USDA sets its sights on expanding packing capacity and reducing loan risk

USDA now has another program on its list of efforts aimed at shoring up the food supply chain. It also looks to address competition in the beef industry.

The Department of Agriculture is launching a new loan guarantee program to reduce the risk of financing ag projects like local processing plants or farmer cooperative cold storage facilities.

According to Ag Secretary Tom Vilsack, “These loan guarantees are important to bankers and those who provide financing, because they may not be as familiar with the risk associated in this or and the reluctance on the part of commercial lenders to establish, to provide the credit. With our loan guarantee, we expect and anticipate that the risk bankers and other financiers will come down significantly and open up credit opportunities.”

The Department of Ag has been hosting listening sessions with the industry, and Secretary Vilsack says that this initiative addresses how products move from farm to shelf.

“This is again focused on the middle of the supply chain and can impact and affect those who are involved in the aggregation of supply, those who are involved in the processing of supply, those who are manufacturing or wholesaling or distributing,” he states.

The agency is hosting a training program for lenders next week, to hopefully drive participation.

“Most FDIC banks can easily become approved, also opening up this opportunity for community development financing organizations CDFIs looking for ways in which we can expand the number of entities that will potentially be interested in participating,” he adds.

Vilsack says that they are putting $100 million dollars into the program, which can be leveraged multiple times as those loans resolve. He also states that the department has already received roughly 250 applications from existing small packing plants looking to make upgrades.

The continuing resolution to keep the government operating gave a short-term extension to mandatory livestock price reporting. It would have expired last week.

However, industry insiders say that the expansion allows more time to negotiate market reform.

An NCBA member points to black swan events leading to a lack of processing capacity, but the U.S. Cattlemen’s Association blames packer concentration instead.

“If the only way we can make money is if there is less cattle than there is shackle space, that’s their theory is that shackle space is the only thing that can determine whether we can be profitable, and I respectfully, definitely, disagree. But, we need more players in the marketplace, and competition is huge,” according to VP Justin Tupper

With the efforts announced this week, USDA and lag lawmakers are working to expand processing capacity and increase transparency. Sen. Chuck Grassley from Iowa says that the current extension gives them three months to work on it.


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