[Federal Register Volume 64, Number 5 (Friday, January 8, 1999)]
[Notices]
[Pages 1178-1179]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-377]
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DEPARTMENT OF AGRICULTURE
Farm Service Agency
Temporary Suspension of Direct and Guaranteed Farm Ownership and
Farm Operating Loan Programs To Construct Specialized Facilities Used
for Hog Production
AGENCY: Farm Service Agency, USDA.
ACTION: Notice of temporary suspension.
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SUMMARY: The Farm Service Agency (FSA) is announcing a temporary
suspension, effective on the date of this notice, of direct and
guaranteed farm ownership and farm operating loan financing for the
construction of specialized facilities used for the production of hogs.
EFFECTIVE DATE: January 8, 1999.
FOR FURTHER INFORMATION CONTACT: James F. Radintz, Director, Farm Loan
Programs Loan Making Division, Farm Service Agency, 1400 Independence
Avenue, SW, STOP 0522, Washington, DC 20250-0522, telephone (202) 720-
1632; email Jim__Radintz@wdc.fsa.usda.gov.
SUPPLEMENTARY INFORMATION:
Background
A specialized facility, hereafter referred to as a facility, is
defined for the purposes of this temporary suspension as any building
or enclosure and related equipment specifically designed to house,
raise or feed hogs of any size, age, or market class.
This action is necessary for USDA to adopt consistent policies to
address the economic crisis in the pork industry. The Secretary of
Agriculture has taken a variety of administrative actions to mitigate
the current over-supply and historic low price conditions being
experienced by hog producers. It is inconsistent with USDA policies for
FSA to continue to finance construction of additional production
facilities through direct loans and loan guarantees while other
agencies within USDA expend resources to ameliorate over-supply
conditions.
FSA is concerned that during this period of low prices, the
availability of its credit programs may facilitate additional
production capacity that will prolong the current hog price depression.
Additional capacity is also likely to damage the prospects for long-
term financial recovery in the industry. These results would be
damaging to individual hog producers and the public interest. Without
the moratorium, the effect will be increased Federal outlays as the
time necessary for USDA amelioration of over-supply will be extended.
Producers will experience continued severe financial stress and delayed
financial recovery. Further, USDA is concerned that continued financial
stress on hog producers may force and accelerate concentration of the
production, processing, and marketing of hogs into fewer hands. Such a
concentrated structure would result in a significant reduction in the
diversity of agricultural production and in the independence of family
farmers across the country.
In many cases, a producer would be unable to obtain the required
capital for new facilities were it not for FSA's direct and guaranteed
farm ownership and farm operating loan programs. Loan guarantees limit
the loss risk to commercial lenders up to 95 percent, while qualified
applicants may receive 100 percent financing through the direct loan
program. The current price levels for hogs ready for slaughter will not
generate adequate cash flow to support new loans. However, through
production contracts or other means, some loan applicants may be able
to meet loan repayment requirements and qualify for credit for the
construction of new facilities. The Agency is
[[Page 1179]]
particularly mindful that the availability of an FSA loan guarantee may
induce commercial lenders to finance facilities that they would
otherwise not consider viable under current market conditions.
Direct and guaranteed loan applications that were received by FSA
county offices on or before the date of this notice will be processed
through to completion and will not be affected by this temporary
suspension. Loan applications for purchase, refinancing, maintenance or
repair of facilities currently in production will continue to be
processed, as will loan requests for operating loans for annual
production purposes. In all other cases, applications will only be
processed when the government's interest will be imperiled. All other
loan applications submitted to FSA county offices during the temporary
suspension will be accepted but held in abeyance until the suspension
is lifted.
This temporary moratorium will be lifted upon determination by the
Secretary that economic and financial conditions have improved to the
extent that USDA action is no longer necessary to alleviate financial
stress on hog producers.
Signed in Washington, DC, on January 4, 1999.
Parks Shackelford,
Acting Administrator, Farm Service Agency.
[FR Doc. 99-377 Filed 1-7-99; 8:45 am]
BILLING CODE 3410-05-P
