114 



There does appear to be a capacity to borrow more, as 

 the debt-to-asset ratio has improved since the 1980s. 

 However, this is what got producers in trouble during that 

 time period. 



The last chart shows commercial banks are assuming a 

 greater role in providing farmers and ranchers credit. 

 This would be the reason for the increase in the non-real 

 estate debt of producers that was seen in figure 1. 



Commercial banks have historically provided operating 

 credit for producers. When the producer could not pay off 

 the operating debt in the 1980s, this was rolled over or 

 refinanced into long-term debt. 



The federal land banks, insurance companies, FmHA, and 

 sales on contract accounted for the land acquisition or 

 long-term debt. We are seeing little increase now in 

 lending by the Farm Credit System, insurance companies and 

 FmHA. The increase in lending by individuals and others 

 would account for suppliers who are providing many farmers 

 and ranchers with operating capital. 



We know that the average age of farm operators is 

 getting higher every year. Young folks are reluctant to 

 begin farming, and lenders are reluctant to finance them, 

 with the present outlook in agriculture. The simple fact 

 is that unless there is adequate income, there will not be 

 an orderly influx of new producers. 



A Western Kansas ASCS office recorded 70 ASCS forms 

 155-2 "Change of Operator" last year. The majority of 

 these were not because of new, young operators taking 

 over. They were the result of old operators leaving 

 production agriculture for financial reasons and other 

 established farmers trying to-make-a-go-of-it by getting 

 larger. 



MARKETING LOANS 



We do not see the marketing loan programs for wbe'at 

 and feed grains which were triggered as a result of the 

 failure to achieve a GATT agreement as being bejreficial to 

 producers. Of course, it depends on how C^TT^ill be 

 implemented. However, cotton prices dropped more than 50 

 percent in the introductory use of marketing loans for 

 that commodity. 



Under the marketing loan system, producers will have 

 the option of paying back the loan either at the 

 government-set loan rate or at the current county-posted 

 market price. This will remove the price support floor 

 and could increase the cost to the government. 



-8- 



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