the FCS were to obtain the significantly expanded powers they1892seek, we conclude that FCS institutions would offer ``funds held''1893deposit-like accounts to essential community facilities, small1894businesses financed by RBICs, businesses that serve aquaculture and1895others. This could cause major damage to the deposit base of community1896banks. The relevant section (Sec. 4.37. Application of Uninsured1897Accounts) of the Farm Credit Act is loosely worded, allowing1898inappropriately broad latitude to the FCA to write the regulations to1899allow these accounts far beyond the use of farmers and ranchers. We1900urge the Committee to limit the use of these accounts and to ensure1901they apply only to farm and ranch accounts. Siphoning deposits out of1902community banks was not ever the intention of Congress in creating the1903FCS.19041905Scope and Eligibility Issues1906    The FCA allows loans for non-eligible purposes inconsistent with1907the Farm Credit Act. For example, although the statute states that FCS1908lenders may finance rural housing, this is required to be only in towns1909of up to 2,500 population. Yet, the FCA will allow FCS to finance a1910home anywhere, even in towns of 20,000 population or more, if the owner1911of the home is a ``producer.'' Under FCA definitions, a producer is1912anyone who is or is expecting to be involved in agriculture in the1913future. Likewise, the FCA will allow FCS to finance a business in a1914non-rural area if the FCS can claim that one of the owners of the1915business is a `producer.'1916    It's easy to understand how such lax oversight of FCS activities1917can lead to tremendous abuse of their authorities. Should community1918banks and the public trust how any new powers will be administered by1919the FCA? Not without reforms to the Farm Credit Act to prevent the FCS1920from sidestepping the intent and purposes of the statute by playing1921definitional games. The farm bill should tighten eligibility for1922financing non-farm purposes.19231924Conclusion--Need for a New and Improved Farm Bill1925    We appreciate the Committee's work on a new farm bill. Let's be1926sure we get the details in the ``skinny farm bill'' right. We urge the1927Committee to adopt the recommendations regarding USDA loan programs and1928Farmer Mac and we urge you to deny the FCS's expanded powers push or1929provide limitations to ensure the FCS fulfills the traditional role of1930a GSE as a supplemental source of credit to private sector lenders1931while keeping their focus on their mission of serving farmers and1932ranchers. To ensure adequate credit for rural America, it is important1933to ensure the FCS not be allowed to muscle community banks off of main1934street USA. Thank you.19351936    The Chairman. Thank you, Mr. Gilbert.1937    Mr. Wicks, please begin.19381939    STATEMENT OF  JOHN R. WICKS, OWNER/OPERATOR,  TIBER1940     RIDGE INC.; PRESIDENT, LIBERTY/TOOLE LOCAL FARMERS1941     UNION, LEDGER, MT;  ON BEHALF  OF NATIONAL FARMERS1942     UNION19431944    Mr. Wicks. Thank you, Chairman Scott and Ranking Member1945Davids, for your invitation to testify today. My name is John1946Wicks, and I am a fourth-generation farmer in Montana. I am a1947Farmers Union member, and I serve as President of the Liberty/1948Toole Local Farmers Union.1949    I grew up on a dry land farm and have been running our1950family farm since 2007. I was attending college when my father1951passed, and I returned to the farm where I primarily raised1952lentils, chickpeas, wheat, durum, rye, and barley. Farming is a1953way of life, an important part of my identity, but it is also a1954business, which demands significant investment in land,1955equipment, and inputs to succeed. It also comes with1956inescapable risks. That is why I need access to affordable and1957reliable credit and risk management tools to build and sustain1958a successful farm business. I will focus much of my testimony1959today on how important USDA FSA loan programs have been for my1960farm.1961    While FSA lending is a small percentage of the overall1962agricultural lending portfolio, it has been critical for me and1963many others. My first experience with FSA loan programs was1964when I was 14 years old. I received a $5,000 youth loan to1965purchase cattle, and I ran those cattle alongside my dad's herd1966for 4 years. The proceeds helped fund my college education.1967    Many beginning farmers lack equity, credit history, and can1968have difficulty accessing capital. USDA loan programs are1969designed to provide a pathway for beginning farmers to access1970credit, and this made a big difference for my farm. When I was1971starting out, our farm's combine suffered a major breakdown1972during harvest. Our bank wasn't able to provide another line of1973credit, but through FSA, I quickly purchased a replacement1974combine, which saved our harvest and helped me build equity in1975an operation still paying dividends today.1976    FSA loan programs came in handy once again when I started1977growing pulse crops like lentils and chickpeas, which are more1978delicate to handle than grain crops. To make handling pulses1979feasible, I needed to purchase hopper-bottom bins, which I1980bought using FSA's farm storage facility loan. FSA loans also1981helped us transition the farm to the next generation. An FSA1982farm ownership loan helped me to take over land and the1983generational debt that was tied to it through a relatively safe1984loan option.1985    I ask the Committee to make important updates and1986improvements to FSA loan programs this year, including1987adjusting loan limits to reflect current economic environment,1988making it more feasible for farmers to restructure debt when1989needed and ensuring those programs meet the unique needs of all1990types of producers.1991    My family is also a customer of AgWest Farm Credit. We1992remain grateful for the time that AgWest helped us through a1993period of major financial stress. They understood the value of1994what we were trying to accomplish on our farm and more1995accurately evaluated our risk compared to other lenders we1996consulted. While access to affordable and reliable credit and1997well-functioning risk management tools are important for family1998farmers, we must have fair and competitive markets and a robust1999farm safety net.2000    Farm bankruptcies are on the rise. Recent changes to2001improve the farm safety net may help alleviate some challenges2002with persistently high input costs and low commodity prices,2003but farmers will face major economic stress as long as2004corporate monopolies in agriculture remain unchecked the way2005they are today.2006    Thankfully, lawmakers can take action to address these2007challenges. For example, you can strengthen the connection2008between the USDA and our chief Federal competition and2009antitrust law enforcers, the DOJ and the FTC, by passing the2010Meat and Poultry Special Investigator Act (H.R. 1380/S. 1312).2011We can ensure that recently finalized Packers and Stockyard Act2012rules are retained and forcefully implemented. You can2013reestablish country-of-origin labeling for beef so consumers2014know where their food is really coming from and so farmers and2015ranchers are paid fairly. You can guarantee farmers the right2016to repair their own farm equipment. You can expand local and2017regional market opportunities for farmers such as by investing2018in new local meat processing. And you can strengthen these2019markets with more financial and technical support, local and2020regional food procurement by food banks, schools, and other2021institutions.2022    Thank you for the opportunity to testify today, and I look2023forward to answering your questions.2024    [The prepared statement of Mr. Wicks follows:]20252026Prepared Statement of John R. Wicks, Owner/Operator, Tiber Ridge Inc.;2027 President, Liberty/Toole Local Farmers Union, Ledger, MT; on Behalf of2028 National Farmers Union2029    Thank you for the invitation and the opportunity to provide2030testimony on behalf of National Farmers Union (NFU) and Montana Farmers2031Union. NFU is made up of more than 200,000 family farmers and ranchers2032across the country. Similarly, Montana Farmers Union is a grassroots,2033nonprofit organization dedicated to preserving the agricultural way of2034life, our rural communities, and family farms and ranches. We believe2035that no farmer or rancher should stand alone, and we are fighting for2036the issues that will preserve agriculture and our communities for the2037next generation.2038    I am a fourth-generation farmer in Liberty County, Montana. I grew2039up on a dryland wheat farm south of Chester, Montana, and I spent a lot2040of time in Eastend, Saskatchewan, where my family also farmed until the2041late 1990s. I have been running our family farm in north central2042Montana since 2007. I primarily raise lentils, chickpeas, wheat, durum,2043rye, and barley. I farmed both conventionally and organically for a2044period of time, and the entire 4,000 acre farm became USDA certified2045organic in 2021. I previously served on the Liberty County Farm Service2046Agency (FSA) County Committee for nine years. I currently chair the2047Montana Agriculture Development Council, I am President of the Liberty/2048Toole Local of Montana Farmers Union, and I serve on the executive2049board of the Montana Organic Association (MOA).20502051Credit2052    Farming is not just a way of life--it is a business that demands2053significant investment. Land, equipment, and inputs like seeds,2054fertilizer, and other materials are foundational for generating revenue2055and profit. Access to affordable and reliable credit is a necessity for2056building and sustaining a successful farm business.2057    NFU's grassroots, member-driven policy, stands for a lending system2058that is fair and provides opportunities for all types of farmers to2059thrive. We also believe that the USDA FSA farm loan programs are2060foundational to providing credit for farmers when it cannot be obtained2061elsewhere. Congress should ensure that the FSA farm loan system remains2062adequately funded to meet producer demand as it fluctuates and ensures2063fair, equitable, and supportive approaches to debt restructuring or2064debt forgiveness when needed. These lending opportunities should be2065made available to equitably assist all family farmers and ranchers,2066including those who are beginning, socially disadvantaged, or2067historically under-served.\1\2068---------------------------------------------------------------------------2069    \1\ NFU Policy Book, March 2025. https://nfu.org/policy/.2070---------------------------------------------------------------------------2071Importance of FSA Loan Programs2072    I could not have built my farm to what it is today without USDA FSA2073loan programs. Even though FSA lending as a percentage of the overall2074agricultural lending portfolio is relatively small, it is critical, as2075my own experience demonstrates.2076    My experience with FSA loan programs dates back to when I was 142077years old, and I received a $5,000 youth loan to purchase cattle. I ran2078those cattle alongside my dad's herd for four years, and the proceeds2079helped fund my college education.2080    Loan opportunities to help beginning farmers at FSA came in2081especially handy for me when our farm's combine suffered a major2082breakdown right at the start of harvest one year. At the time, our bank2083was unable to extend another line of credit until we had post-harvest2084financials in place. Thanks to FSA loans and the support of FSA staff,2085I was able to quickly purchase a replacement combine. This not only2086saved our harvest but also helped me build equity in our operation. The2087special focus at USDA on supporting beginning farmers and understanding2088the unique circumstances beginning farmers face can make a big2089difference.2090    Of course, it is important that USDA is also helping farmers2091receive the education and training we need to avoid defaulting. Our2092local FSA hosts a ``Next Gen'' conference, of which attendance is2093required for new borrowers. It covers a range of topics, from2094agricultural lending to crop insurance.2095    FSA loans also helped my operation evolve when it needed to. I2096started growing pulse crops like lentils, which can be more complicated2097to manage than cereal/grain crops--including by requiring specialized2098equipment. One thing I especially needed to make growing pulses2099feasible was hopper bottom bins, which are specialized storage2100containers for these crops. To acquire these, I used FSA's Farm Storage2101Facility Loan Program, which had a lower interest rate than other2102options at the time; I am not sure I would have been able to make this2103transition work without that resource.2104    The investment in on-farm storage had long-term value beyond just2105convenience. Those bins now serve multiple purposes like storing seed,2106facilitating efficient crop load-out, and even saving truckers2107significant time. It is an example of how a small, well-placed2108investment can ripple across the entire operation.2109    Like many family farms, we faced challenges with succession2110planning. Transitioning the operating line of credit and securing the2111land required for collateral were major hurdles. An FSA Farm Ownership2112Loan made it possible for me to take over land and the generational2113debt tied to it through a safe loan option that helped stabilize our2114operation and increase the likelihood of intergeneration success in2115farming.2116    My experience with FSA loan programs is part of why I support the2117Producer and Agricultural Credit Enhancement (PACE) Act (H.R. 1991),2118led in the House by Rep. Brad Finstad (R-MN) and Ranking Member Angie2119Craig (D-MN). This bill would update FSA loan limits to ensure they2120make sense in the current economic environment. The bill also takes the2121innovative step of helping distressed borrowers by allowing for the2122refinancing of guaranteed loans into direct loans and drives home the2123point that FSA loan programs must be fully funded to meet producer2124demand.2125    The critical role played by FSA lending programs is also why we are2126deeply disappointed by USDA's recent decision to remove the ``socially2127disadvantaged'' \2\ definition from numerous USDA programs, including2128USDA loan programs. NFU's grassroots, member-driven policy notes that2129we support a ``Farm Credit policy that . . . provide(s) special2130assistance to beginning and socially disadvantaged farmers.'' \3\ The2131socially disadvantaged designation does not discriminate against2132anyone; it simply provides a hand-up for people who have faced2133historical discrimination in our society. According to reporting, the2134rule could affect approximately 20 percent of USDA's farm loan2135volume.\4\2136---------------------------------------------------------------------------2137    \2\ The 1990 Farm Bill defined ``socially disadvantaged'' farmers2138and ranchers as members of a group subjected to racial or ethnic2139discrimination. USDA's 1990 definition for socially disadvantaged2140farmers lists farmers who identify as Black, or African American,2141Native American or Native Alaskan, Hispanic, Asian and Native Hawaiian2142or Pacific Islander. Women were also added to the definition in 19922143for loan programs.2144    \3\ NFU Policy Book, March 2025. https://nfu.org/policy/.2145    \4\ Chris Clayton, ``USDA Ends Programs, Policies Supporting2146`Socially Disadvantaged' Farmers and Ranchers,'' DTN Progressive2147Farmers, July 10, 2025. https://www.dtnpf.com/agriculture/web/ag/news/2148article/2025/07/10/usda-ends-programs-policies-socially.2149---------------------------------------------------------------------------2150    Additionally, a memo issued by USDA on April 29, 2025, is2151concerning because it stated that all direct and guaranteed loans over2152$500,000 will require further clearance from the Office of the2153Secretary and the Department of Government Efficiency (DOGE) to ensure2154lending complies with an Executive Order from President Trump on2155government cost efficiency.\5\ The integrity of all USDA programs is2156very important, but access to credit also needs to be timely--whether2157for operating loans to ensure farmers can get a crop in the ground at2158the optimal time, or for ownership loans where there can be stiff2159competition for land purchases. This move could impact thousands of2160potential borrowers each year. Accessing credit is already challenging2161and can be very stressful; we ask the Subcommittee to make sure the2162Administration is not adding unreasonable or duplicative review steps2163to FSA loan approvals and is transparent and fair in its review2164processes.2165---------------------------------------------------------------------------2166    \5\ Chris Clayton, ``DOGE Will Now Approve Larger USDA Loans,'' DTN2167Progressive Farmer, May 1, 2025.2168---------------------------------------------------------------------------2169Importance of the Farm Credit System and Other Credit Options for2170        Farmers2171    My family is a customer of AgWest Farm Credit. Our experience has2172been very positive, and they helped us through a very difficult patch2173with our farm. After my father passed away and my mother and I began2174operating the farm together, we ended up needing to find a new bank.2175The good news is we found a lender, but the bad news was that at that2176time, our profitability was very up and down year-to-year. Part of how2177we improved our profitability was by shifting to organic production,2178which provided us some important opportunities. But our banker lacked2179experience with organic production systems, and at one point they cut2180our operating line of credit before we reached our agreed loan limit.2181This put us in a major bind and we faced a period of extreme financial2182stress.2183    We ended up finding a path forward with AgWest, who both approved2184our financing for that season and took on our long-term debt. They2185understood the value of the price guarantees that we had received and2186were able to more accurately evaluate our production risk. They also2187helped us through some challenges in transitioning our debt to them. We2188are thankful for the positive working relationship we have with AgWest,2189and we are on very solid footing today in part thanks to our2190partnership with them.21912192Risk Management and Disaster Programs2193    Market volatility and economic uncertainty are harmful to the2194finances of family farmers and ranchers and undermine their ability to2195access credit. Enacting better Federal risk management programs helps2196protect family farmers and ranchers against natural disasters and lower2197prices. This reduction in risk makes getting a loan or line of credit2198more accessible and affordable for family farmers. Farmers Union2199supports improvements to crop insurance, including some of the changes2200in the recently passed reconciliation bill, which bolsters the2201Supplemental Coverage Option (SCO) and increases premium subsidies.2202    Outside of the recent improvements to crop insurance, Congress has2203frequently authorized ad hoc disaster programs over the last several2204years. Most recently, the American Relief Act of 2024 included $302205billion for farmers who suffered losses due to weather disasters or low2206prices. The economic assistance portion of the aid, known as the2207Emergency Commodity Assistance Program (ECAP), disbursed $7.8 billion2208and remains open for participation for another month.\6\ Meanwhile, the2209disaster assistance programs are mostly up and running, but family2210farmers and ranchers need assistance quickly. This Committee and USDA2211should closely review disaster programs like these--and other recent ad2212hoc efforts such as the Coronavirus Food Assistance Program, Wildfire2213and Hurricane Indemnity Program (WHIP), WHIP+, and Emergency Relief2214Program (ERP)--to evaluate their effectiveness. These programs helped2215keep family farmers and ranchers in business but must be made as2216responsive and equitable as possible.2217---------------------------------------------------------------------------2218    \6\ https://www.fsa.usda.gov/resources/programs/emergency-2219commodity-assistance-program/dashboard (Data retrieved July 11, 2025).2220---------------------------------------------------------------------------2221    Congress should consider policy changes to help beginning farmers2222have more affordable access to risk management. Beginning farmers often2223have less equity in their farm operations and are unable to withstand a2224difficult farm economy.2225    For example, the Crop Insurance for Future Farmers Act (H.R. 2117),2226led by Rep. Randy Feenstra (R-IA) and Ranking Member Craig (D-MN) and2227cosponsored by eleven other Members of Congress, would make crop2228insurance more affordable for beginning farmers and help these farmers2229more easily manage their risk, which in turn improves their ability to2230gain access to credit.2231    Another valuable risk management option in need of improvement is2232Whole Farm Revenue Protection (WFRP). WFRP is a crop-neutral revenue2233insurance product designed to protect a farmer's entire operation,2234including livestock, and provides diversified farms an option to insure2235all their crops and livestock under one policy. These farms may not2236have access to separate policies for each crop they grow, and a well-2237functioning WFRP could help. Currently, the program is not available to2238or effective for many producers. Recent legislation, including the2239Whole Farm Revenue Protection Program Improvement Act in the 118th2240Congress and the Save Our Small Farms Act (H.R. 2435), led by Rep.2241Jahana Hayes (D-CT) in the 119th Congress, offer some solutions to2242these issues by reducing paperwork and increasing premium discounts for2243family farmers using WFRP. Improvements to the Non-Insured Crop2244Disaster Assistance Program (NAP) could also help.2245    While crop insurance and disaster programs are not a replacement2246for fair market prices and an adequate price support program, they play2247an important role in today's farm safety net and factor into2248agricultural credit decisions.22492250Fair Markets and a Robust Farm Safety Net2251    While access to affordable and reliable credit and well-functioning2252risk management tools are essential to farming successfully today, we2253believe fair and competitive markets and a robust farm safety net are2254even more foundational. Congress should do more to ensure our antitrust2255and competition laws are strengthened and better enforced, and invest2256in building local, regional, and other market opportunities that help2257farmers capture a larger share of the retail food dollar. While we2258welcome recent investments and improvements to the farm safety net2259through the budget reconciliation process, Congress should make further2260improvements by establishing permanent dual enrollment in the2261Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs,2262and institute other innovative policies that help farmers improve their2263bottom lines while ensuring the long-term economic sustainability of2264their farms.22652266Advancing Fair and Competitive Markets2267    Fair, open, and competitive markets are foundational for the well-2268being of the American economy and our democracy, but farmers must buy2269from and sell into highly consolidated and uncompetitive markets. Very2270few firms control the market for agricultural inputs (such as seeds,2271crop protection products, fertilizer, and farm equipment), processing2272(including livestock slaughter and processing), food manufacturing,2273wholesale distribution, food service, and grocery retail. The small2274number of large, consolidated firms in the middle of the agricultural2275supply chain wield immense market power.7, 8, 9 High levels2276of concentration throughout the food supply chain have contributed to2277driving down the farmer's share of the retail food dollar while also2278raising costs for inputs and creating higher prices for consumers.2279Today, farmers and ranchers on average receive only 15.9 of every2280dollar that consumers spend on food, which remains near historic2281lows.\10\2282---------------------------------------------------------------------------2283    \7\ Jonathan B. Baker, ``Market power in the U.S. economy today,''2284Washington Center for Equitable Growth. March 2017. https://2285equitablegrowth.org/market-power-in-the-u-s-economy-to2286day/.2287    \8\ USDA, Agricultural Marketing Service (AMS), Packers and2288Stockyards Division. ``Packers and Stockyards Division: Annual Report22892021 & 2022,'' (March 2024). https://www.ams.usda.gov/reports/psd-2290annual-reports.2291    \9\ Claire Kelloway and Sarah Miller, ``Food and Power: Addressing2292Monopolization in America's Food System,'' Open Markets Institute, May229313, 2019. https://www.openmarketsinstitute.org/publications/food-power-2294addressing-monopolization-americas-food-system.2295    \10\ USDA ERS. November 2024, Food Dollar Series. http://2296www.ers.usda.gov/data-products/food-dollar-series/documentation.2297---------------------------------------------------------------------------2298    We need to tackle these problems to ensure farmers like me have2299genuine access to fair and open markets, which would allow me to2300continue investing in and building a business that sustains my family2301farm, supports my local economy, and helps feed people.2302    As the Committee looks to further update farm policy, it should2303take steps to make markets fairer and more competitive by strengthening2304the connection between USDA and our chief Federal competition and2305antitrust law enforcers at the Department of Justice (DOJ) and the2306Federal Trade Commission (FTC), protecting the Packers & Stockyards Act2307(P&S Act), and spurring the development and expansion of alternative,2308local, and regional markets.2309    Congress should pass the bipartisan Meat and Poultry Special2310Investigator Act (H.R. 1380/S. 1312). The bill would establish an2311independent office at USDA to strengthen enforcement of the P&S Act and2312to ensure USDA has a liaison to the DOJ and FTC on competition and2313trade practices matters in the food and agriculture sectors. A raft of2314private price fixing and other lawsuits in the food and agriculture2315sector demonstrates that, without strong Federal enforcement of2316antitrust and competition laws, harmful practices are being carried out2317under the noses of Congress and at the expense of family farmers and2318consumers. It is also essential that recently finalized P&S Act rules2319are maintained and implemented.2320    There are many other actions Congress should take to make markets2321more competitive and fair, including ensuring truth-in-labeling through2322reestablishing country-of-origin labeling for beef, establishing the2323right to repair our own farm equipment, permanently establishing a2324Farmer Seed Liaison at USDA to strengthen competition and choice in the2325seed marketplace, and supporting additional research into consolidation2326in the livestock industry.23272328Expanding local, regional, and diverse markets and processing2329    Anticompetitive practices have eroded local and regional livestock2330processing options, which limit opportunities in the marketplace for2331producers while making our food system less resilient. Local and2332regional market opportunities, supported by adequate alternative2333processing capacity, can help farmers capture a larger share of the2334retail food dollar.2335    In recent years, USDA increased its support for businesses and2336communities looking to invest in expanded meat and poultry processing.2337Members of Congress have also taken note of the importance of this2338issue, introducing the bipartisan Strengthening Local Processing Act2339(H.R. 3076/S. 1509). USDA's investments are critical, and we must2340ensure these new facilities are able to operate sustainably and thrive2341over the long term.2342    These new facilities are making a big difference in Montana so far.2343Montana consumers eat about 100,000 head of cattle each year. Before2344the recent investments in local meat processing, we could only process2345about 30,000 head annually, far short of the approximately two million2346calves we sell each year. The disruptions to meat processing during the2347pandemic made it clear that something needed to change so that we could2348better feed ourselves. Thanks to recent investments in the state,2349supported by USDA grants and low-interest loans, we now have the2350capacity to process over half of the cattle we consume.2351    These investments are also helping alleviate inflexible scheduling2352for harvesting livestock due to insufficient shackle space. Montana2353Farmers Union worked with several direct-to-market producers to form2354meat processing cooperatives, including the Montana Premium Processing2355Co-op,\11\ which also leveraged USDA grants and low-interest loans to2356build meat processing plants. Participating member-owners now can2357schedule harvest in a more manageable period of three months out,2358rather than more than a year out. Food security is national security,2359and investing in our food security should be a top priority.2360---------------------------------------------------------------------------2361    \11\ Montana Premium Processing Cooperative. https://2362www.mtpremiumprocessing.com/directors.2363---------------------------------------------------------------------------2364    Despite this good news, without strong enforcement of the P&S Act2365and our antitrust laws, and ongoing and consistent support for new2366processing facilities from USDA, we fear the major meatpackers will2367force new, smaller packing plants out of business.2368    Another way to create more competitive markets and ensure2369Americans' food security is to strengthen local and regional markets.2370Until recently, local and regional procurement programs like the Local2371Food Purchase Assistance (LFPA) and Local Food for Schools (LFS)2372programs were strengthening local and regional food systems, putting a2373larger share of the retail food dollar in farmers' pockets, helping2374farmers expand and build new markets, while also creating a stronger2375connection between farmers and their local communities. We were2376disappointed that USDA decided to terminate funding for these programs,2377especially given their great success in such a short period of time,2378spurring roughly $400 million in new direct food purchases from farmers2379and generated an estimated $747 million in new economic activity in2380rural communities across the country. We have been heartened by the2381bipartisan support in Congress for permanently authorizing these2382programs, and we look forward to continuing to work with Members of the2383House Agriculture Committee and other Members of Congress on this2384matter.23852386Ensuring and Maintaining a Strong Farm Safety Net2387    The recently enacted reconciliation bill included major changes and2388improvements to the farm safety net. Increases to commodity reference2389prices--ranging from about 10 percent to 20 percent--reflect higher2390costs of production over the last decade. The provision to2391automatically boost reference prices based on inflation is also a2392welcome adjustment. Farmers Union has also long-supported another good2393provision included in the law: that producers will receive either the2394ARC guarantee or PLC assistance, whichever is higher. This dual2395enrollment provision was only added for the 2025 crop year, and we hope2396that provision will be extended indefinitely, because ARC/PLC does not2397provide a true safety net if family farmers need to gamble on which2398program is going to work best for them in any given year.2399    The reconciliation bill also authorizes a one-time allocation of2400new base acres, up to a total of thirty million additional acres, to2401help cover more cropland and farmers. Congress made encouraging2402improvements to existing permanent disaster programs like the Livestock2403Indemnity Program (LIP) and Livestock Forage Program (LFP), which will2404now reflect regional price differences, include unborn livestock2405losses, and make the trigger for assistance due to drought more2406responsive.2407    Despite this progress, Congress should make further improvements to2408the farm safety net in additional agricultural legislation this year.2409Congress should take a closer look at the Inventory Management Soil2410Enhancement Tool (IMSET), which is a voluntary, incentive-based2411conservation and farm safety net program concept. It has two core2412purposes: to help conserve our soil and to protect net farm income when2413agricultural markets falter. By voluntarily enrolling in IMSET, farmers2414would have an additional opportunity and incentive to participate in2415working lands conservation programs in exchange for stronger farm2416safety net protections. This policy concept can address important2417conservation needs while maintaining fiscal responsibility and merits2418inclusion in the future farm policy. Congress should also close farm2419program eligibility loopholes to ensure safety net support is directed2420to family farmers and ranchers.24212422Tariffs and Market Instability2423    Management of relationships with our trading partners also has2424major implications for farms like mine, and my ability to access the2425credit I need to stay in business. This past winter, I faced a long and2426frustrating experience while negotiating contracts for the 2025 lentil2427crop. Canada has made significant investments in lentil and pulse2428processing, meaning a large portion of our crop is exported north. Much2429of that product is then re-imported to the U.S. for sale.2430    When the threat of tariffs was raised, Canadian processors became2431hesitant to finalize contracts. Some explicitly stated they would2432invoke the ``act of God'' clause to terminate the contract if tariffs2433were enacted. Others declined to set delivery dates. As a result,2434Canadian offers dropped, and rather than maintaining U.S. market rates,2435American buyers followed suit by low-balling offers based on Canadian2436pricing.2437    Even though tariffs were only being discussed and not enacted, the2438speculation alone cost me tens of thousands of dollars and drastically2439reduced our market opportunities. The uncertainty harmed American2440producers without achieving any meaningful trade protections.24412442Federal Funding Freezes and Reductions in Force at USDA2443    Several Executive Orders, ongoing Federal funding freezes, and2444massive reductions in staffing levels pursued by the current2445Administration are continuing to create uncertainty for family farmers,2446ranchers, and my community. We have already faced inadequate Federal2447workforce staffing levels for FSA field offices in recent years, and2448current policy decisions are making matters worse. USDA office closures2449and reductions in force put more pressure on existing staff, add to2450wait times for farmers, and increase the burden of getting a loan2451reviewed and approved. While we should always be striving for greater2452efficiency, we need well-trained staff in the field who can help2453farmers navigate USDA programs.2454    Data show that most of that nearly 13,000 of the approximately245515,000 USDA employees who accepted buyouts from the Trump2456Administration worked outside of the national capital region. More than24571,100 FSA and county committee employees took buyouts.\12\ We worry2458about how these reductions in force will affect our community and my2459ability to farm successfully. We also worry that the move to make cuts2460or prompt early retirements are not over.2461---------------------------------------------------------------------------2462    \12\ https://www.agri-pulse.com/articles/23031-usda-buyouts-extend-2463well-beyond-the-beltway-data-shows.2464---------------------------------------------------------------------------2465    I urge the Subcommittee to take seriously how current policy is2466jeopardizing farm livelihoods. Congress and the Administration should2467review and reform Federal programs and processes if they are performing2468poorly or can be improved, but they should pursue improvements in an2469orderly manner, after robust stakeholder feedback. I ask the2470Subcommittee to seek information, explanations, and clarity from the2471Administration about the many problems ongoing funding freezes and2472reductions in force are causing in our rural communities.24732474Conclusion2475    Thank you for the opportunity to testify. I appreciate the2476Subcommittee's attention and look forward to answering your questions.24772478    The Chairman. Thank you all for your testimony today.2479    At this time, Members will be recognized for questions in2480order of seniority, alternating between Majority and Minority2481Members, and in order of arrival for those who joined us after2482the hearing convened. Each Member is recognized for 5 minutes2483in order to allow us to get as many questions as possible.2484    I now recognize myself for 5 minutes.2485    To those of you who are lenders here with us today, we all2486know that the process of approving a loan is not simple. What2487are some of the lending programs at the Farm Service Agency you2488are able to utilize to ensure that you are making a sound2489financial decision when reviewing a loan application?2490    Additionally, what are some of the changes and improvements2491we can look at making as we continue our work to finish the2492farm bill? And I would specifically like to hear your opinion2493on the time that it takes to get the approval. Mr. Hood?2494    Mr. Hood. Ask me again.2495    The Chairman. I am sorry?2496    Mr. Hood. Were you asking that to me?2497    The Chairman. I am asking it to all of you who are lenders.2498    Mr. Hood. Okay. Yes, please.2499    Mr. Gilbert. I can go first. At First National Bank, we2500have teamed up with FSA on many, many loans. I know in my oral2501testimony I said that we use FSA for customers that maybe don't2502qualify for conventional financing and beginning farmers. But I2503would tell you that that has really expanded. Our partnership2504with them has really expanded in the last couple years where2505some of our more sophisticated, younger borrowers are utilizing2506joint financing where they will finance a portion, 45 percent2507we'll finance 50, and they only have to put 10 percent down. It2508is a very great way for a young producer to be able to compete2509and enter the market, so those farm ownership joint loans.2510    We utilize the guaranteed program at First National Bank,2511but probably not as heavily as what a smaller, more rural bank2512would because of their lending limits versus ours, but we do2513use guaranteed loans.2514    We are a preferred lender with FSA, so our loan approvals,2515they come fairly reasonable, but I know we have had some of our2516banks through ICBA that aren't preferred lenders, and they are2517saying timing is 30 or 60 or 90 days, which that doesn't really2518cut it today, just with how fast things are moving.2519    Ms. Minick. I would echo that as well. So AgWest is a2520preferred lender also when we are getting guarantees, so that2521is very helpful, but oftentimes, even though we go through a2522rigorous program ahead of time to look at those applications2523and make sure that they are packaged well, it can still take2524quite a long time for them to come back from FSA. So making2525that more streamlined, particularly for preferred lenders, as2526well as the increase to the loan limits that are out there for2527those when you send a loan to FSA to get a guarantee or even in2528the direct lending and it is close to the top of the lending2529limits, then that puts up some red flags and things that they2530have to look at a little bit longer. So both of those, making2531it just easier for our customers to get access more quickly are2532very important.2533    Mr. Hood. Mr. Chairman, I don't have a lot to add to that.2534My bank handles a very mature ag portfolio, and we don't have2535the staff right now to do the new farmer, the young farmer2536programs like I would like to. As we grow our portfolio, I am2537going to add some more staff.2538    For me personally, I think it is an extremely valuable tool2539that bankers can use to help farmers, not just farmers that are2540farming with their parents or with their family, but also2541farmers that the bug just hit them that they want to get out on2542the farm and take the leap. It is hard to do when you don't2543have the resources. Even when you compare it to what you go to2544the equipment place to buy this several hundred thousand dollar2545equipment, it is monumental the task that it takes to be able2546to finance all that. But I love the first-time farmer programs.2547We just don't utilize them right now.2548    The Chairman. Mr. Hood, you are a banker in my part of the2549world. You have a front row seat to the economics of what is2550happening in rural America. You have outlined some of this, and2551how our economy starts and stops with the farm economy, where2552we come from. Each season, certainly in the last several2553seasons especially, farmers have put more and more money at2554risk to continue to seek from what I can tell is a smaller and2555smaller profit margin. What does a long-term farm bill mean to2556that community that you serve? And how can we build on the work2557of the legislation that is recently passed to make sure that2558our rural communities and specifically our ag economy can2559expand?2560    Mr. Hood. Yes, sir, Mr. Chairman. That is a vital tool that2561not just the ag bankers have but the farmers have to be able to2562have a farm bill that they can count on. And historically,2563farmers have used the commodities market wherever that market2564price falls to be able to either break even or make a profit.2565Now, the commodity market is so depressed that all these2566margins are upside down. Well, the proverbial safety net that2567the farm bill has always provided is really way below where2568that margin needs to be, so the farmer finds themselves in no2569man's land. The commodity market can't help them survive, and2570the farm bill can't help them survive. So they are in between,2571and it is really hard on these families right now.2572    The Chairman. My time has expired, but I literally--as my2573neighbor was talking to me about his concerns with planting2574cotton, the question I asked him is why would you plant it with2575the price that it is at? And I know you have the payment on the2576cotton picker and you have the payments on everything else and2577sometimes you have to have it in the rotation, but man, it is2578sure hard to plant when you know you are going to lose X2579numbers of dollars per acre even if you do everything right.2580    Mr. Hood. One hundred and eight dollars per acre loss, with2581brackets around it, on paper. So, if we are not working on2582paper, it is not going to work in real life either.2583    The Chairman. And that is for cotton.2584    Mr. Hood. Yes, sir, cotton.2585    The Chairman. Ms. Davids?2586    Ms. Davids of Kansas. Thank you, Mr. Chairman.2587    It might seem as though I planned this based on your first2588question. We didn't coordinate that. We could have. And thank2589you for holding this hearing.2590    So, Kansas producers rely, of course, on credit and crop2591insurance to navigate those ups and downs that we have been2592hearing about from you all already. And I think those tools are2593especially important for new and beginning farmers who face2594significant barriers when trying to get started, whether it is2595land access, equipment costs, just the securing of a loan. And,2596in Kansas, less than ten percent of our producers are under the2597age of 35, and that is concerning, I think not just to me but2598to quite a few people, and it is something that we need to2599address if we are going to see a future of farming that is2600sustainable.2601    Mr. Wicks, I was hoping to hear from you on the other side2602of the ledger there for the FSA. In your written testimony and2603in your oral testimony, you talked about the value of the Farm2604Service Agency and specifically mentioned the young farmers2605program. I am curious if you could just share a bit about2606improvements that we could make to those programs to better2607support access to credit for beginning farmers and ranchers who2608are just getting started, and then if others want to chime in2609after for improved provisions that you think might help.2610    Mr. Wicks. Yes, thank you. I think it is really important2611to increase those loan limits a little bit to help with the2612rising costs of everything and to maybe expedite the process of2613the paperwork to kind of get people the financing quicker. But2614the tools are really amazing and really helpful for somebody2615that, on our farm, we were struggling with. We were reaching2616the end of our equity and needing a new operator to come in,2617and that was me. So just having that access to maybe more2618funding. And, for the farm ownership loan, that was quite a2619process to start, and it took months, and, I mean, the buyer2620was my mother, so she knew she was going to sell to me.2621    Ms. Davids of Kansas. A hard bargain.2622    Mr. Wicks. In another case, you might have somebody else2623outbid you while you are going through all the loan approval, I2624think the pre-approval would be great.2625    Ms. Davids of Kansas. Oh, okay. Thank you. I was going to2626ask that specific thing. Okay.2627    Mr. Wicks. Thank you.2628    Ms. Davids of Kansas. I don't know if anybody else--go2629ahead, Mr. Gilbert.2630    Mr. Gilbert. Yes. I touched on it a little bit, but that2631express loan program, to get quicker answers. And I think banks2632across the country, I won't speak for Farm Credit, Mandy can,2633but I think we would be okay with reducing the level of the2634guarantee if we could get an answer quicker in some cases so2635the banks or Farm Credit would take more of the burden, say, if2636it was a 50/50 guarantee or a 75/25 guarantee versus that 902637percent FSA guarantee.2638    One thing we struggle with a little bit that I could2639mention is, and John kind of touched on it, but that farm2640ownership piece, when a piece of land goes to auction and we2641want to finance it through FSA, it is very difficult because of2642the time constraints. Usually, they want to close within 602643days. Appraisals are taking longer, title work is taking2644longer, and the FSA, at least in our area, doesn't allow for2645the bank to fund it on a bridge loan, say, a 90 day note, and2646then refinance it with FSA. So we jump through a lot of hoops2647with that, but there is one thing there that if they would2648allow us to just finance it initially and then refinance it2649with FSA with the same borrower, it would be very helpful.2650    Ms. Minick. I would agree with that and appreciate the2651journey we have had with Mr. Wicks on getting his farm up and2652running. I think that FSA-AgWest Farm Credit partnership is2653invaluable, so having those partnerships, especially on the2654preferred lenders, so those of us that have already gone2655through a lot of qualifications with FSA, if there are a few2656more things you have to ask us and we have to do ahead of time2657for us to be able to get those guarantees, that would be2658another option as opposed to lessening the amount of the2659guarantees. So tell us what we need to do to qualify more, and2660then come back and look at those loans later on if you need to.2661And again, we have already talked about increasing those loan2662limits for beginning farmers is really important.2663    Ms. Davids of Kansas. Thank you.2664    Mr. Hood. The only thing I would add to that--a great2665question--I have been in banking for 37 years, and they sucked2666the fun out of banking years ago, and it takes----2667    Ms. Davids of Kansas. Did you say Congress?2668    Mr. Hood. No.2669    Ms. Davids of Kansas. I am just kidding. Sorry. Sorry,2670sorry.2671    Mr. Hood. Just the process.2672    Ms. Davids of Kansas. Yes.2673    Mr. Hood. It is very difficult being an ag lender today. It2674is difficult being a banker in general, especially agriculture.2675But what I would love to see, anything that can help reduce the2676time constraints on the process, and there are some really good2677ideas here, I am in favor of. The reason I haven't put this in2678place in my bank, it takes a lot more staff to do it because2679even a commercial loan now takes over 60 days to get through,2680and the farmer is sitting there waiting on money. The2681government guarantee is even longer, so anything that can2682reduce the time constraints.2683    Ms. Davids of Kansas. Thank you. These are some great2684ideas, and I will probably end up following up.2685    Thank you, Mr. Chairman. I yield back.2686    The Chairman. Thank you. I heard you loud and clear on the2687bridge loan. We will find out if that is legislative or2688regulatory and follow up on that.2689    With that, Mr. Crawford, you are recognized for 5 minutes.2690    Mr. Crawford. Thank you, Mr. Chairman.2691    I have a bill that I have been working on actually probably2692since I have been here in Congress. It is called Farm Risk2693Abatement and Mitigation Election, or the FRAME Act (H.R. 1400,2694115th Congress; H.R. 10045, 118th Congress). What this does is2695it sets up a tax-deferred savings account for farmers, we call2696them FRAME accounts, where a farmer can deposit funds tax-free2697during profitable years and withdraw tax-free during hard2698times. So it is almost a little bit like an HSA kind of model,2699but it is geared toward farmers and providing some degree of2700risk abatement for those. And it opens another option for2701farmers to invest tax-advantaged profits outside of the2702traditional section 179 where we are going to run out and buy a2703new tractor or a combine to avoid a tax liability, but now we2704have incurred more debt. And so when that is appropriate, I am2705all for section 179. Buy the new combine. Buy the new cotton2706picker or tractor as you need it, but not as a tax strategy. I2707think that creates more problems. So this serves a couple of2708different things. The other thing it does is the deposit2709account can be used to help collateralize an operating loan. I2710mean, there are a lot of advantages to it.2711    So I want to get your feedback. I know we have some lenders2712at the table. We have farmers at the table here. I want to get2713your feedback, understanding that, obviously, in the current2714crisis, it is really difficult to try to tell farmers to put2715money in a FRAME account. That is the whole point. It is not2716always going to be like this. We are going to get back to a2717point at which we will have some more profitable years,2718hopefully, hopefully. But you get my point here. I just kind of2719want to get your feedback.2720    And, Mr. Hood, I will start with you because you have a2721long history of ag lending and kind of want to get your2722perspective on that.2723    Mr. Hood. Yes, sir, Congressman, and that is a great2724question. And I love the premise of what you are trying to do.2725My first initial question would be, really, to fund the2726account, you are pulling capital out of the farm enterprise and2727putting it into account, the same way I do with the bank with2728my health savings account. I get that. The question I would2729have, is it subject to seizure? Is it subject to being used in2730hard times? And does it become an off-balance-sheet item to2731where the bank can't count that as capital? Because these2732farmers need all the capital they can get right now to qualify2733for loans. If it is an on-balance-sheet savings account, then I2734say, ``Heck, yes, put that in.'' It is not that dissimilar than2735a CD except you have had to pay taxes on the CD, so I like the2736idea.2737    Mr. Crawford. Right. Yes, good. Yes, I think your2738assessment is right. I do think that would be an on-balance2739account for those purposes, as you described, so that is our2740goal there.2741    Anybody else want to weigh in on that?2742    Mr. Gilbert. Conceptually, we think it is a great idea as2743well. I think about, like you said, the number of farmers that2744have utilized section 179, and some of them should have, but a2745lot of them probably got in, or some of them got in over their2746heads. So I think farmers can always benefit from having tax-2747free accounts. And I think we could accomplish placing a hold2748on that account or some way to collateralize it. So yes, we2749would love to work with you on the details to get across----2750    Mr. Crawford. I have to be careful about that section 1792751piece because, having worked in the equipment business for a2752long time, I don't want to alienate my equipment dealers.2753    Mr. Gilbert. Right.2754    Mr. Crawford. But, we also know, too, that it is important2755for the farmers to make good choices with regard to how that is2756reflected on the balance sheet and incurring more debt to avoid2757tax liability is not necessarily a good strategy long-term. Any2758other comments?2759    Mr. Wicks. Yes, I would just say that that might be an2760option. I have never been a fan of spending money, putting on2761debt, just to avoid a little tax. But I think, as a farmer, I2762would be more worried about the safety net first and really2763encouraging that to be a----2764    Mr. Crawford. You just led into my next question on this.2765    Mr. Wicks. Okay.2766    Mr. Crawford. It has been brought up to my attention from2767some of my constituents that crop insurance companies have been2768pulling out of areas they consider to be high risk, and that is2769certainly in my district that has been brought to my attention.2770Since crop insurance companies receive Federal subsidies to2771offer services, that is a concern to me. So have any of you2772heard anything like that? And what is your perspective on that?2773I mean, I don't think we should be taking a geographic look at2774crop insurance eligibility, but let me get your thoughts on it.2775    Mr. Wicks. I haven't had experience in that.2776    Ms. Minick. I would like to say thank you, first of all.2777Some of the relief for that, I think, came in the budget2778reconciliation around the A&O and then some of the payouts that2779are going to go to the AIPs. But it is still a problem with the2780high risk levels that are happening, especially in specialty2781crops that are one-off. The markets are so volatile because2782there is such a short period of time to be able to market those2783crops. So there is still some work to be done to make sure that2784all of our producers have access to the crop insurance programs2785that are out there, and there is still some more programs that2786could be put in place as well.2787    Mr. Crawford. Thank you. Mr. Chairman, I yield back.2788    The Chairman. Mr. Sorensen, you are recognized for 52789minutes.2790    Mr. Sorensen. Thank you, Mr. Chairman.2791    Our farmers are betting big every season with borrowed2792money up against Mother Nature and economic uncertainty. The2793stakes get higher every year. In the United States, more farms2794have filed for bankruptcy in the first 3 months of this year2795than all of 2024. It is a clear sign that the extreme financial2796pressures of 2018 and 2019 are coming back. Input costs are2797rising significantly while commodity prices are dropping. Add2798to that uncertainty with trade and tariffs, with the cherry on2799top being any potential drought or flash flood, tornado, or2800straight-line winds that flatten a crop. In fact, severe2801weather is in my district ongoing right now over the farm2802fields of northern Illinois.2803    The one thing that we can do today is put American farms2804first. This Administration needs to work harder so producers2805can be competitive, and it needs to create an environment that2806is predictable and stable. Even with the most fertile soils on2807Earth, Illinois is challenged. Lenders remain a critical part2808of the equation, helping farmers finance the equipment and2809infrastructure needed to keep operations running. And during2810downturns, these programs don't replace profitability, but they2811do reduce income volatility, preserve credit access, and help2812producers stay afloat so they can get to the next growing2813season. Crop insurance and price supports are necessary2814safeguards that not only protect their operations, but are also2815often required to secure financing.2816    Farmers in Illinois are some of the most productive and2817resilient in the country, in the world, but to keep that legacy2818going, to ensure these operations can be passed on to the next2819generation, we have to give them the tools to succeed, and that2820means strengthening the farm safety net, expanding access to2821credit, and crafting policies that are flexible enough to2822reflect the real conditions on the ground.2823    And Mr. Hood, I want to begin with you. In your opening2824statement just a few moments ago, you talked about the value of2825the FFA. I am so grateful that I had some young men and women2826in my office today wearing those corduroy jackets. We need to2827make sure that that next generation is there for us in2828agriculture. It is so important. And so I hope that you can2829talk a little bit more about how we can make sure that we are2830doing everything when it comes to credit for new and beginning2831farmers. Could you touch on that?2832    Mr. Hood. Yes, sir, I can, Congressman, and I love that2833topic. Thank you for bringing that up. This is near and dear to2834my heart, not just because I serve on the Georgia FFA2835Foundation where we try to raise money to make sure some of2836these underprivileged kids that want to experience the ag, that2837they can't do it in their own pocketbook, that we are able to2838help them do it, so I love that program.2839    You mentioned the difficulties in various times during the2840cycle of agriculture. It made me go back to the mid-1980s. When2841you take 2025 and you subtract my 37 years of banking, you2842arrive in the mid-1980s. That is when I had to leave the farm.2843And I have a hard time sometimes talking about it because it is2844very emotional for me. My family continues to farm today. My2845brothers have taken over. But I was the oldest son, and I had2846to leave. One day my daddy stopped at the mailbox. I don't know2847what was in the mailbox. It was probably something from a bank.2848But he looked at me in the truck and said, ``Clint, you2849probably need to go do something else for a living because the2850farm is holding you back.''2851    Well, that was the catalyst for me to leave. Thank goodness2852God was shining on me, and I went into the ag finance business.2853But I don't want that happening to people. I have been very2854fortunate that I could come back and be part of agriculture,2855but a lot of people can't when this goes, and we are at a crux2856of time where this is about to happen to these farmers. The28571980s is about to happen again. The only difference in the28581980s and today, in the 1980s, farmers were flat broke. They2859were insolvent. Their liabilities were higher than their2860assets. Today, their assets are still higher than their2861liabilities, but it is because of the equities that they have2862in the farmland.2863    Well, as you know, equity is given to you in two different2864places. Number one, the market can give you equities, running2865up value, depending on where your farm is. The other way to get2866equity is to pay debt down. So our equities are eroding right2867now.2868    Mr. Sorensen. And I may open this up to all of you. What is2869the canary in the coal mine? We talk about the 1980s, and I2870live in Moline, Illinois. And International Harvester is just a2871slab, right? John Deere is holding on only because of the2872diversification and also the international nature of their2873business. What is the canary in the coal mine when it comes to2874Farm Credit and making sure that we are there for our2875producers?2876    The Chairman. The gentleman's time has expired. If one of2877you can answer that real quick.2878    Mr. Gilbert. I think one of the biggest differences is the2879crop insurance safety net here versus the 1980s, so that is2880just extremely important to all lenders and all farmers. That2881is the biggest thing I would say, my takeaway.2882    Mr. Sorensen. Thank you, Mr. Chairman, for giving me some2883extra time, and I yield back.2884    The Chairman. Mr. Bost, you are now recognized for 52885minutes.2886    Mr. Bost. Thank you, Mr. Chairman. I want to thank you all2887for being here.2888    And as we were just describing, farming is a risky2889business, and it requires specific time, energy, and2890investment. Getting into this industry can be a challenge with2891the rising cost of land, input prices, and equipment. Many2892farmers hit the FSA guaranteed loan limit quickly, very2893quickly. Mr. Hood, can you comment on the importance of2894increasing FSA loan limits and how it could be mutually2895beneficial to both farmers and the banks? And additionally,2896what other provisions should we look at to support in the2897credit title of the farm bill to help new and beginning farmers2898gain access?2899    Mr. Hood. Yes, sir, Congressman. Thank you for that. I2900don't see how we can't increase limits. Our cost to put a crop2901in is unbelievable now. And when you have depressed commodity2902prices, that gives you a recipe for failure. And I do believe2903that it is time to increase, in my bank in the last 2 years, I2904have told my bankers, whether the farmer is asking for an2905increase in their line of credit for the coming year or not,2906increase it by 20 percent. It is so much easier to do it on the2907front-end in March and April than it is August and September2908when you have to really worry, are they going to be able to pay2909me back, and then have to go give them a little bit of extra2910money. You can tell as a banker. You can tell as a farmer. You2911can tell as a Congress Member. There is not enough money out2912there to operate on without increases, so I love that idea.2913    Mr. Bost. So Mr. Gilbert, in your role as a local lender,2914you are not just providing credit. You are often a trusted2915advisor for producers making complex business decisions. Can2916you speak on how you and your institution support producers2917beyond the loan itself, specifically maybe how you talk to the2918producer, give them risk management decisions, discussions, and2919tools like crop insurance or Title I program, and financial2920advice, giving them to help them understand what is available2921to them. I know most farmers, if they have been around a long2922time, they are going to know, but most of our young farmers2923that we are wanting to keep in don't always know.2924    Mr. Gilbert. That is right. No, great question. At the2925First National Bank in Sioux Falls, education and adding value2926is a huge piece of what we do because we don't want to just2927lend money, and a big part of that is being a trusted advisor.2928I spoke to our Farmers and Bankers Program. That is an intense2929four-to-five-session program where we do teach them or help2930coach them through their farm financials. We talk about2931insurance, the importance of marketing, and also the programs2932that are out there that we can team up with FSA and Farmer Mac2933and other folks to help them achieve their goals.2934    Our lenders, the vast majority of them, are licensed to2935sell crop insurance, as well as livestock risk protection. We2936take a different approach than what other banks and2937institutions do. We are not trying to increase our bottom line.2938What we are trying to do is make our lenders and agents more2939knowledgeable to help our farmers through that, or through the2940ups and downs and work with them, especially on the LRP side of2941things, has been huge.2942    I can speak from my own personal experience. Margin calls,2943if you are hedged, are tough. It is easier as a banker to say2944you made the right choice when it is your own dollars. It is2945tough. So that LRP program that producers don't have to pay the2946premium until the end of the period until the cattle are sold2947has been really beneficial and, quite frankly, I think will2948stop a huge, I don't want to say this, but a huge decline in2949profitability. The cattle market is so high right now, and2950without a risk protection, price protection, there could be2951severe losses of money, so that program has been awesome for2952that, in my opinion.2953    Mr. Bost. Thank you. And I want to thank you all for being2954here. With that, I am going to yield back.2955    The Chairman. Thank you. Ms. Brown, you are now recognized2956for 5 minutes.2957    Ms. Brown. Thank you, Chairman Scott and Ranking Member2958Davids.2959    So it seems like the only predictable thing about farming2960is that it is unpredictable. Whether it is rising input costs,2961extreme weather, or shifting tariff policies, producers today2962face uncertainty at every turn. But access to capital and risk2963management tools shouldn't be a part of that uncertainty.2964Farmers and ranchers and dairymen and -women need confidence to2965plan and plant and invest in equipment and recover from a2966natural disaster. That comes not only from investing2967meaningfully in key farm bill programs but also making sure2968that those dollars are backed up by thoughtful and forward-2969looking policy. Well-funded is only half the battle. Well-2970designed is the other half.2971    Unfortunately, the partisan bill passed 2 weeks ago missed2972the mark. It fractured the historic farm bill coalition and2973plussed up programs without doing the hard work of improving2974and modernizing them. That is exactly why we have a farm bill2975process, to be deliberative and responsive.2976    So Ms. Minick, your testimony talks about some of the2977unique challenges that specialty crop farmers face when2978accessing traditional risk management tools. Ohio ranks fourth2979in the nation for the diversity of specialty crops grown, so I2980have heard firsthand about how one size doesn't fit all when it2981comes to risk management tools. Can you talk about what policy2982or structural changes would help make those tools more2983accessible and relevant for specialty crop growers?2984    Ms. Minick. Yes, thank you for that question. So2985California, I believe, is the top state for the specialty crops2986grown, and so throughout the West Coast, we have many of those2987in our service territory. And the Whole Farm Revenue Protection2988Program and the micro farm have been really instrumental in2989moving things forward because folks with specialty crops that2990weren't qualified for crop insurance in the past can use those.2991Those tools have been important, but they are very complex and2992hard to understand as the agent and as the producer.2993    We have had a couple of experiences in the last year or two2994where other crop insurance agencies have come to us saying we2995have people that work here that are retiring or things like2996that. Will you take our whole farm revenue portfolio? There is2997no buying, there is not anything like that because it is so2998complex. They don't feel like it is worth the investment to2999learn how to administer those policies. And so if you don't3000have agents that are willing to learn and know how to work with3001those customers, then having them out there, if producers can't3002access them, then it doesn't support that, so really making3003sure that we can streamline those processes, that they can3004cover more commodities, and also that agents remain compensated3005to be able to do that, to keep the lights on is a very3006important part of that.3007    And then also continuing to broaden the different specialty3008crops that are included in some of the different programs. For3009example, we have been working on an oyster policy for many3010years that we would like to see come to fruition. Sometimes3011specialty crops will have policy rolled out in specific3012geographic areas, but then they are not expanded to other3013counties where there is a lot of that production or other3014states. So those are some areas where we could really see some3015improvements just to have more access for more producers.3016    Ms. Brown. Thank you. Mr. Hood, your testimony talks about3017the importance of supporting young and beginning farmers and3018ranchers on their journey to enter the industry. Despite3019increased funding for beginning farmer programs, the average3020age of farmers in this country is 58 years old and rising. That3021is a clear sign that our tools need to be improved. Mr. Hood,3022you know the challenges that beginning farmers face when they3023enter the industry. Costs are high, programs just don't fit the3024realities of starting a new operation. What policy changes3025beyond just increasing funding are most critical to making3026Federal credit and risk management tools truly accessible and3027workable for beginning farmers?3028    Mr. Hood. Thank you, Congresswoman. That is a very3029difficult question, and I ask myself that all the time because3030I am the father of six children, and the first five have not3031come back to the farm. I am the oldest of five in my family,3032and three of us did not come back home to the farm. We couldn't3033afford to. I have a hold out on my 13 year old. Hopefully, he3034has got enough interest in it to where he will come back.3035    But the biggest issue that I have seen is just the3036monumental expense. And it is not just finding the operating3037money, getting the FSA guaranteed loan. It is how do you go to3038John Deere or some of these other equipment places and3039negotiate hundreds of thousands of dollars of equipment needs?3040You really have to have a family member that already has that3041equipment and that they like you and that they will let you use3042that equipment. Trying to start from scratch in this country3043today is a daunting task, and I don't have a clear answer for3044that. I know it needs to be paid attention to, and you guys3045have the power to do that, and I would welcome any other ideas,3046but something needs to be done to help preserve this for young3047people.3048    Ms. Brown. My time has expired. Thank you, Mr. Chairman.3049    The Chairman. Thank you, Ms. Brown.3050    I can tell you my personal scenario, and you know this, Mr.3051Hood, or Clint, back home. I have a brother, a sister, and five3052first cousins, and all of our grandparents farmed and none of3053us farm, and that is what scares me for the future of3054agriculture.3055    Mr. Taylor from Ohio, you are recognized for 5 minutes.3056    Mr. Taylor. Thank you, Mr. Chairman and Ranking Member, for3057holding this hearing today, and great thanks to our witnesses3058for sharing your expertise on credit in our agricultural3059industry and the sacrifices you all made to be here with us3060today.3061    I want to go further on with the line of questioning. My3062colleague, Representative Brown, was just talking about over3063the next 2 decades, almost 50 percent of our farmland is3064expected to transfer hands. Currently, only nine percent of3065farmers are under the age of 35, while nearly 40 percent are3066over the age of 65. As we think about our farmland, in my3067opinion, it should remain in farmland and not in solar panels,3068not be sold to adversaries like China and others, and be owned3069and operated by a local farmer. I mean, that is what my3070preference would be. I think that would be the most positive3071road forward. This not only helps the next generations, but it3072helps all of our rural communities thrive. As a guest in my3073office earlier put it succinctly, succession is success.3074    So Mr. Hood, you were asked about it. I want to open it up3075to the panel. What USDA programs do you folks think have been3076helpful or productive for beginning farmers who are looking to3077acquire land and get into the business or take over their3078family business?3079    Mr. Wicks. I would just say that the farm ownership loan3080for beginning farmers has been very helpful, along with having3081access to an operating line. That is quite a bit of money we3082are talking about for a young person starting out, maybe3083leasing part of a farm and buying another. So those programs3084there for farm ownership and equipment purchases are really,3085really helpful for young people to get into agriculture and3086remain there for the succession.3087    Mr. Taylor. Sure.3088    Mr. Gilbert. I know we talked about the average age or the3089demographic of farmers being about 58\1/2\. We have the luxury3090at First National Bank of having a younger-than-that portfolio.3091Our average age of our entire portfolio of the farmer is 51\1/30922\. And there are two things, I think, that have helped our3093customer base either enter the market or be younger than the3094average, and not that we are trying to age discriminate, but we3095all know that we have to get the next generation involved. And3096those two things are livestock and agribusiness. We have worked3097tirelessly with the USDA to get EQIP funds, things like that,3098to help our borrowers, mostly young, build a deep pit cattle3099barn, or a hog confinement facility to add revenue to their3100farms.3101    And we have also really pushed in our area, we are3102fortunate because we do have very fertile ground in most of our3103trade territory, but we have really pushed the focus on3104agribusiness too. A lot of these young farmers have to have3105something besides just the farm to help.3106    Mr. Taylor. Sure.3107    Mr. Gilbert. So if there is something we could tie in with3108that, I think it would be very helpful. And I don't know what3109that is, but we can get back to you on that, but----3110    Mr. Taylor. Okay. Thank you. Ms. Minick, did you have3111anything you wanted to add?3112    Ms. Minick. I would just agree with what they have all3113said, and I would also say that those programs where it is not3114always, especially for a beginning farmer or somebody that has3115maybe been in farming for a while but they are experiencing3116some economic downturns to be able to jump straight from FSA to3117a full-fledged borrower, and so to have some of those down3118payment assistance, some of those different steppingstones is3119really important. And then I think working closely, having3120great folks in your FSA offices, they really understand those3121customers and want to see them graduate, so I think that that3122staff at the FSA office is really important as well.3123    Mr. Taylor. Okay. Thank you. Since this is being recorded,3124I do want to give my position on 58 not actually being old,3125just so we all agree with it.3126    We talked about what programs are helping some, and I don't3127have a whole lot of time left, but is there something anybody3128on the panel has in their pocket that they say I wish Congress3129would act on this specific thing, this would make such a big3130difference for young farmers for succession of family farms?3131    Ms. Minick. To your point, since this is being recorded and3132we have said it a lot is increasing those FSA loan limits would3133make a huge difference.3134    Mr. Taylor. Okay. Thank you. Anybody else?3135    Mr. Hood. I would second that.3136    Mr. Taylor. Okay. Great. Thank you, guys. Oh, go ahead, Mr.3137Hood.3138    Mr. Hood. The only thing I will add to that is I love any3139program that will help a farmer start to get on their feet, but3140we still have to adhere to the banker's creed of the five C's3141of credit: the character, the capital, the capacity, the3142conditions, and the collateral, specifically the character,3143which most of that is in place. But that capacity to repay3144right now is diminished. It is knocked in the head. So if you3145can't adhere to those five C's of credit, I am not sure what3146program could help. So we need help in having the capacity to3147repay the debts.3148    Mr. Taylor. Thank you all very much. I yield back, Mr.3149Chairman.3150    The Chairman. The chair now recognizes Mr. Harris for 53151minutes.3152    Mr. Harris. Thank you, Mr. Chairman. And thanks to all of3153you for your time and your expertise that you brought. I3154greatly enjoyed reading through your testimonies that were3155submitted prior and reading through them.3156    And I just had a couple of questions, and I think all of us3157have a lot of the same things on our minds today in this3158Committee. But I did want to ask, Mr. Hood, in your testimony,3159you specifically mentioned that raising the limits on3160guaranteed loans and the down payment assistance program as3161changes that would greatly help the industry. You also3162mentioned the need for the Farm Service Agency to have access3163to new technology. Can you just elaborate more on the need and3164the value of the new technology you had in mind?3165    Mr. Hood. Everybody benefits from new technology,3166Congressman, and I love that you brought this up. Our bank is3167constantly spending dollars on new technology to make us better3168bankers, but especially in the FSA program. My next-door3169neighbor, who is also a cattle and pecan farmer, she is a3170retired FSA loan officer, and she and I, we get together for3171drinks and we talk about this all the time. If they had had3172today's technology back in the 1970s and 1980s, she said we3173could have gotten a lot more done for more farmers. So the3174technology piece, you are spot on. I don't know what all it3175includes. I still have to have a 7 year old show me how to3176operate a new phone when I get one. But the need is definitely3177out there to bring the technology level up.3178    Mr. Harris. Okay. Great. Thank you.3179    And, Mr. Gilbert, you have a great perspective as both a3180lender and a producer, and I imagine most farmers don't go into3181the business because they have a love of finance. However, it3182is clear that today's farmers have to be savvy on debt and3183lending while also experts on crops and livestock in the3184process. So can you share more about the Farmers 'N Bankers3185program that you mentioned in your testimony and how education3186on finance is a key part of the farming operations?3187    Mr. Gilbert. Can we push the non-record button here? No, I3188am just kidding. The Farmers 'N Bankers program actually was3189started by our current chief credit officer, and he was a3190lender at the time. And it was about--I am going to get this3191wrong--but probably 2016, and we were facing some challenges in3192our area. And we had noticed that a lot of our customers were3193just kind of--they were just kind of going through the motions,3194and they didn't necessarily understand a lot of what it takes3195to be profitable or to improve margins even to get closer to3196zero maybe sometimes.3197    So he had developed a four- or five-session program, and we3198bring in industry leaders from our ag advisory board that we3199have at the bank to FSA loan officers to--we bring in tax3200specialists. We do also have a wealth management department, so3201we bring them in too for some estate planning to help with that3202transition, and as well as--I can't remember if I said it--but3203commodity brokers to just coach on break-evens. And it is just3204another set of eyes other than their banker saying, hey, this3205is what you need to do.3206    But probably the most instrumental thing that we do there3207is we take them through case studies, and we show them,3208obviously, we change the names, change the numbers, but show3209them the decisions that we had to make for farmers that were3210their age and let them make the decision on whether they would3211have approved that loan or not.3212    And I would say in the last 9 years that we have done that,3213I would say almost every group has said no, and we said yes in3214both of those case studies, and they are both still customers3215of ours. So it just helps the producer realize that, hey, there3216is more than just getting up every day, going out and doing3217chores, and planting the crop and harvesting the crop. It is a3218lot. It is not their dad's farm anymore.3219    Mr. Harris. Super. Well, thank you. Thank you so much for3220sharing that.3221    Mr. Chairman, I yield back.3222    The Chairman. Thank you, Mr. Harris.3223    Before we adjourn today, I would like to invite Ranking3224Member Davids to share any closing comments she may have.3225    Ms. Davids of Kansas. Thank you, Mr. Chairman.3226    Well, I want to first of all start by thanking all of our3227witnesses today. Thanks for sharing your time and your3228expertise and personal experiences.3229    I mean, this is a crucial part of the work we do here. The3230Subcommittee definitely needs to understand how producers and3231farmers are using credit and risk management tools that are3232available, and then, of course, where improvements can be made.3233And the testimony we heard today is absolutely going to help3234with that.3235    I am certainly committed to strengthening the farm safety3236net, especially for producers and our rural communities who3237keep our country and, frankly, the world fed, so thank you3238again.3239    And, Mr. Chairman, I yield back.3240    The Chairman. Thank you, Ranking Member.3241    And I have already checked on some of the things I3242understand are legislative, and we will draft legislation and3243hopefully work together to try to get some simple changes done3244that help move this in the right direction.3245    I appreciate you all for being here. And while lending is a3246big part of any successful operation, ultimately, you have to3247have more dollars coming in than you have going out. The safety3248net is important for those bad years, but long-term, we have to3249have a system that works for our farmers to have more dollars3250coming in than they have going out.3251    That said, under the Rules of the Committee, the record of3252today's hearing will remain open for 10 calendar days to3253receive additional materials and supplementary written3254responses from the witnesses to any questions posed by Members.3255Thank you, and this hearing of the Subcommittee on General Farm3256Commodities, Risk Management, and Credit is adjourned.3257    [Whereupon, at 3:16 p.m., the Subcommittee was adjourned.]3258    [Material submitted for inclusion in the record follows:]32593260                          Submitted Questions32613262Questions Submitted by Hon. Mary E. Miller, a Representative in3263   Congress from Illinois32643265Response from Mandy Minick, Senior Vice President, Stakeholder3266        Relations, AgWest Farm Credit; on behalf of Farm Credit Council3267    Question 1. Ms. Minick, could you speak about how AgWest Farm3268Credit has partnered with the FSA Beginning Farmer programs to support3269new producers in your region?3270    Answer. Farm Credit's partnership with USDA, through programs such3271as the 50/50 joint financing option, provides substantial benefits for3272emerging agricultural producers by enabling access to nearly 100%3273financing.3274    AgWest Farm Credit has used FSA guarantees for many of our3275beginning producers. As they improve financially, they gradually3276graduate from the guarantees after their first five years. We do this3277through joint partner land loans with the FSA, which can vary between327850/50 financing and the beginning farmer down payment land loan option3279(5/45/50). These two programs have been instrumental in allowing us to3280finance our customers who otherwise would not be able to attain 100% of3281the loan directly with us. This collaborative approach significantly3282reduces the up-front capital requirements that would otherwise3283necessitate substantial down payments, thereby preserving borrowers'3284liquidity during the critical establishment phase of their operations.3285    This financing structure proves particularly advantageous for3286young, beginning, and small-scale (YBS) producers who typically operate3287with limited capital reserves. By reducing initial equity requirements,3288these collaborative programs allow producers to maintain adequate3289working capital reserves to address the inevitable operational3290challenges that arise during enterprise development. Such flexibility3291enables borrowers to respond effectively to unexpected expenses,3292including equipment repairs, additional input costs, market3293fluctuations, or seasonal cash flow gaps--without jeopardizing their3294operational viability.3295    The preservation of working capital through reduced down payment3296requirements represents a crucial risk mitigation strategy for new3297agricultural enterprises, where access to liquid funds can determine3298the difference between successfully navigating startup challenges and3299potential business failure.3300    This story highlights a partnership with FSA, creating3301opportunities for our customers:33023303          AgWest began working with customer Doug back in the summer of3304        2015. He farms in remote eastern Washington raising soft white3305        wheat, garbanzo beans, barley and canola. Doug started farming3306        in 2013 and was able to attain direct operating funds from the3307        FSA. Prior to 2013 Doug worked full time for a local farmer and3308        realized how much he loved agriculture. This passion gave him3309        the determination to try and attain his own farm leases. He was3310        fortunate enough that his extended family provided 548 acres of3311        farm ground to lease in 2013. He had very limited assets and no3312        farm equipment, and his only option to start farming was3313        utilizing the FSA's direct operating loan funds. His father-in-3314        law allowed him to use some of his farm equipment to seed,3315        fertilize, spray and harvest his crop.3316          Doug approached AgWest about providing financing in early3317        2015 and discussed the possibility of buying out his wife's3318        aunt's farmland. Following the advice and guidance of his FSA3319        loan officer, Doug was able to build up working capital during3320        his first two crop years and became strong enough for AgWest to3321        enroll him into our YBS program called AgVision. We provided3322        his first real estate loan to purchase 227 acres in August 20153323        in conjunction with the FSA using their 5/45/50 beginning3324        farmer land loan program. The FSA land loan program allowed3325        Doug to put 5% down in cash and the FSA provided 45% of the3326        funding and we provided the remaining 50%. Without the ability3327        to partner with the FSA on this land loan, Doug would not have3328        been able to put the standard 30% down payment. This would have3329        resulted in the family selling the farmland to another farmer3330        or investor.3331          In the fall of 2016, we agreed to provide Doug with an3332        operating loan using an FSA loan guarantee. The loan guarantee3333        provided us with additional security in the event of financial3334        deterioration. If we had not been able to attain an FSA3335        guarantee, we would not have been able to provide operating3336        financing, and he would have needed to maintain his direct FSA3337        financing. In 2017 he was able to purchase an additional 116.53338        acres from his wife's family, and we utilized the joint 50/503339        financing with the FSA for the additional property. While Doug3340        continued to improve financially, we would not have been able3341        to provide traditional financing if we had not been able to3342        utilize the FSA joint financing program.3343          Doug has made substantial improvements throughout the years,3344        and we were able to stop using the FSA guarantee program in3345        2020. We have since moved him to a traditional operating loan3346        and have been able to provide him with additional traditional3347        loans the last few years. He continues to financially perform3348        and make progress and now farms over 3,200 acres of farmland in3349        the prime Palouse region.33503351    Question 2. Second, based on what you're seeing in the field, Ms.3352Minick, would raising the program's loan limits be timely and helpful?3353    Answer. It would be extremely helpful and timely to increase loan3354limits for both direct and guaranteed loans. Most notably, it would3355broaden the number of operations that would benefit from FSA financing3356options at a time when the cost of doing business has significantly3357increased, input and labor costs are higher, and the amount of capital3358for beginning farmers is extremely limited. Farmers face an ever-3359growing array of regulations related to environmental protection, food3360safety, animal welfare, and traceability. Meeting these standards often3361requires additional expenditure on infrastructure, certification,3362documentation, and specialized equipment. While these regulations aim3363to protect consumers and the environment, they contribute to the rising3364cost structure of modern farming.3365    We support the Producer and Agricultural Credit Enhancement (PACE)3366Act to modernize Farm Service Agency loan programs, including increased3367loan limits that reflect current costs of production agriculture.3368Strong FSA Guaranteed Loan Programs assist agriculture lenders in3369working with farmers and ranchers dealing with these challenges and3370provide opportunities for young and beginning farmers and ranchers.3371    Along with increasing the loan limits, streamlining the approval3372process for Preferred Lender approval of guarantees and lessening the3373paperwork requirements for loan applications is needed. Time is of the3374essence for producers, especially those with specialty crops, and3375anything that can be done to speed up the approval process would be3376welcomes improvements.3377    This story illustrates a young, beginning producer hindered by3378current FSA loan limits:33793380          Beginning farmer Beau planted his first crop when he was3381        still in high school and came to AgWest after graduating and3382        farming for 4 years in rural eastern Montana. Beau previously3383        borrowed from FSA, but due to LOC limits and higher input3384        costs, borrowing from FSA was no longer an option. Beau came to3385        us as a referral from another AgWest customer. After reviewing3386        Beau's financial information and 2025 cropping plan, we used3387        the FSA Guarantee program to meet his financing needs. Beau had3388        previously visited several other financial institutions, but3389        most were not interested in working with him due to his lack of3390        experience, weaker financial position and lack of a strong3391        cosigner.3392          Another area of timely concern is the beginning farm purchase3393        program. The value of farmland has risen sharply in many3394        regions, driven by competition from investors, urban expansion,3395        and alternative land uses such as solar farms or real estate3396        development. Higher land prices translate directly into3397        increased costs for farmers.3398          The biggest hurdle our young producers face when trying to3399        purchase farmland is lack of cash to help with a down payment.3400        Being able to utilize the beginning farmer land loan program3401        with the FSA allows the customer to put 5% down on the3402        purchase, however the loan limit for the FSA portion is only3403        $300,000. We end up needing to provide more than $300,000 for3404        our loan for most producers, but market rates are typically3405        significantly higher than the FSA rate, adding burden to the3406        beginning of producers already challenging situation. Raising3407        these loan limits would be particularly helpful, and I would3408        encourage Congress to approve moving the limit up to $600,0003409        to match the current loan limit for joint financing 50/50 loans3410        while maintaining 5% down payment requirement.34113412    Question 3. We've also heard from producers innovating in small-3413scale, high-value specialty markets. Ms. Minick, what are the biggest3414credit challenges these producers face, and what USDA program fixes3415could help better serve this growing niche?3416    Answer. Specialty crop growers encounter challenges not faced by3417larger commodity producers. These crops have shorter harvest periods,3418are vulnerable to weather and pests, often require manual harvesting,3419and must be delivered to market quickly due to their perishability. Our3420smallest producers feel these outside influences even more as they3421often have very limited, niche marketing opportunities and little to no3422capital to fall back on. Timely availability of credit and risk3423protection is very important.34243425Collateral and Asset Valuation Challenges3426    Small-scale innovative operations frequently encounter significant3427barriers when seeking financing due to insufficient traditional3428collateral. These enterprises typically operate on limited land bases3429with specialized equipment that fails to meet conventional asset-3430backing requirements. While high-value specialty crops can generate3431substantial revenue per acre, the smaller acreage footprint provides3432inadequate security from a traditional lending perspective.3433    This customer story illustrates collateral challenges:34343435          Kyle and Alix are YBS customers who had an opportunity to3436        purchase a piece of land that bordered their ranch on three3437        sides. They had the overall financial capabilities but lacked3438        collateral for traditional financing. AgWest had worked with3439        the young couple in the past, helping them with other financing3440        needs. They secured a one year, lease-to-own option on the3441        ground and then closed the sale the following year. AgWest,3442        using joint financing with FSA to offset collateral deficiency,3443        allowed Kyle and Alix to purchase the ground. AgWest earned3444        business because of our strong customer relationship and our3445        Preferred Lending Agreement with FSA.34463447Infrastructure and Risk Assessment Complexities3448    Specialty crop production often necessitates unique infrastructure3449investments--including greenhouses, specialized processing equipment,3450and cold storage facilities--that present elevated risk profiles for3451lenders. These assets typically have limited resale markets and3452uncertain residual values, complicating standard risk assessment3453methodologies used in conventional agricultural lending.34543455Institutional Knowledge Gaps3456    A critical barrier stems from lenders' limited familiarity with3457innovative agricultural business models, specialty crop production3458systems, and their associated profitability patterns. The complexity3459and diversity of these operations often exceed the expertise of loan3460officers trained primarily in traditional commodity agriculture,3461resulting in conservative underwriting decisions that may not3462accurately reflect the true risk profile or potential of these3463enterprises.3464    This knowledge disparity creates significant geographic inequities3465in credit access. For instance, certain loan officers who have3466developed expertise through repeated exposure to innovative operations3467demonstrate consistently successful lending outcomes with specialty3468crop producers. However, other offices within the same state frequently3469decline credit applications for substantially similar business models,3470primarily due to their limited experience with these operation types.3471This variance underscores how institutional knowledge gaps can create3472arbitrary barriers to capital access, where a producer's ability to3473secure financing may depend more on their geographic location and3474assigned loan officer's experience than on the actual viability of3475their enterprise.34763477Systemic Solutions and Recommendations3478    Establishing specialized lending expertise at the state or regional3479level--with officers specifically trained in alternative agricultural3480models--would significantly reduce access barriers for innovative3481producers. Such specialization would enable more accurate risk3482assessment and appropriate loan structuring for non-traditional3483operations.34843485Consequences of Current Limitations3486    These systemic challenges often compel promising small-scale3487producers toward alternative financing sources that, while accessible,3488frequently lack the comprehensive financial education and constructive3489credit-building opportunities essential for early-stage agricultural3490enterprises. This dynamic can ultimately undermine the long-term3491financial sustainability and growth potential of innovative farming3492operations.3493    Federal crop insurance is a vital tool in stabilizing access to3494credit. Continued expansion of crop insurance products to specialty3495crop producers will continue to support small scale producers. The3496Microfarm policy has helped many and it can continue to be improved.3497Additional programs for fresh market products and specialty crops must3498continue to be developed. Streamlining these products will make them3499more user friendly for both the producer and the agents and will help3500ensure they remain current and viable tools.3501Response from Brian Gilbert, Senior Vice President, Ag Banking Manager,3502        First National Bank in Sioux Falls; Member, Rural America and3503        Agriculture Committee, Independent Community Bankers of America3504    Question. Mr. Gilbert, how has your institution used FSA guarantees3505to support younger or less established producers who may not yet be3506bankable under traditional programs?3507    Answer. First, I'd like to thank you for taking the time to reach3508out with your question. The First National Bank in Sioux Falls has a3509large and diverse Ag portfolio that spans across most of South Dakota,3510SW Minnesota, NW Iowa, and northern Nebraska.3511    Given our large geographic footprint we run into several unique3512situations where a borrower may benefit from utilizing FSA guarantees3513or direct loans. We have a former FSA Loan Officer on our team and3514several other experts that have executed several FSA guarantees,3515assisted borrowers with FSA's direct financing programs and FSA/Bank3516joint financing.3517    At FNBSF, we assist the borrowers with the application process and3518work with producers from application to loan closing.3519    Specifically, to the FSA guarantee program below are a few of the3520ways we've helped younger/less established Ag producers:35213522  1.  Guaranteed operating loans to lessen the necessary collateral3523            they have to pledge.35243525  2.  Guaranteed M&E and Livestock loans to ease the cash flow through3526            longer amortizations.35273528  3.  Guaranteed farmland loans that we then sell to Farmer Mac to3529            achieve lower rates and longer amortizations for the3530            borrower.35313532    All of these programs assist the borrowers to build their3533operations and compete with more established farmers, which is3534essential to help the next generation be able to come back into the3535family operation and keep farm operations viable for many years to3536come. With the price of land and inputs today vs. even 6 years ago, we3537as lenders work diligently to help ease cash flows and mitigate risk to3538help farmers through the cyclical nature of agriculture.3539    With my roots growing up as a farm kid from South Dakota, I take3540great pride in helping our ag producers achieve their financial goals3541and I know firsthand that things don't always go according to plan with3542production issues or commodity prices or both. FSA guarantees certainly3543help give us another tool to keep farmers farming and bring in the next3544generation of farmers.35453546                                  [all]