Young Farmers in Crunch

June 24, 2010 at 3:54 pm Leave a comment

Credit ebbs despite programs to help 35-and-under producers

By MATEUSZ PERKOWSKI
Capital Press

The amount of credit extended to young farmers fell sharply last year after rising steadily for much of the past decade, according to the federal government.

Farmers younger than 35 received about $6.6 billion in loans from the Farm Credit System network of lenders in 2009, a 16 percent drop from the prior year.

However, that decrease is in line with the overall contraction in agricultural loans issued last year, according to the Farm Credit Administration, a federal agency that regulates system lenders.

“Activity for the year has declined, but activity overall has declined,” said Mark Johansen, a policy analyst with the administration.

Lenders within the Farm Credit System are required by federal law to develop programs aimed at extending credit to young, small and beginning farmers, said John Moore, the agency’s chief economist.

Typically, lenders relax their regular standards for collateral and other criteria when making loans to farmers who fall into those categories.

Though agricultural lenders have generally become more strict in recent years, they haven’t abandoned those practices, said Moore.

“We’re impressed that the system continued to maintain what in effect are less stringent standards for young, beginning and small farmers,” he said.

The loan volume to young farmers nonetheless fell due to a lower demand for credit and because many young growers did not qualify for loans even under relaxed standards, Moore said.

“It’s tougher to meet the criteria when your financial prospects are weakened,” he said.

Based on the proportion of young farmers within the overall agricultural industry, the Farm Credit System’s outreach efforts have been successful, Moore said.

Only about 8 percent of all farm operators are under 35 — a major reason they’re the focus of federal financing programs — but nearly 12 percent of system’s loans are made to young farmers, he said.

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