US to expand poultry-loan guidance to pork

The USDA plans to expand guidance in place for loans to contract poultry operations, designed to protect them from questionable business practices, to include contract pork operations.

USDA secretary Tom Vilsack said, "USDA currently provides guidance to county offices on the analysis and evaluation of applications for direct and guaranteed loans for contract poultry operations, and how those loans are serviced, to avoid making loans that may exacerbate integrator business practices that have left some producers suddenly without contracts and unable to pay back their Farm Service Agency (FSA) loans."

Vilsack said contracted poultry and pork operations face increased risk in these challenging economic times, and this additional guidance for pork, putting it in agreement with the poultry guidance, will aid the loan officers in county offices as they continue to make informed decisions on loans for contracted pork operations, providing opportunities for producers.

Higher energy and feed costs in recent years, along with reduced demand, have trimmed profit margins and returns. As a result, some companies that contract with producers to supply poultry or hogs have closed processing plants and declined to renew contracts.

In some cases, "it may have proven less expensive to cancel old contracts and begin new contracts with new producers, supported by FSA loans," USDA said. "The producers were sometimes left with debt for their contract operation facilities, but no contract to provide income and repay their USDA direct or guaranteed loan."

In addition, FSA "will issue an Advanced Notice of Proposed Rulemaking to solicit input from the pork and poultry community regarding the prevalence of type of contracting situation," the release said. FSA will solicit proposals for the best way for USDA to address these contract situations in the long term, they said.