Legislation Would Enhance State’s Loan Programs
Legislation to be offered for introduction by the Joint Agriculture Committee of the Wyoming Legislature this month would expand financing opportunities for Wyoming farmers and ranchers. The bill (SF8) earlier received unanimous support from the Committee.
Wyoming Stock Growers Association has led the effort to craft the legislation, working with the state’s other agricultural organizations and the Office of State Lands and Investments (OSLI). The bill amends the current Farm Loan Program that is administered by that agency.
In keeping with ongoing initiatives to provide more opportunities for beginning agricultural producers, the total amount of money available for loans to beginning producers is increased to $27.5 million. The present cap of $7 million was reached in 2007, thereby causing OSLI to turn down additional loan requests. This money is currently available at a fixed rate of 4.55 percent for 10 years after which the rate increases to 8 percent.
A new classification of loans, to be known as livestock enhancement loans, is established by the legislation. This program is designed to encourage growth in the state’s livestock industry, which constitutes nearly 85 percent of cash receipts from Wyoming agricultural production. Livestock numbers have seen a serious decline in recent years due in part to drought. Loans would be for a maximum of seven years and a maximum amount of $300,000, secured by a real estate mortgage and would be offered at an interest rate equal to 70 percent of the lowest rate on a standard farm loan. This would make the current livestock enhancement loan rate 5.6 percent. Up to $55 million would be allocated for these loans. This program would be in lieu of the drought breeding stock replacement program which was established by the legislature in 2005 but remains unused. The legislation would also increase the size of the minimum farm loan to $10,000 and the maximum total amount of loans to any one borrower to $800,000.
A total of $275 million is statutorily available for farm loans. The legislation does not change this amount, but only increases the allocation to specific programs. During times of high commercial interest rates outstanding loans have approached this limit. However, recent low interest rates saw the use of the total Farm Loan Program decline to less than $35 million.
I occasionally hear the comment by producers that the State Loan and Investment Board should adjust Farm Loan interest rates to better reflect commercial rates. The current rates of 8 percent and 9 percent have been maintained since the early 1980s. It is my view that this program’s purpose is to address unfilled credit needs of qualified Wyoming agricultural producers. When adequate credit is available in the private sector at affordable rates, the state program should not seek to be a competitor. When private sector credit is inadequate or unaffordable to production agriculture, the Farm Loan Program provides a safety net.
The specific provisions of the beginning agricultural producer and livestock enhancement loans, if adopted, reflect a policy decision to foster a healthy Wyoming agriculture industry with a strong future. They deserve the support of Wyoming legislators.
Jim Magagna is executive vice president of the Wyoming Stock Growers Association.