WASHINGTON – U.S. Rep. Axne (IA-03), member of the House Agriculture Committee, questioned Chairman and CEO of the Farm Credit Administration (FCA), Glen Smith, on the rising amount of farm debt and farmers turning to alternative lenders who charge far higher interest rates at Tuesday’s Committee hearing.
“I have serious concerns about the level of debt our farmers have,” Rep. Axne said. “Farm debt is projected to hit $416 billion this year, and the $19 billion of farm debt that Iowans have is the highest in the nation. And this level of debt has consequences: the Farm Bureau reports that farm bankruptcies rose 24% compared to a year ago. Additionally, a recent study from Iowa State University classifies 44% of Iowa farmers as financially vulnerable.”
Rep. Axne also raised concerns over a recent report on a rise of farmers turning to alternative lenders outside of the Farm Credit System or traditional banks. These lenders can provide a lifeline for farmers, but often come with stricter terms and higher rates. One such loan carried an interest rate above 30% and required daily automatic withdrawals for payments. Rep. Axne asked Chairman Smith if he has seen an increase in farmers going outside of traditional banks or the Farm Credit System for loans.
“Yes, unfortunately we have,” Chairman Smith responded. “I describe them as payday lenders because of some of the interest rates that have been charged… It’s deeply concerning. It’s deeply concerning the security interests that these alternative lenders are taking that might have an impact on long-term lending that the banks and the system might be holding, as well. So yes, to answer your question, we’re seeing an increase and it is a concern.”
At the beginning of the hearing, Rep. Axne introduced Chairman Smith, a native of Atlantic, Iowa, to the committee. Glen was designated Chairman and CEO of the FCA on July 17 and has served as a member of the FCA board since December 2017. Glen was raised on a diversified crop and livestock farm and graduated from Iowa State University with a degree in agricultural business. Today, their family farm, Smith Generation Farms Inc, encompasses 2,000 acres devoted to corn, soybeans, hay, and a beef cow herd.