SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Agricultural Credit Improvement Act 
of 1998''.

SEC. 2. PROHIBITION OF LOAN GUARANTEES TO BORROWERS WHO HAVE RECEIVED 
              DEBT FORGIVENESS AFTER APRIL 4, 1996.

    (a) In General.--Section 373(b)(1) of the Consolidated Farm and 
Rural Development Act (7 U.S.C. 2008h(b)(1)) is amended to read as 
follows:
            ``(1) Prohibitions.--Except as provided in paragraph (2):
                    ``(A) Loan prohibition.--The Secretary may not make 
                a loan under this title to a borrower who has received 
                debt forgiveness on a loan made or guaranteed under 
                this title.
                    ``(B) Guarantees prohibited for borrower who has 
                received debt forgiveness after april 4, 1996.--The 
                Secretary may not guarantee a loan under this title to 
                a borrower who has received debt forgiveness after 
                April 4, 1996, on a loan made or guaranteed under this 
                title.''.
    (b) Authority To Make Emergency Loans to Certain Borrowers Who Have 
Received Debt Forgiveness.--Section 373(b)(2) of such Act (7 U.S.C. 
2008h(b)(2)) is amended--
            (1) by inserting ``(A)'' before ``The''; and
            (2) by adding at the end the following:
            ``(B) The Secretary may make an emergency loan under 
        section 321 to a borrower who--
                    ``(i) on or before April 4, 1996, received not more 
                than 1 debt forgiveness on a loan made or guaranteed 
                under this title; and
                    ``(ii) after April 4, 1996, has not received debt 
                forgiveness on a loan made or guaranteed under this 
                title.''.

SEC. 3. FAMILY FARM DEFINITION.

    (a) Real Estate Loans.--Section 302 of the Consolidated Farm and 
Rural Development Act (7 U.S.C. 1922) is amended by adding at the end 
the following:
    ``(c)(1) The primary factor to be considered in determining whether 
an applicant for a loan under this subtitle is engaged primarily and 
directly in farming or ranching shall be whether the applicant is 
participating in routine, ongoing farm activities, and in overall 
decision making with regard to the farm or ranch.
    ``(2) The Secretary may not deny a loan under this subtitle solely 
because 2 or more individuals are employed full-time in the farming 
operation for which the loan is sought.''.
    (b) Operating Loans.--Section 311 of such Act (7 U.S.C. 1941) is 
amended by adding at the end the following:
    ``(d)(1) The primary factor to be considered in determining whether 
an applicant for a loan under this subtitle is engaged primarily and 
directly in farming or ranching shall be whether the applicant is 
participating in routine, ongoing farm activities, and in overall 
decision making with regard to the farm or ranch.
    ``(2) The Secretary may not deny a loan under this subtitle solely 
because 2 or more individuals are employed full-time in the farming 
operation for which the loan is sought.''.
    (c) Emergency Loans.--Section 321 of such Act (7 U.S.C. 1961) is 
amended by adding at the end the following:
    ``(e)(1) The primary factor to be considered in determining whether 
an applicant for a loan under this subtitle is engaged primarily and 
directly in farming or ranching shall be whether the applicant is 
participating in routine, ongoing farm activities, and in overall 
decision making with regard to the farm or ranch.
    ``(2) The Secretary may not deny a loan under this subtitle solely 
because 2 or more individuals are employed full-time in the farming 
operation for which the loan is sought.''.

SEC. 4. COMBINED LIMIT ON AMOUNT OF GUARANTEED FARM OWNERSHIP LOANS AND 
              GUARANTEED FARM OPERATING LOANS; INDEXATION TO INFLATION.

    (a) Limit on Amount of Guaranteed Farm Ownership Loans.--Section 
305 of the Consolidated Farm and Rural Development Act (7 U.S.C. 1925) 
is amended--
            (1) by striking ``$300,000'' and inserting ``$700,000 
        (increased, beginning with fiscal year 1998, by the inflation 
        percentage applicable to the fiscal year in which the loan is 
        to be made or insured), reduced by the unpaid indebtedness of 
        the borrower on loans under subtitle B that are guaranteed by 
        the Secretary''; and
            (2) by adding at the end the following: ``For purposes of 
        this section, the inflation percentage applicable to a fiscal 
        year is the percentage (if any) by which (A) the average of the 
        Consumer Price Index (as defined in section 1(f)(5) of the 
        Internal Revenue Code of 1986) for the 12-month period ending 
        on August 31 of the immediately preceding fiscal year, exceeds 
        (B) the average of the Consumer Price Index (as so defined) for 
        the 12-month period ending on August 31, 1996.''.
    (b) Limit on Amount of Guaranteed Farm Operating Loans.--Section 
313 of such Act (7 U.S.C. 1943) is amended--
            (1) by striking ``$400,000'' and inserting ``$700,000 
        (increased, beginning with fiscal year 1998, by the inflation 
        percentage applicable to the fiscal year in which the loan is 
        to be made or insured), reduced by the unpaid indebtedness of 
        the borrower on loans under the sections specified in section 
        305 that are guaranteed by the Secretary''; and
            (2) by adding at the end the following: ``For purposes of 
        this section, the inflation percentage applicable to a fiscal 
        year is the percentage (if any) by which (A) the average of the 
        Consumer Price Index (as defined in section 1(f)(5) of the 
        Internal Revenue Code of 1986) for the 12-month period ending 
        on August 31 of the immediately preceding fiscal year, exceeds 
        (B) the average of the Consumer Price Index (as so defined) for 
        the 12-month period ending on August 31, 1996.''.

SEC. 5. EXPANSION OF CLASS OF BEGINNING FARMERS ELIGIBLE FOR DIRECT 
              OPERATING LOANS.

    Section 311(c)(1)(A) of the Consolidated Farm and Rural Development 
Act (7 U.S.C. 1941(c)(1)(A)) is amended by striking ``who has not 
operated a farm or ranch, or who has operated a farm or ranch for not 
more than 5 years''.

SEC. 6. PRIORITY FOR FARMER-OWNED VALUE-ADDED PROCESSING FACILITIES.

    Section 310B of the Consolidated Farm and Rural Development Act (7 
U.S.C. 1932) is amended by adding at the end the following new 
subsection:
    ``(h) Priority for Farmer-Owned Value-Added Processing 
Facilities.--In approving applications for loans and grants authorized 
under this section, section 306(a)(11), and other applicable provisions 
of this title (as determined by the Secretary), the Secretary shall 
give a high priority to applications for projects that encourage 
farmer-owned value-added processing facilities.''.

SEC. 7. NOTICE OF RECAPTURE UNDER SHARED APPRECIATION ARRANGEMENTS.

    Section 353(e) of the Consolidated Farm and Rural Development Act 
(7 U.S.C. 2001(e)) is amended by adding at the end the following:
            ``(6) Notice of recapture.--Not later than 12 months before 
        the end of the term of a shared appreciation arrangement, the 
        Secretary shall notify the borrower involved of the provisions 
        of the arrangement.''.

SEC. 8. NATIONAL REALLOCATION OF FUNDS FOR USE BY SOCIALLY 
              DISADVANTAGED FARMERS AND RANCHERS.

    Section 355(c)(2) of the Consolidated Farm and Rural Development 
Act (7 U.S.C. 2003(c)(2)) is amended to read as follows:
            ``(2) Reservation and allocation.--
                    ``(A) In general.--The Secretary shall, to the 
                greatest extent practicable, reserve and allocate the 
                proportion of each State's loan funds made available 
                under subtitle B that is equal to that State's target 
                participation rate for use by the socially 
                disadvantaged farmers or ranchers in that State. The 
                Secretary shall, to the extent practicable, distribute 
                the total so derived on a county by county basis 
                according to the number of socially disadvantaged 
                farmers or ranchers in the county.
                    ``(B) Reallocation of unused funds.--The Secretary 
                may pool any funds reserved and allocated under this 
                paragraph with respect to a State that are not used as 
                described in subparagraph (A) in a State in the first 6 
                months of a fiscal year with the funds similarly not so 
                used in other States, and may reallocate such pooled 
                funds in the discretion of the Secretary for use by 
                socially disadvantaged farmers and ranchers in other 
                States.''.

SEC. 9. APPLICABILITY OF DISASTER LOAN COLLATERAL REQUIREMENTS UNDER 
              THE SMALL BUSINESS ACT.

    Section 324(d) of the Consolidated Farm and Rural Development Act 
(7 U.S.C. 1964(d)) is amended by adding at the end the following: ``The 
Secretary shall not deny a loan under this subtitle to a borrower by 
reason of the fact that the borrower lacks a particular amount of 
collateral for the loan if it is reasonably certain that the borrower 
will be able to repay the loan. Notwithstanding the preceding sentence, 
if a borrower refuses to pledge available collateral on request by the 
Secretary, the Secretary may deny or cancel a loan under this 
subtitle.''.

SEC. 10. GROWER-SHIPPER AGREEMENTS.

    (a) Real Estate Loans.--Section 302 of the Consolidated Farm and 
Rural Development Act (7 U.S.C. 1922) is further amended by adding at 
the end the following:
    ``(d) This section shall not be construed to prohibit the Secretary 
from making a loan under this subtitle to an applicant therefor who has 
entered into an agreement with a shipper of perishable commodities 
under which the applicant and the shipper share in the proceeds from 
the sale of an agricultural commodity if--
            ``(1) in the absence of such an agreement, the applicant 
        could not easily market the agricultural commodity, or could 
        not market the agricultural commodity without incurring 
        significant additional risk; and
            ``(2) the agreement is clearly beneficial to the 
        applicant.''.
    (b) Operating Loans.--Section 311 of such Act (7 U.S.C. 1941) is 
further amended by adding at the end the following:
    ``(e) This section shall not be construed to prohibit the Secretary 
from making a loan under this subtitle to an applicant therefor who has 
entered into an agreement with a shipper of perishable commodities 
under which the applicant and the shipper share in the proceeds from 
the sale of an agricultural commodity if--
            ``(1) in the absence of such an agreement, the applicant 
        could not easily market the agricultural commodity, or could 
        not market the agricultural commodity without incurring 
        significant additional risk; and
            ``(2) the agreement is clearly beneficial to the 
        applicant.''.
    (c) Emergency Loans.--Section 321 of such Act (7 U.S.C. 1961) is 
further amended by adding at the end the following:
    ``(f) This section shall not be construed to prohibit the Secretary 
from making a loan under this subtitle to an applicant therefor who has 
entered into an agreement with a shipper of perishable commodities 
under which the applicant and the shipper share in the proceeds from 
the sale of an agricultural commodity if--
            ``(1) in the absence of such an agreement, the applicant 
        could not easily market the agricultural commodity, or could 
        not market the agricultural commodity without incurring 
        significant additional risk; and
            ``(2) the agreement is clearly beneficial to the 
        applicant.''.
Agricultural Credit Improvement Act of 1998 - Amends the Consolidated Farm and Rural Development Act to prohibit agricultural loan guarantees to borrowers who have received debt forgiveness after a specified date.  Authorizes emergency loans to be made to borrowers who have received debt forgiveness after a specified date. 
(Sec. 3) States that with respect to agricultural real estate, operating, and emergency loans, the primary factor in determining whether an applicant is primarily and directly engaged in farming or ranching shall be whether he or she participates in ongoing farm activities and decision making. 
(Sec. 4) Increases the respective limits and provides inflation indexing for guaranteed farm ownership and operating loans. 
(Sec. 5) Eliminates the prohibition on providing beginning farmer direct operating loans to persons who have operated a farm or ranch for more than five years. 
(Sec. 6) Gives loan and grant priority to projects that encourage farmer-owned value-added processing facilities. 
(Sec. 7) Requires borrowers under shared appreciation arrangements to be given notice of recapture. 
(Sec. 8) Provides for reservation and reallocation of specified loan funds for socially disadvantaged farmers and ranchers. 
(Sec. 9) Prohibits emergency loan denial based upon insufficient collateral if it is reasonably certain that the borrower will be able to repay the loan. 
(Sec. 10) Provides that under specified conditions a grower-shipper agreement shall not disqualify the applicant-grower from receiving a real estate, operating, or emergency loan.
Agricultural Credit Improvement Act of 1998