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$50m to refill coffers of popular lending program called for ‘to foster next generation of farmers’

(House Photography file photo)
(House Photography file photo)

Weather and interest rates. Two things impacting farmers’ income that are out of their control.

The House can’t do much about the weather, but one of its committees took action Thursday to address the latter.

The House Agriculture Finance and Policy Committee approved without dissent — and sent to the House Capital Investment Committee — identical bills that would appropriate $50 million from state bond proceeds for the Rural Finance Authority. Rep. John Burkel (R-Badger) sponsors HF103, and Rep. Samantha Vang (DFL-Brooklyn Center) sponsors HF463.

The money could be used for beginning farmer, loan restructuring, seller sponsored, agricultural improvement and livestock expansion loans

Established during the farm crisis of the 1980s, the Rural Finance Authority is the state’s main program for farm lending, partnering with local lenders to offer low-interest loans.

House Agriculture Finance and Policy Committee 1/19/23

There is about $19 million left of the $50 million appropriated for the authority in 2020. However, demand has increased along with interest rates, and the authority expects to be out of funds by this fall, according to Matt McDevitt, agriculture finance supervisor for the Department of Agriculture.

[MORE: See the department’s PowerPoint presentation]

“Replenishing this account will really help to foster the next generation of farmers across the state,” said Kaytlin Bemis, public policy specialist at the Minnesota Farm Bureau.

Rural Finance Authority loans are popular among new farmers, who cannot exceed a maximum net worth threshold of $903,000 in most cases.

“Especially for farmers of color who often have barriers to access land, having low-interest loans such as RFA offers gives them the opportunity to have a more sustainable farming experience,” Vang said.

The Rural Finance Authority typically works through local lenders rather than lending directly to farmers. After a loan closes, the RFA “buys” 45% of the loan, lowering the overall interest rate. The borrower repays the local lender, and the local lender repays the Rural Finance Authority.

Bill supporters hope the Legislature acts quickly, allowing the Agriculture Department to lock in interest rates and assist farmers at the beginning of the 2023 growing season.

Only loans secured by a real estate lien can be financed by general obligation bonds. The Rural Finance Authority has several revolving loan funds, including disaster recovery loans. The no-interest loans can be offered in federal or state disaster areas or those declared by the Rural Finance Authority board. For example, it is looking at loans to farmers whose barns collapsed under heavy snowfall this winter.

The Rural Finance Authority has issued 91 disaster recovery loans for $6.5 million, including six loans for $860,000 to cover revenue loss due to COVID-19 and 17 loans for $1.6 million for losses during the most recent drought. For example, Burkel, a turkey producer, received a disaster relief loan following the 2015 avian influenza outbreak.

In its history, the authority has issued 3,810 loans totaling $362.4 million and has taken a loss on only 21 of them (0.002%). It currently has 742 active loans with balance of more than $99.9 million.


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