The Farm Service Agency

Farm loan programs were created in response to well-established characteristics of agriculture: the uncertainties of weather and other factors that influence crop prices, the need of farmers for operating loans, and the tendency of farm commodities to come on the market all at one time (e.g., harvest time), with a resultant glut effect on prices. These characteristics are permanent and inherent in agriculture, but pose special requirements at variance with the idealized textbook theory of markets.

Under provisions of the 1996 Freedom to Farm Act, the loan programs of the FSA are scheduled to be phased down and eventually abolished. Given the persisting agricultural recession of the 1990s, however, this outcome may be uncertain. The Freedom to Farm Act has come under increasing political criticism, and $7.4 billion in emergency farm aid was allocated as recently as August, 1999 (Frommer, 1999).

II. Overview of the Farm Service Agency

1. Mission of the FSA with respect to agriculture

. . .
urces Regular allocations to the FSA are decreasing under terms of the Freedom to Farm Act, but still totaled over $500 million in 1999 (Southwest Farm Advisors). Emergency loans may be authorized by the Secretary of Agriculture or by Presidential declaration ("Emergency Loan [EM] Assistance," 1999). In addition to broad emergency recovery loans, the Secretary may authorize more limited emergency loans to cover only direct material (e.g., crop) losses. In the case of guaranteed loans, the FSA will guarantee up to 95 percent of the principal of loans by conventional agricultural lenders. Such loans are arranged by the farmer directly with the lender; it is the lender, not the farmer, who arranges for the FSA guarantee. The commercial lender has full responsibility for servicing the account for the life of the loan ("Farm Loan Programs," 1999). 5. Loans and terms offered a. Purposes and types of loans Loans available under FSA programs fall into two broad classes: general operating assistance to farmers, and recovery loans in response to natural disasters. Within these broad classifications, a wide variety of loans are available; a comprehensive listing is available at the FSA web page. b. Example loan program A charac
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Approximate Word count = 1516
Approximate Pages = 6 (250 words per page)

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