Federal Government Seeks Options as Farm Loan Funds Run Out of Cash

July 29, 2016

The U.S. government's $2.65 billion operating loan program to help farmers keep their businesses going has already run out of cash, officials said Monday. As a result, the U.S. Department of Agriculture is looking for other sources of money to bridge the gap "until additional funds are made available, either this year or in the next fiscal year," the agency said in a statement.

The agency declined to say what other funding it was hoping to leverage for assistance.

Such USDA Farm Service Agency loan guarantees and direct loans are often considered to be loans of last resort, say banking experts. Without the financial support, some farmers may struggle to survive until the next cash injection in the fall, say rural economy experts.

As the rural sector struggles with low commodity prices and mounting trade competition, U.S. grain farmers are increasingly relying on the FSA for loan assistance. Agricultural lenders, too, are turning to the agency to help guarantee the loans they are issuing to farmers - whether for operational or real estate needs.

Even with the operational loan program funding depleted, the applications from farmers and the bankers who back them continue to grow.

"At this time, there are already tens of millions (of dollars) in backlog in Direct and Guaranteed operating loan accounts, and that number is expected to increase through the end of the fiscal year," the FSA said in an email.