Farm Progress is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Young farmers face difficult wait

Their 2001 cotton crops are up and starting to lap the middles, but four young west Tennessee farmers still don’t have their production loans. And it could be mid-August before they finally know if they will get them.

Three of the farmers applied for loans in February 2001 and one this May. As planting time approached — and no news had come on the status of the loans — the farmers arranged for credit through their families or with suppliers.

In late May, a letter from FSA brought the worst possible news. The agency had denied all four farmers the money they needed to finish their crops.

FSA explained that the farmers either couldn’t cash flow their operations or didn’t meet certain eligibility requirements. It appeared to be a straight-forward decision based on sound lending principles.

But Johnny Porch , west Tennessee cotton farmer and farm activist, contends that the denial of the loans and the drawn-out appeals process are all part of a scheme by FSA to “eliminate young farmers.” He immediately filed appeals on behalf of the four farmers.

“I wouldn’t argue with the denials if economic conditions were favorable and we weren’t in a drought the last three years and everybody else was doing well economically and these farmers weren’t,” Porch said. “But everybody is hurting, not just these farmers. The only thing these farmers are guilty of is getting started in farming at the wrong time.”

Some of Porch’s remarks, which were made during the second day of appeal hearings in Jackson, Tenn., rankled several FSA officials attending.

“Nothing could be further from the truth than to say that FSA is trying to run off new farmers,” said Carey Johnson, FSA district director. “The proof is the hundreds of youth loans that we have made throughout the state of Tennessee.”

Michael Boyd, a farm loan specialist with FSA, says the agency gave all the farmers ample opportunity to fulfill their loan obligations and the farmers just don’t show the ability to repay their loans.

But Porch believes the farmers, 20 to 23 years old, are being singled out.

Matt farms a little over 400 acres of cotton. He filed for his production/living expenses loan on Feb. 23 and was denied a loan on May 29. Most of the discussion at the hearing centered around his purchase of a used cotton picker without FSA approval.

Porch claims that Matt was required only to “consult” FSA before purchasing the picker, which he says he did in a meeting in 2000. Matt also claims that the picker would improve his off-farm income through a custom harvesting venture.

FSA says the picker purchase was not specifically mentioned in the meeting, although ways to improve off-farm income were.

Chester farms a little over 600 acres of dryland cotton and, according to FSA, has not met his loan obligations in any of the previous three years. But Porch points out that drought had pushed Chester’s yields to less than half a bale per acre each year.

In 1999 and 2000, FSA computed his cash flow based on the county average yield of a little over 600 pounds per acre. But in 2001, FSA figured his cash flow based on his actual yields during the previous three years, when west Tennessee was in the grip of a drought.

FSA is instructed to use the county average in figuring cash flow during years of drought or disaster, but felt they had the authority to use real numbers in Chester’s case because the county average yield did not drop significantly during the disaster years. Meanwhile, Chester’s yields never exceeded 300 pounds.

On FSA’s lowering of Chester’s projected yield, Porch noted, “They have no idea of what he can do in a normal year. He did make a bad mistake. He started farming the first year of a long drought.”

When the county average is used in the computations, the young farmer’s operation does cash flow, according the Porch. “There’s no reason why this young man shouldn’t get his loan. There’s plenty there to show a positive cash flow.”

“We try to look at everybody in the most favorable light as we can,” Boyd said. “But the borrower has been unable to pay back the loans and the county average yield is 40 percent higher than he’s ever produced. This is not a personal vendetta against young people,” Boyd said. “It was the proper decision.”

Two other farmers, Justin and Bill, appeared to be set for approval, then were turned down for insufficient cash flow.

Bill went from 400 acres of cotton in 2000 to a little over 1,600 acres of cotton in 2001. “FSA told him they didn’t have a problem with the young man increasing his acreage,” Porch said. “They came back later (after he had rented the land) and said he didn’t have a positive cash flow.”

In addition, “FSA had advised Bill to liquidate some Wal-Mart stock his grandmother had given him to help pay off debts,” according to Porch. “After he did all that, they still turned him down.”

In Justin’s case, as in Chester’s, actual yields during the disaster years were used to compute cash flow. But Porch says county average yields should have been used. And FSA could have restructured Justin’s loan to make it cash flow.

“There were a lot of things that they could have done to cash flow both loans,” Porch said. “But they chose not to.”

Chester is currently depending on his parents for living expenses and financing of the crop. Matt has relied on his family for support during the appeals process, as has Justin. Bill is receiving some help from his grandmother and a supplier, Helena Chemical Co., has provided some credit.

FSA and Porch agree that the agency is not to blame for lengthy loan reviews, although Porch accuses them of “dragging their feet sometimes.”

“We’re not like a bank where someone might get a loan based on a piece of paper,” Boyd said. “We have to ask farmers to provide us with all the records of past years. We have to have five-year historical records, and we have to verify all their debts.

“So even though the application is dated in February, that may not be the date that the application was actually considered complete. Once it’s considered complete, we have a 60-day turnaround, by law, to approve or disapprove the loan.”

However, Porch says leading farmers to believe they are getting a loan, then denying the loan is a “tactic” FSA uses to discourage young farmers from agricultural ventures.

“I saw this happen one time before when we had a change of administration,” Porch said. “I’m not pointing the finger at President Bush, but it seems that whenever we get a Republican administration and we have a Republican appointee as state director, that the attitude is to eliminate FSA borrowers. And they use whatever means they have to do that.”

Boyd denies there is any such conspiracy. “But we are the lender of last resort. Every farmer that comes in is a little risky. It’s the nature of our business. If they weren’t risky, they’d be at the bank.”

The agency says it is trying to address the aging of the farm community through youth loan programs. “We know that farmers are getting older,” Boyd said. “We know we have to get young people in there. We have a youth loan program that makes loans to youths from 10 to 20 years old. We have made a slew of those loans for them to put in a small crop or to buy a few cattle.

“The whole purpose of this youth loan program is to get their feet wet while they’re young, get them to learn how to manage something and know about borrowing money and paying debts back.”

As to Porch’s contention that FSA’s loan approval rate varies according to whatever political party is in power, Boyd said, “We have a set of federal statutes that we are required to go by. Eligibility and feasibility are the two criteria.”

According to Johnson, there were 33 loan applications by farmers 32 years old and younger in Haywood, Madison and Fayette counties in west Tennessee this year. Of those, 22 loans were made, seven were rejected, and four were withdrawn.

Johnson noted that many young farmers today are facing an uphill battle. “Many of them don’t have the equity and borrowing power, and that’s reflected especially in the cotton and strictly row-crop counties.”

The hearing officer has 30 days from the appeal date to issue a decision on the farmers’ appeals, which were heard on July 17 and 18.

e-mail: [email protected]

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.