SENATE AGRICULTURE COMMITTEE HEARING
Overview
For questions on the note below, please contact the Delta Strategy Group team.
On March 11, the Senate Committee on Agriculture, Nutrition, and Forestry held a hearing entitled “Perspectives from the Field: Risk Management, Credit, and Rural Business Views on the Agricultural Economy Part III.” Witnesses in the hearing were:
- Tara Durbin, Chief Lending Officer for Agriculture, Farm Credit Mid-America
- Dalynn Hoch, EVP and Head of Rural Community Insurance Services, Zurich North America
- Caleb Hopkins, Loan Production Officer, First Dakota National Bank
- Ben Noble, Executive Vice President and Chief Operating Officer, Riceland Foods
- Sedrick Rowe Jr., Farmer/Owner, Rowe Organic Farms
Below is a summary of the hearing prepared by Delta Strategy GroupDelta Strategy Group. It includes several high-level takeaways, followed by summaries of opening statements.
Key Takeaways
The following is a summary of the main topics explored in the hearing, with further details in the Discussion section below.
- Senators agreed on and discussed the need for a modernized five-year Farm Bill to ensure financial stability for all levels of agriculture alongside the importance of Farm Service Agency (FSA) guaranteed loan programs for lenders in addition to producers.
- There was bipartisan concern from Senators about the rising cost of input costs and the necessity of access to farm credit lines and crop insurance, with discussions on the expansion of farm loan programs and Senator Smith (D-MN) raising farmer tax credits programs.
- Senator Klobuchar (D-MN) cited her reintroduction of the Crop Insurance for Future Farmers Act (CIFFA) with Senate Majority Leader Thune (R-SD) to help insurance providers better manage and mitigate risk farm credit systems.
- Senator Smith (D-MN) raised the inclusion of farmer tax credits programs in the new Farm Bill, with Durbin referencing how Farm Credit Mid-America’s (FCMA) Growing Forward programs helps support the long-term viability of operations by providing critical resources to access needed capital.
- Senator McConnell (R-KY) talked about how the Protecting American Farmlands Act aims to reduce capital gains taxes for farmers who sell their land to buyers committed to maintaining its agricultural use for at least ten years.
- Hopkins explained why producers rely on maintaining current estate tax exemptions and capital gains exemptions, supporting the Access to Credit for our Rural Economy (ACRE) Act as a means to create a level playing field for all agricultural lenders. He referenced the co-sponsorship from Senators Moran (R-KS), King (I-ME), Tuberville (R-AL), Gallego (D-AZ), Marshall (R-KS), and Cramer (R-ND).
Opening Statements and Testimony
Chairman John Boozman (R-AR)
We need to pass a strong five-year Farm Bill this year that strengthens the farm safety net and revitalizes rural communities. The most potent mechanisms for rural development are the risk management tools that our producers utilize to secure the financing necessary to grow and expand their operations which in turn supports the communities. Local governments count on the tax base and economic activity from agricultural sectors to provide critical services and infrastructure needed to keep communities healthy and vibrant. I noticed a distinct change in tone beginning last summer as I visited with not just producers but also their lenders, who said that producers could struggle to secure financing for planting roughly twenty percent of the acres. The $10 billion in economic assistance provided at the end of last year is a critical bridge for many farmers to secure 2025 operating loans. I appreciate the work in securing this assistance and look forward to swift implementation by Secretary Rollins and U.S. Department of Agriculture (USDA). However necessary to ensure operation for the upcoming year, this economic assistance should not in any way be considered a substitute for a five-year Farm Bill. Whether you look at rising levels of farm debt, loan delinquency rates or the percent of row crop farmers that need to refinance debt to cash flow, it is clear that Congress needs to act quickly to strengthen Farm Bill programs.
Tara Durbin, Chief Lending Officer for Agriculture, Farm Credit Mid-America
Row crop producers are facing headwinds, while corn, soybeans, and wheat have benefited from several years of building liquidity and reinforcing their financial positions. Conversely, cotton and rice producers have endured multiple years of price volatility, quality concerns, and yield challenges, leading to more rapid liquidity erosion. We employ several strategies to support producers through challenging cycles and these include proactively restructuring debt to address cash flow concerns, providing financial coaching and education, and leveraging federal programs such as crop insurance and the FSA loan guarantee program to mitigate risk. The FSA loan guarantee program enables lenders to provide loans to farmers who may not qualify for traditional credit. We support the PACE Act, which will provide crucial updates to the FSA loan program by aligning loan limits with the current cost of operating a farm. Programs like the FCMA’s Growing Forward help support the long-term viability of operations by providing critical resources to access needed capital.
Dalynn Hoch, EVP and Head of Rural Community Insurance Services, Zurich North America
Crop insurance not only secures loans and protects farmers when they suffer a loss, but it also has a ripple effect on the local economy, benefiting agricultural retailers and other local businesses, which are often the first line of unsecured debt to the farmer. The last several years have seen a drastic increase in ad hoc disaster payments to rural America. We need to look for ways in the next Farm Bill to address these gaps in the safety net and consider crop insurance as the primary tool to fill these gaps. We strongly discourage the creation of any disaster program that would disincentivize farmers from purchasing crop insurance. We need recognition that companies incur costs when administering aid outside the federal crop insurance program and oppose the creation of any disaster package funded by cuts to crop insurance. Approved Insurance Providers (AIPs) have seen significant increases in expenses, with rising costs to market, service, and adjust claims. Inflation has impacted the industry, yet the administrative and operating payments provided by the USDA to help cover delivery costs have not kept pace with rising prices or the increasing complexity of modern crop insurance. The inflation factor adjustment, originally built into calculations, was unfortunately removed in 2015.
Caleb Hopkins, Loan Production Officer, First Dakota National Bank
Banks continue to be one of the primary sources of agricultural loans for producers, with over eighty percent of U.S. banks having agricultural loans in their portfolios and financing all types of agriculture across the country to improve short- and long-term operations. While the assistance passed by Congress will provide some relief to our customers, it will not be enough for many. Soybean acres are expected to receive a payment of $30 per acre, yet some regional estimates indicate soybean farmers will still be short by $300 per acre. It is increasingly evident that economic assistance alone will not be sufficient to cover these shortfalls or strengthen balance sheets enough to withstand another difficult year. Bankers strongly support a long-term Farm Bill because customers need the certainty that a Farm Bill provides, and lenders must operate based on knowns rather than projections. Key priorities for the next Farm Bill include increasing FSA-guaranteed and direct loan programs. We appreciate PACE Act, which serves as a model for achieving these enhancements, as revising eligibility requirements for beginning farmers and ranchers is crucial for bringing the next generation into agriculture. ABA looks forward to the ongoing tax reform process in Congress as customers rely on maintaining current estate tax exemptions and capital gains exemptions. The ACRE Act is a key piece of tax legislation that would create a level playing field for all agricultural lenders and could reduce the effective interest rate by up to one percent for qualified borrowers, with co-sponsorship from Senators Moran, King, Tuberville, Gallego, Marshall, and Cramer. The Act will expand credit access for rural America while lowering borrowing costs, providing a crucial solution for supporting rural communities both in difficult economic times and for long-term growth.
Ben Noble, Executive Vice President and Chief Operating Officer, Riceland Foods
The key in our business model is the ability of the farmer to secure financing and produce a crop on an annual basis, as well as a strong economy that allows farmers to remain profitable. Without our farmer members, all the economic activity that Riceland Foods generates and the jobs we support disappear, leaving economic deserts in many areas of East Arkansas and the Bootheel of Missouri. Financial institutions work diligently and creatively to keep farmers on the farm this growing season, but a shadow of uncertainty remains across the entire system. Planning decisions and seed purchases are often made months before now and as final assessments are made, productive farmland will likely remain fallow this year due to some farmers’ inability to attain financing. This could reduce the production of rice, soybeans, corn, and possibly other commodities in our growing region. We must take serious and substantial action that results in updated reference prices that secure a strong safety net for rice farmers, meaning a substantial increase in the PLC reference price and the assurance that payment limitations are increased to reflect modern-day farming. These enhancements must be effective for the 2025 crop year. Of particular significance to cooperatives such as Riceland, the Section 199A deduction stands out as one of our farmer members’ most crucial tax policies. This provision enables cooperatives to pass tax deductions directly through to their members, who then reinvest the funds back into their operations and local economies.
Sedrick Rowe Jr., Farmer/Owner, Rowe Organic Farms
The next Farm Bill should include provisions to: 1) increase the maximum amount a producer may owe on a microloan to $100,000; 2) index the Direct Farm Ownership Down Payment Loan Program to align with current loan limits; 3) remove the punitive and arbitrary seven year limit of loan eligibility for operating loans; 4) create an Agency rulemaking pathway for allowing distressed borrowers to refinance guaranteed loan into direct loans; 5) develop a pre-approval or pre-authorization pilot program for Direct Farm Ownership loans; and 6) authorize a multi-year loan pilot to finance start-up costs. FSA should create a revenue-based option within Noninsured Disaster Assistance Program (NAP), similar to WFRP, and could also provide an on-ramp to help farmers transition from NAP to WFRP once they establish the required operational history. This will get more farmers enrolled in NAP early on while continuing to support them with a basic safety net, as well as establish a relationship with USDA, which is crucial for loan access.
Discussion
Senator McConnell (R-KY): What financial tools would help address the problems of land and capital access that farmers face? Does a preferable outcome require a legislative solution from Congress? Durbin: We need to consider looking for ways that we can incentivize farmland to stay in agriculture production, such as Protecting American Farmlands Act, as an incentive. The barriers to entry into agriculture are huge when we think about land, so looking for ways to incentivize keeping agriculture in production is definitely a way to work together for a solution. It would be the work of Congress, as well as working with industry partners.
Senator Ernst (R-IA): Why is federal crop insurance superior to the ad hoc disaster payments, and do you see any improvements that Congress needs to make in the next Farm Bill? Hoch: Recent disaster payments made have been significant, presenting a real opportunity to strengthen crop insurance. Several products have already been developed, such as indexed products and area-based plans that can provide farmers with supplemental coverage beyond their immediate protection. We can develop new insurance products through 508(h), working creatively to transition ad hoc disaster relief into a more structured and reliable system. Hope is not a plan, and ad hoc disaster assistance often relies on hope. Certainty is equally vital for my banking colleagues. By working collaboratively, we can find ways to integrate disaster payments into crop insurance, ensuring a structured risk-sharing model where farmers, the government, and insurance providers share in the responsibility.
Senator Ernst (R-IA): Why is crop insurance a necessary tool for farmers in gaining loans and on the banking side of the process? Hopkins: Crop insurance is the number one risk management tool for agricultural lenders and empowers producers by allowing them to evaluate different coverage levels and make decisions tailored to their operations. Beyond risk management, crop insurance creates marketing opportunities, enabling producers to proactively market their products throughout the year. This level of certainty is crucial for bankers when assessing operating line renewals.
Senator Tuberville (R-AL): What can we do to help producers? Noble: Quick action on a Farm Bill because long-term policy matters, not just for agricultural lenders but for the farmers who rely on these loans. We have always supported free trade, but trade must also be fair; too often, it has not been. The challenges and complexities of global competition in commodity markets are significant. If we expect domestic producers to compete in a worldwide market, there must be stability and certainty.
Senator Tuberville (R-AL): What is the importance of raising guaranteed ownership loans to $3.5 million? Durbin: Farm Credit utilizes the FSA guaranteed loan program as a crucial tool for serving our customers, particularly young, beginning, and small farmers. This program is essential, enabling us to extend loans to more farmers, help them establish their operations, and support their growth. It also serves as a vital risk mitigation tool, allowing us to better support agriculture while ensuring financial stability for both lenders and producers.
Chairman Boozman (R-AR): What is the impact a strong farm safety net on rural communities? Noble: When you consider how many times a dollar turns over in a rural community, it becomes clear that rural America ultimately depends on farmers as the backbone and heart of their communities. Without a strong safety net, I shudder to think what will happen to these areas and the people who rely on the revenue and jobs from community agricultural operations; Hoch: Crop insurance plays a crucial role here, with efforts to continue expanding coverage levels and premium support for farmers, such as area plans, as essential. When facing extremely high input costs, securing a loan and having a sense of certainty that a crop will be covered in the event of a loss becomes critical. Even at the highest level of Multiple Peril Crop Insurance (MPCI) coverage, soybean coverage remains inadequate. The ability to layer on additional coverage, such as the Enhanced Coverage Level (ECL) plan, provides an extra layer of protection from an area-based perspective, helping increase overall coverage in the event of a loss. Farmers must maintain their individual coverage while using area plans to enhance their risk management strategy. It is critical that these products remain actuarially sound to ensure their long-term viability and effectiveness.
Chairman Boozman (R-AR): What is the state of credit availability considering the current farm balance sheet? Hopkins: What started in Arkansas and the Southeast is now making its way through the Midwest and across the country, with continued, significant net worth losses across the board. Lenders in these regions, particularly in parts of the Southeast, are now in their second, third, or even fourth year of losses. As a result, bankers are beginning to develop workout plans and engage in difficult conversations about long-term financial viability. We were able to complete all our renewals this year, but the discussions centered on the current burn rate of working capital, which is rising at an increasingly rapid pace.
Senator Smith (D-MN): What are the biggest barriers to entering farming, and what should Congress on focus on in the new Farm Bill, such as farmer tax credits programs? What are the impacts of rising land prices on industry participants or entrants? Durbin: Land access remains a significant challenge for young farmers. Within the Farm Credit System, all Farm Credit associations have a Young, Beginning, and Small Farmer program. At FCMA, our program is called Growing Forward, applying different underwriting standards tailored specifically for young, beginning, and small farmers. These farmers receive our tier-one best interest rate, with a key requirement: participants must complete the provided educational programming that we provide that includes developing business plan to ensure the viability of their operation. This program offers financial support and provides technical assistance; Rowe: Land access is always a challenge for young farmers or farmers in general, as well as educational loans that carry over to an operational loan. There needs to be more access to opportunities for young farmers to be able to start up the farm not based on the history of education. I support the establishment of a pilot program to invest in locally led projects to tackle challenges in access to land, credit, and markets.
Senator Booker (D-NY): What impact and threat does the USDA funding freeze, especially on signed contracts and with absence of reimbursements already owed, have on producers? How does the lack of grant funding impact producers and access to markets? Rowe: The impact from the freeze is even more uncertainty, debt, and a lack of resources, such as boots on the ground to manage and advise on farm practices. Farmers may have to alter plans, not farm this year, or scale due to the funding freeze limiting government support and available resources, from personnel to financial.
Senator Booker (D-NY): Why does Congress need to make changes to the new Farm Bill to ensure that crop insurance agents are incentivized to sell crop insurance to small producers? Durbin: Incentivize crop insurance agencies to sell crop insurance to small-scale farmers and to specialty crop producers, making worth their time to work with small farmers like me. Large crop insurance providers do not particularly focus on young farmers because these farmers often lack their own risk management tools. We need to ensure better access to crop insurance to strengthening producers’ financial security and long-term success.
Ranking Member Klobuchar (D-MN): Why will the CIFFA legislation to help you manage and mitigate risk? Hoch: Significant investments must be made in operational inputs all before farmers know the prices they will receive at harvest or even if they will have a harvest. Crop insurance, especially for beginning farmers, provides the certainty they need in an unpredictable industry. Providing premium support for beginning farmers is essential and I support CIFFA because it offers financial security but also encourages education and early participation in risk management programs, helping to keep new farmers in the industry.
Ranking Member Klobuchar (D-MN): From a lender’s perspective, why do we need to update farm loan limitations in the next Farm Bill? Hopkins: The increase in capital expenses, along with normal operating costs, has grown substantially over the last five years. Land costs have also risen significantly yet guarantee limits have not kept pace. Raising these limits would provide lenders with more tools to work creatively with producers through challenging times. There are lenders who, even two years ago, had already hit the existing limits while trying to help customers manage losses. Increasing these limits would give us the flexibility needed to support producers and keep them in business; Durbin: I agree, but I would add that given the rising cost of inflation, it is crucial that the next Farm Bill properly indexes these limits. This would ensure they keep pace with economic conditions, preventing the need to repeatedly request increases in future Farm Bills; Rowe: While considering these factors, recognize the variances in diversified operations.
Senator Hoeven (R-ND): How do you view the impact of these changes, including the increased loan limits for direct and guaranteed operating and ownership loans, as well as the FSA microloan program doubling its cap from $50,000 to $100,000? What are your thoughts on how these adjustments might affect access to capital, borrower participation, and overall financial stability for farmers? Durbin: We need to be able to work closely with our farmers and use those increased loan limits in line with more modernized agriculture. We work with smaller farms in applying different underwriting standards, recognizing that they have a different bar to meet. We provide also them with educational opportunities to better understand their financials, make informed decisions, and see how those decisions impact their current and future operations, implemented through our Growing Forward program.
Senator Hoeven (R-ND): How can we enhance the FSA loan qualification process and timeline, such as through the FOIA Durbin: We need to find and use all ways to support and incentivize agriculture and its producers in strengthening farm credit; Hopkins: Enhancements to pre-qualification would not only improve efficiency within the FSA loan programs but also allow us to get capital to beginning farmers much faster. Proactive education remains our best tool for supporting young and beginning farmers, and pre-qualification enables them to start these conversations much earlier. When an opportunity arises, producers often have only four to six weeks to act. Most farms are now sold through auctions rather than private sales, leaving little time to navigate the loan process. Strengthening pre-qualification would significantly improve access, ensuring producers can move quickly and proactively when opportunities arise; Rowe: I support the FOIA.
Senator Warnock (D-GA): Which farmers do you think are hurt worse by tariff uncertainty, large farming operations or small and underserved farmers? Rowe: All farmers are hurt by tariffs.
Senator Marshall (R-KS): Why are crop and flood insurance rates going up? Hoch: The cost of crop insurance will be driven by two predominant things: the yields that come out and the commodity price. Yields can be impacted by weather, as well as by a farmer’s specific choices regarding seed selection or the inputs they apply to their crop.
Senator Moran (R-KS): What is the value of extending the crop insurance benefit for beginning and veteran farmers from five years to ten, as in the Chairman’s Farm Bill framework? How would your circumstances have been different when starting your operation, and how would your relationship with your banker have been affected if you had secured crop insurance? Rowe: Five or ten years is a reasonable timeframe based on my experience and observations. With crop insurance, I have peace of mind through a safety net to rely on and a starting point that allows me to move forward, even in the face of challenges. In the absence of crop insurance, that security would be lost. A lot of things would be different, as the bank would have loved knowing that I would be able to take care of my loan. Without crop insurance, producers are taking a big risk.
Senator Moran (R-KS): Is the recent disaster assistance provided to affected producers an impediment to crop insurance? Are these gaps in insurance coverage increasing or decreasing? Hoch: Crop insurance cannot cover every single gap, nor is it designed to address every possible situation, so there are moments when disaster aid is necessary. We need to find more opportunities and develop actuarially sound products that can help fill those gaps. It is also essential to ensure that aid is distributed fairly and equitably through an efficient system. The public-private partnership in place has built a framework that delivers payments to farmers in a fast, effective, and streamlined manner, ensuring they receive the support they need when they need it most. The gaps are decreasing, and we would like to see them decrease more. Obtaining the underlying data on products through the 508(h) process is crucial, enabling the collection of data necessary to achieve actuarial soundness and ensuring that crop insurance can be effectively provided for those products. It is used to develop new insurance products and modify existing ones.