Most Farmers Skipping Subsidized Loans and Going for the Cash
Sunday, October 15, 2006; 12:00 AM
There is an alternative to giving struggling farmers emergency disaster aid after every drought, hurricane and storm. Only farmers who cannot qualify for a commercial loan are eligible.
They can take out federally subsidized low-interest loans up to $500,000 for each disaster they experience. But the farmers tend to pass up the emergency loans in favor of the emergency cash.
For example, Nebraska farmers took out just nine emergency loans totaling about $389,000 between 2004-2006, records show. During roughly the same period, they collected more than $100 million in disaster payments.
"They don't want a loan," said R. Coke Gray II, head of the Farm Service Agency in Columbus County, N.C., where farmers have also gotten millions in disaster aid. "They want a disaster program because those are going to be dollars they don't have to borrow. If I was in their boat, I'd do it too."
Others say the farmers are just being smart.
"Farmers are very careful about taking on additional debt," said Brian Wolford, the top U.S. Department Agriculture official in Nebraska. "At the same time, I don't think any farmer counts on disaster aid because there are no guarantees."
Nationwide, use of the loans has declined sharply as disaster aid has increased. Farmers took out just 381 emergency loans in 2005, down from nearly 2,500 in 2000, records show.
The loans began in the late 1940s when the Farmers Home Administration began looking for a way to help farmers recover from natural disasters.
To qualify, farmers must be located in a county that has been declared a disaster by the secretary of agriculture. The declaration process is complicated and involves surveys, paperwork and meetings. Dozens of local, state and federal officials are involved, including two USDA employees who review applications and make recommendations to the secretary.
Each year, thousands of applications arrive in Washington. And so long as they meet the government's threshold that at least one crop or one farmer in a county suffered a loss of 30 percent or greater, they usually are approved.
"It is not a very high bar to clear," USDA Deputy Administrator John Johnson acknowledged in an e-mail to The Post.
Recently, as many as two of every three counties in the country have received declarations, prompting some to question the government's standard. "To me, we're not living in the Sahara," said Hunt Shipman, a former top USDA official. "So if we're having multiple years of disaster declarations, we may not have the right ruler to measure disasters."
Local officials, governors and farm state legislators campaign aggressively for the declarations, writing letters and making phone calls. Nebraska Gov. Dave Heineman made three requests this year on behalf of counties hurt by drought. He was joined by Republican Sen. Chuck Hagel, who wrote three separate letters to the USDA, according to a July press release issued by Hagel's office applauding a declaration covering 49 counties.
"Today's announcement is an important step to help farmers and ranchers . . .survive a difficult market and recover from damages caused by poor conditions," Hagel wrote.
Despite the effort, few farmers in Nebraska or elsewhere appear to want the loans that the disaster declarations enable.
Why do legislators go to all the trouble then? Hagel did not respond to requests for comment. Some USDA officials believe it is so legislators can put out press releases showing they are helping their farm constituents.
"There is also a public relations benefit for those officials who like to write letters requesting or supporting the designation," Johnson told The Post.
Still another reason is that the letters and disaster declarations attract public attention and help set the stage for disaster legislation that puts cash in the hands of farmers, some times years later.
"Probably the most important thing it does is it signals there is a greater need out there," Wolford said.