Why are farmers avoiding emergency federal loans?
2011, though it happened quietly, has been a monster year for disasters in the United States. The Mississippi and Missouri Rivers flooded, swamping thousands of acres of farmland, drought swept Texas and other Midwestern states, and Tropical storms pounded the Easter Coast. But, despite the massive areas declared disaster zones and the large amount of federal funding set aside for emergency farm relief in these areas, there were only about three hundred claims for these loans in the financial year ending in September. These loans totaled around 30 million dollars, which to put it in perspective, there were over a billion and half dollars worth of eligible farm damage in Texas alone. With all this cash set aside, unused, in the face of such massive losses the question bears asking: why are so many farms declining to take advantage of these Farm Service Agency loans?
According to the Associated Press, there are number reasons, staring with the problem of interest rates. As the economy has tanked it has taken interest rates down with it, with means that the old rate (3.5 %) that has been long established for the FSA is actually quite a bit higher than the FSA’s non emergency loan programs with rates around 1.8%.
Also, numbers of farmers actually report that, with the massive damage actually driving up corn and wheat prices, they are able to either make a profit regardless or else have the money set aside from previous years, eliminating the need to borrow more money. The option of a non federal farm loans also remains tempting for many.