The Minnesota House on March 5 approved legislation (House File 2959) to appropriate $50 million bond funds for the Rural Finance Authority (RFA), a state entity that offers low-interest loan programs to farmers. Existing funds are nearly depleted and there is an urgent need to replenish the account to guarantee more loan availability.
State Representative Jeanne Poppe (DFL-Austin), chief author of the bill to appropriate funds and chair of the Agriculture and Food Division, said the bill has bipartisan support and expects the entire Minnesota House to swiftly approve it.
“We all know 2019 was one of the worst years in decades for farming, whether it was extreme weather, mental health crises, historically low commodity prices, or uncertainty with global trading partners,” said Poppe. “Today, we’ve reached a collaborative and fruitful outcome that will give farmers the financial support they need to stay afloat. And we did it in a way that was transparent and accountable.”
The Minnesota Farmers Union, Minnesota Farm Bureau, and Minnesota Department of Agriculture (MDA) have all expressed support for the bill’s swift passage. To date, more than $289.7 million has been invested in 3,094 loan participations by the RFA, and they have a strong record of success. Through December 31, 2019, the RFA bonded programs had loan losses (totaling $555,707) on only 21 loans since 1986, an outstanding loan balance of $94.4 million, and 626 active loan files.
In the last two years, the RFA has seen increased participation in Beginning Farmer programs and increased numbers of bond funded loans issued. This increase can be partly attributed to the very low interest rates that RFA is able to offer, which are achieved through successful bond sales at interest rates as low at 2.15% in 2019. Education and outreach about these loans to farmers and lenders have increased their popularity. RFA loans are appealing to farmers and lenders during difficult economic times because the low interest rate also makes it easier to cash flow.
According to MDA, $35 million in user-financed bond sales historically would last about three or four years, but because of increased awareness, economic need, and low interest rates, the RFA has used $22-$25 million per year in recent years.