Public Policy Toward Agricultural Credit

The primary focus of this symposium is on future sources of loanable funds ' for agricultural banks, an important and timely topic. This paper focuses somewhat more broadly on public policy toward agricultural credit, with emphasis on Federal lending programs. We believe that Federal policies toward farm credit will be an important determinant of the role of various lenders in financing agriculture in the 1980s. The paper reviews the general farm credit situation and prospects and examines the rationale for public, especially Federal, involvement in farm ci-edit. It concludes with a review of the role and status of the major public lenders, especially the Farmers Home Administration. Summary Credit has been an important tool of agricultural policy for more than 50 years. Federal credit policies have assured abundant loan funds and competitive interest rates for agriculture and were a major factor in the technological transformation of agriculture to the highly industrialized, productive, capital-intensive sector it is today. Today, farmers depend heavily on borrowed funds to finance annual produc-tion and to acquire ownership of land and other capital goods. Projections for the next 10 years suggest sharp increases in farmers' use of debt as production expenses rise, primarily because of inflation