According to the Agricultural Retailers Association, several major commodity groups have requested USDA Secretary Ed Schafer to help address any potential liquidity crunch in the agribusiness sector should one occur as a result of another rapid increase in commodity prices.



It is believed the USDA has the authority under the Commodity Credit Corporation to establish a temporary loan guarantee program that would ensure efficient marketing of farm commodities in the event of a liquidity crunch. Such a temporary program could provide loan guarantees to qualified financial institutions lending to agricultural businesses; allowing for the continuation of forward contracts and crop input supply financing to producers. Increased borrowings by agribusinesses and farmers has placed significant pressure on company balance sheets, and in some cases, resulted in significant restrictions on the availability of forward contracts for U.S. farmers.



The USDA has been informed that high costs for crop inputs will require much greater financing for agricultural retailers and producers. Many of these businesses could hit authorized borrowing limits and agricultural lenders could reach the limits of their ability to manage concentrated risks associated with these types of loans.



ARA is closely following this serious financial issue. Please let ARA know if your business is experiencing difficulties obtaining credit by e-mailing your feedback to Richard Gupton at richard@aradc.org.