the court determines that the corrected forms and explanations required by this court's order of May 7, Dated at Fargo, North Dakota, this 2nd day of June, 1987. Den Wan birth BRUCE M. VAN SICKLE, JUDGE Senator CONRAD. Mr. Severens. STATEMENT OF EUGENE SEVERENS, CENTER FOR RURAL AFFAIRS, WALTHILL, NE Mr. SEVERENS. Thank you very much, Mr. Chairman. I work for the Center for Rural Affairs in Walthill, Nebraska. The Center was formed in 1973 by rural Nebraskans concerned about the role of public policy in the decline of family farms and rural communities. We would like to thank the chairman and other members of this committee for holding hearings on the role of Farmers Home Administration [FmHA]. The Agency is the main instrument of Federal agricultural credit policy, and its policy and commitment are needed today more than ever. I say, "today more than ever," because we are entering the rebuilding stage of the farm crisis. The excess debt attached to farming assets has been painfully squeezed out during the liquidation stage of the past 4 or 5 years, and farming assets, especially farmland, is now available for the first time in years at affordable prices. As I stated to this committee before at field hearings in Omaha last January, we believe that any Federal policy that affects access to agricultural credit must be analyzed from the standpoint of— how will this policy alter competitive positions of farmers within agriculture? Or in today's rebuilding stage, the policy question becomes: how will this policy alter the competitive positions of farmers or other land buyers-to buy farmland? We need to remind ourselves that farmers are not a homogeneous group. If Federal actions, like FmHA policies, the secondary market, or Farm Credit System [FCS] bailouts, differentially affect access to agricultural credit, Congress will, by definition, be helping one group of farmers-or land buyers-at the expense of another. This, of course, is not a new revelation, but is the historic rationale for the creation of FmHA and Federal intervention in agricultural credit: to provide special access to credit for a specific subset of farmers. That longstanding, bipartisan definition of that subset has always been: beginning and modest, low-equity farms that have the ability to become efficient family size operations but are unable to get credit elsewhere. I would like to spend the rest of my time discussing how Federal credit policies, especially FmHA's, affect family size farmers' ability to participate in the coming rebuilding of agriculture. In particular, my testimony will focus on how those credit policies adversely affect family size farmers' ability to control access to farmland. FEDERAL POLICY AND THE RESALE OF LENDER INVENTORY FARMLAND Our organization believes that the coming round of farmland sales is going to be an historic event that will shape the future ownership and control of American farmland and, by implication, the future of family farm agriculture and the concept of the owneroperator. Until recently, much of the potentially available farmland has been voluntarily warehoused by agricultural lenders, including FmHA. As we know, farmland sales started picking up, and some FCS banks as well as FmHA have begun selling farmland. Several proposed changes in Federal agricultural credit poli the court determines that the corrected forms and explanations required by this court's order of May 7, Dated at Fargo, North Dakota, this 2nd day of June, 1987. Lawn Man Likh BRUCE M. VAN SICKLE, JUDGE Senator CONRAD. Mr. Severens. STATEMENT OF EUGENE SEVERENS, CENTER FOR RURAL AFFAIRS, WALTHILL, NE Mr. SEVERENS. Thank you very much, Mr. Chairman. I work for the Center for Rural Affairs in Walthill, Nebraska. The Center was formed in 1973 by rural Nebraskans concerned about the role of public policy in the decline of family farms and rural communities. We would like to thank the chairman and other members of this committee for holding hearings on the role of Farmers Home Administration [FmHA]. The Agency is the main instrument of Federal agricultural credit policy, and its policy and commitment are needed today more than ever. I say, "today more than ever," because we are entering the rebuilding stage of the farm crisis. The excess debt attached to farming assets has been painfully squeezed out during the liquidation stage of the past 4 or 5 years, and farming assets, especially farmland, is now available for the first time in years at affordable prices. As I stated to this committee before at field hearings in Omaha last January, we believe that any Federal policy that affects access to agricultural credit must be analyzed from the standpoint ofhow will this policy alter competitive positions of farmers within agriculture? Or in today's rebuilding stage, the policy question becomes: how will this policy alter the competitive positions of farmers or other land buyers-to buy farmland? We need to remind ourselves that farmers are not a homogeneous group. If Federal actions, like FmHA policies, the secondary market, or Farm Credit System [FCS] bailouts, differentially affect access to agricultural credit, Congress will, by definition, be helping one group of farmers-or land buyers-at the expense of another. This, of course, is not a new revelation, but is the historic rationale for the creation of FmHA and Federal intervention in agricultural credit: to provide special access to credit for a specific subset of farmers. That longstanding, bipartisan definition of that subset has always been: beginning and modest, low-equity farms that have the ability to become efficient family size operations but are unable to get credit elsewhere. I would like to spend the rest of my time discussing how Federal credit policies, especially FmHA's, affect family size farmers' ability to participate in the coming rebuilding of agriculture. In particular, my testimony will focus on how those credit policies adversely affect family size farmers' ability to control access to farmland. FEDERAL POLICY AND THE RESALE OF LENDER INVENTORY FARMLAND Our organization believes that the coming round of farmland sales is going to be an historic event that will shape the future ownership and control of American farmland and, by implication, the future of family farm agriculture and the concept of the owneroperator. Until recently, much of the potentially available farmland has been voluntarily warehoused by agricultural lenders, including FmHA. As we know, farmland sales started picking up, and some FCS banks as well as FmHA have begun selling farmland. Several proposed changes in Federal agricultural credit poli cies are going to have a profound impact on those sales as those policies change the competitive positions of the would-be buyers of that farmland. Some of those major policies include: the manner in which FmHA sells its farmland inventory; the availability of FmHA FO funds for farmland purchases; the ability of FmHA borrowers to settle debts by partial liquidation and retain a minimum farming base from which they too can participate in the rebuilding; the continued availability and success of chapter 12 bankruptcy to allow the retention of a minimum farming base from which those farmers too can participate in the rebuilding; the continued development of bankruptcy alternatives, like mandatory mediation, to promote fair, realistic debt settlement procedures that prevent arbitrary, unnecessary and inefficient termination of family farming bases; the sale of FCS inventory as a part of a broader FCS bailout is another policy consideration; and finally the creation of a secondary market for farm mortgages. This is just a partial list of the types of policies that Congress will be dealing with in the next few months that are going to affect who can participate in the rebuilding stage of agriculture. Generally, these policies fall into two groups: one, those that allow an operation to retain a secure farming base from which to participate in the rebuilding, and two, those that directly affect the availability of financing to build up a farming base to a family size farm operation. I have some other material in my prepared statement that I hope could be made a part of the record. I would like to skip, if I could, to the next page of my testimony on the role―― Senator CONRAD. Without objection we will include your full statement in the record. Mr. SEVERENS. Thank you very much. Let me back up one step and simply say that S. 1179, Mr. Chairman, primarily deals with that first policy area: the ability of current farmers to maintain a farming base from which to participate in the rebuilding. I think with a few minor reservations we support wholeheartedly S. 1179. But we think the bill could also be improved if it addressed some of the issues that we think are going to be faced in the second policy area: that of providing financing for the rebuilding stage. THE SPECIAL ROLE OF FMHA FmHA is the main instrument of Federal agricultural credit policies; it has decades-long experience in assisting new or struggling operations to become efficient family size operations; it is equipped with well-articulated public purposes that have been carefully deliberated by congressional committees. We have every reason to expect FmHA to be playing a positive role-especially in the farmland rebuilding stage which is the basic purpose for which the Agency was created is at stake, and at a time when farmland prices are affordable and the risks to FmHA and the taxpayer low. Unfortunately, this is not the case. But before focusing on FmHA's disappointing performance, I would like to make some general observations about the new set of emerging farmland buyers. |