Several witnesses representing key agriculture lending institutions and credit agencies told members of the House Agriculture Committee’s Subcommittee on Department Operations, Oversight, and Credit that access to credit is essential for farmers and crop insurance plays an important role in that access. The hearing, held May 10, went largely unnoticed but is pertinent given the need for most farmers to secure credit.
“Crop insurance is important to the adequate supply of credit to farmers and ranchers as it provides assurance that farmers will be able to repay their operating loans in the event of weather or price related calamities,” said Jeff Gerhart, a banker and chairman of the Independent Community Bankers of America. Gerhart noted that crop insurance was a good risk management tool that their farm customers have learned to use to better manage risk. “The dramatic evolution of crop insurance in meeting the needs of most of our nation’s farmers has been truly impressive,” he said.
Bob Frazee, president and CEO of MidAtlantic Farm Credit, one of 87 Farm Credit cooperatives that is owned by more than 10,500 farmers from the region told the committee that crop insurance gives lenders the peace of mind to loan to farmers in a very risky environment. “It is extremely important as a lender to agriculture that we know our customers have insured their production,” he said. “This protects the farmer and it protects lenders as we provide credit to farmers to cover their operating expenses.”
Matthew Williams, testifying on behalf of the American Bankers Association, told the committee that crop insurance provides his customers with “the certainty they need to make responsible planting decisions and provides my bank with the confidence we need to extend credit to our customers.” Williams reminded the committee that input costs to plant crops today are “staggering,” and explained that his customers use credit to get their crops planted and harvested. “If federal crop insurance was in some way diminished, our ability to lend – in some cases – would be curtailed,” he added.
Subcommittee Chairman Jeff Fortenberry underscored the importance of access to credit and the essential role it plays in maintaining the United State’s abundant and affordable food supply. “Ensuring a stable food supply is directly connected to farmers and ranchers having access to steady sources of credit,” he said.