Farm loan program.

08LSO-0062.C1

                                                         

FISCAL NOTE

 

The fiscal impact, in the form of interest income from outstanding loan volume for new Beginning Ag. Producer Loans and new Livestock Replacement and Enhancement Loans, is indeterminable.

 

Beginning Ag Producer Loans:

Available funds would increase from $7.0 million to $27.5 million.  The initial $7.0 million was loaned out over a 4 year period or an average of about $1.75 million per year.  Since this bill would increase the maximum loan amount from $600,000 to $800,000 and because the Beginning Ag. Producer Loan Program was in its infancy when funds were exhausted, it is likely that loan applications will increase over past experience.  Therefore, assuming that $5.0 million is loaned each year, then loan volume at the end of FY09-FY11 would be $12.0 million, $17.0 million, and $22.0 million, respectively.  Various rates for the first years of the loan are applied to Beginning Ag. Producer Loans dependent upon the date of closure and the lower of 8% or the average yield on a ten(10) year U.S. Treasury Bond for the previous year.  Also, loan volumes do not remain constant throughout the year.  Due to these factors, the exact amount of revenue increase based on interest income is impossible to project.

 

Livestock Replacement and Enhancement Loans:

Should this bill pass, the Breeding Livestock Loan Program would be repealed and replaced with the Livestock Replacement and Enhancement Loans.  In order for the funds to be utilized under the Breeding Livestock Loan Program, the drought had to be declared to be over.  This did not happen, so funds allocated to this Program were never utilized.  The new Breeding Livestock Loan Program would allow funds totaling $55.0 million to be loaned out at an interest rate of approximately 5.6%, so we assume that livestock producers will take advantage of this program and loan volumes will increase each year, however, we have no way to estimate demand for this program.

 

 

 

 

Prepared by:   Dean Temte, LSO    Phone: 777-7881

(Information provided by Fred Pannell, OSLI; 777-6635)