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Amid the continuing partial shutdown of the federal government, Sen. John Hoeven, R-N.D., is asking the U.S. Department of Agriculture to recall furloughed agricultural lending workers.

“With the closure of FSA (Farm Service Agency) county and state offices, there is concern that producers will not have access to important loan programs that provide them with the necessary cash flow to operate,” Hoeven said in a statement.

So Hoeven asked USDA Secretary Sonny Perdue to deem these loan programs essential.

FSA provides both guaranteed and direct farm operating and ownership loans, giving eligible producers access to capital.

In Fiscal Year 2018, North Dakota had a total of 844 FSA farm loans — 450 direct operating loans and 203 loan guarantees among them.

“Sen. Hoeven has got the right idea,” said Cary Anderson, market president for Security First Bank in Mandan.

Bankers have started their busy season for agriculture operating loans, according to Anderson.

“There’s a bottleneck that’s going to form,” he said. “FSA has typically been understaffed plus it’s a busy time of year .... With this shutdown, it’s just going to get worse.”

Anderson said delayed FSA loan guarantees affect banks. But the hurt is felt even more with FSA’s more common subordination loan program.

With subordination loans, FSA issues a direct loan for equipment or cattle and then subordinates its collateral on that loan to banks so the banks can make operating loans to farmers and ranchers.

“Borrowers go to FSA and get everything lined up for subordination and then the details are sent over to the bank,” Anderson said.

But without the FSA personnel there to process the paperwork, the collateral cannot be transferred and banks can’t issue the operating loans.

Anderson said, because FSA is the lienholder on the producer’s assets, producers also aren’t able to cash checks for the sales they make until FSA signs off on it.

“I know several people that are sitting on checks right now,” Anderson said.

Meanwhile, producers continue to accrue interest on their past year’s loans every day and can’t do anything about it.

“That’s a big deal,” Anderson said. “That’s costing a lot of money, especially in a time when they have very, very tight margins.”

Some of the first expenses coming due are going to be cash rents for pastures and crop lands. Those due dates usually start in February and peak between March 1 and April 1. While the shutdown may not last that long, the backup at FSA offices could put producers on a tight deadline.

“Hopefully, guys don’t lose any of their rents if they’re late,” said Todd Neurohr, agricultural lending manager for Starion Bank.

Anderson said it could also have a ripple effect on landowners because, especially if they’re retired, that rent money may be what they live on.

“There’s a lot of financial stress out there right now for producers,” Neurohr said. “This just kind of adds to that unfortunately.”

Neurohr and Anderson said the delay in operating loans means producers could also miss out on price discounts for seed, fuel or fertilizer.

“Right now, they might pay $585 (per ton) for anhydrous. That could jump to $650. That’s a significant amount for those guys,” Neurohr said.

Both Anderson and Neurohr are encouraging borrowers to speak with their lenders early to devise a plan. Anderson said it is easier for lenders to help before payments become delinquent than it is after.

One way Starion is trying to help is by providing interim loan money until FSA can get up and running again, according Neurohr.

“I’ve been telling guys to get their balance sheets and cash flows to me as soon as they can,” he said, noting that some aren’t in a good enough position financially to get approved.

Finally, some are seeing delays in relief payments issued to eligible producers by USDA to partially offset losses due to trade disputes with China, Mexico and Canada. Anderson said those payments were especially significant to soybean farmers.

This is not the first time the federal government has been shutdown due to lack of funding approval by Congress but it is on track to be the longest. And Neurohr can’t remember any of the previous shutdowns taking place during this busy time period for agriculture lending.

“This is kind unique, too, because we’re in this down cycle in agriculture,” he said. “So, it makes it even tougher for everybody.”

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Reach Jessica Holdman at 701-250-8261 or jessica.holdman@bismarcktribune.com

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