Agricultural Disaster Loan Origination Program Act of 2012

Abnormally warm weather in the middle of March followed by more seasonal temperatures in the late March and April caused extensive damage to Michigan's fruit crops.  The early warmth caused premature budding of fruits and the freezes that followed destroyed blooms and early developing fruit.  Early estimates suggest 90% loss of the apple crop ($108 million), 90% loss of the tart cherry crop ($38 million), 15% loss of the blueberry crop ($20 million), 85% loss of the juice grape crop ($17 million), 95% loss of the peach crop ($12 million), and 80% loss of the sweet cherry crop ($12 million). Total estimated loss is $210 million with an estimated economic impact of $503 million.  With input costs such as pesticide, pruning, and limited labor continuing, many producers are struggling to make it to next fall, when the next crop and income may come.   Processors too are struggling due to lack of a crop. 

The United States Department of Agriculture is adjusting some of their Disaster Assistance Programs.  Contact your local USDA Farm Service Agency to see what programs you might qualify for. 

The Michigan State Legislature responded to the 2012 disaster with their own program.  Public Act 193 of 2012, sponsored by Rep. Ray Franz, was signed by Governor Snyder on June 26, 2012.  It establishes the Agricultural Disaster Loan Origination Program Act of 2012 to cover some costs of qualified financial institutions which make qualified agricultural loans to producers and processors that were impacted above certain economic thresholds by an agricultural disaster recognized by the Governor, occurring after January 1, 2012. 

$15 million was appropriated by the legislature and signed into law as PA 305 of 2012 to fund the loan program.

- Farmers will be eligible based on an agricultural disaster and will have to certify by affidavit that they have suffered a loss of 25% or more in major enterprises or production loss of 50% or more in any one crop in this state.

- As a result of an agricultural disaster, processors and handlers would be eligible if they can certify by affidavit a 50% or greater loss in volume of one commodity compared to the prior three years.  As well, agribusiness with at least 75% of their business in direct sales to farmers could qualify based on impact of 50% reduction in sales compared to the prior three years.

- Individual farmer will pay a fixed 1% interest rate, or a fixed interest rate based on the five-year United States Treasury note plus ¼%.

- Lenders will take the credit risk, lending private dollars, and make final decision on loan amount up to the cap based on their risk exposure/tolerance.

- $400,000 cap on loans to individual farmers based on their actual loss, minus insurance proceeds or a reduction on total loan eligibility if insurance was available and farmer chose not to purchase it.

- $800,000 cap on loans for individual processors and handlers, with a $1 million cap on those with multiple locations.

- Loans will have to be entered into prior to March 31, 2013.

- Loans will be for five years with interest payments only for the first two years, then 25% of the principal plus interest payment due at the end of the 24th month of the loan, with three additional equal principle installments plus interest due at due at 36, 48, and 60 months.

For more information, contact your lender and ask if they are participating in the Agricultural Disaster Loan Origination Program Act of 2012.