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In December 2021, the United States Department of Agriculture (USDA) introduced the Food Supply Chain Guaranteed Loan program as a promising initiative to strengthen the nation’s food supply chain. With the American Rescue Plan Act (ARPA) providing the program with a mandate to guarantee approximately $1 billion of qualifying loans, hopes were high for its potential to create a more resilient and secure food supply system. However, the program’s journey took an unexpected turn, and by May 2023, it was abruptly canceled, leaving many wondering what went wrong. First National Bank of Oklahoma was a leader in educating the market on the benefits of the program, and ultimately was able to close the only Food Supply Chain Guaranteed Loan in the state of Oklahoma prior to the program cancellation.
The Purpose and Promise
The USDA Food Supply Chain Guaranteed Loan program was designed to fill a crucial gap in the food supply chain by focusing on projects in the “middle of the food supply chain.” Unlike other USDA guaranteed loan programs, which primarily cater to rural markets, this program had a unique feature – it could be used to finance rural and urban projects. The intent was clear: to foster diversity, security, and resilience in the U.S. food supply chain.
The program’s promise lay in its ability to provide financial support to businesses and organizations that played pivotal roles in the food supply chain but often struggled to secure funding through traditional means. These projects ranged from food processing facilities to distribution centers, and the goal was to create a more sustainable and robust system capable of withstanding unforeseen challenges, such as the disruptions caused by the COVID-19 pandemic.
The Fall of the Food Supply Chain Program
The USDA Food Supply Chain Guaranteed Loan program was canceled in May 2023. It was not due to any inherent flaws in the program itself, but rather as a result of broader political negotiations. President Joe Biden and U.S. House of Representatives Speaker Kevin McCarthy engaged in discussions aimed at increasing the U.S. debt limit. These negotiations culminated in the creation of the Fiscal Responsibility Act (FRA).
The FRA was a budgetary policy that sought to reduce the deficit by $1.5 trillion over the course of a decade while safeguarding critical benefits such as social security, Medicare, and Medicaid. Importantly, no cuts were made to the President’s landmark policy achievement, the Inflation Reduction Act. Instead, the FRA targeted unspent COVID-19 funds, including those allocated through the ARPA, which included the remaining guaranteed loan authority for the Food Supply Chain program.
Impact and Implications
As a result of the FRA, the USDA Food Supply Chain Guaranteed Loan program saw its future prospects dashed. Loans that had already been approved and funded under the program remained unaffected, the cancellation of unspent funds meant that no additional financial support would be available for future projects.
One of the program’s standout features was its ability to finance urban projects, a departure from the typical rural focus of USDA guaranteed loan programs. This aspect was particularly appealing, as it recognized the importance of urban areas in the food supply chain and aimed to address their unique challenges.
The rise and fall of the USDA Food Supply Chain Guaranteed Loan program offers a glimpse into the complexities of government initiatives and the impact of political negotiations on well-intentioned programs. Despite its potential to create a more resilient, diverse, and secure U.S. food supply chain, the program became a casualty of budgetary compromises.
While the program’s cancellation may have left some disappointed, it serves as a reminder of the need for ongoing efforts to strengthen the nation’s food supply chain. As the agricultural landscape continues to evolve, it remains crucial for policymakers and stakeholders to explore innovative ways to address the vulnerabilities in the food supply chain and ensure its long-term sustainability. While the Food Supply Chain program may be a chapter of unfulfilled promise, the quest for a more robust and secure food supply system must continue through other avenues and initiatives.