Farm Credit System is a nationwide system of cooperatively owned banks and associations in the United States. The system is the nation’s largest agricultural lender. It provides loans to farmers and ranchers and their marketing, purchasing, and business service cooperatives in the United States and Puerto Rico. It also provides loans to people with aquatic operations, such as fishing or aquatic farming.
The United States government supplied the original capital for the system. However, farmers gradually replaced the government’s capital, and they now own all the stock in the system’s cooperatives. The system obtains most of its loan funds from the sales of securities to the public.
The Farm Credit System is supervised and regulated by the Farm Credit Administration (FCA), an independent United States government agency. A three-member board of directors sets FCA policies. Members are appointed by the president. One member serves as chief executive officer of the agency.
Organization.
The Farm Credit System consists of five regional banks and approximately 90 local lending associations. The local associations are in all 50 states and Puerto Rico. The regional banks lend funds to the local associations, which in turn lend money directly to farmers, ranchers, rural homeowners, and rural businesses. One of the regional banks—CoBank, based in suburban Denver—also lends funds to large agribusinesses, agricultural cooperatives, and rural energy, communications, and water companies throughout the United States. An agribusiness is a company that produces, processes, markets, or distributes farm products, or that supplies goods or services to farmers. An agricultural cooperative is an association in which farmers work with one another to market farm products, purchase supplies, or furnish farm services.
Each regional bank and local association is owned and controlled by its borrowers. To receive a loan, a borrower must purchase stock in the bank or association. Each bank and association has a board of directors elected by the borrowers.
The Federal Farm Credit Banks Funding Corporation manages the sale of Farm Credit System securities. It is the main source of funds to the five system banks. The Funding Corporation is owned and operated by the banks. It is headed by a 10-member board.
The Farm Credit System Insurance Corporation (FCSIC) provides insurance to investors in system securities. System banks pay annual premiums into the insurance fund. The three members of the FCA board of directors also make up the FCSIC board of directors.
History.
Congress authorized Federal Land Banks in 1916. By 1947, government capital invested in these banks was repaid. Federal Intermediate Credit Banks were authorized in 1923. The FCA was established in 1933. Production Credit Associations and Banks for Cooperatives were authorized that same year.
In the early 1980’s, many farmers experienced serious financial difficulties due to high interest rates, a loss of international markets, and other related problems. As a result, the Farm Credit System had record losses. Because of these losses, Congress restructured parts of the Farm Credit System through the Agricultural Credit Act of 1987. The passage of this act resulted in a large-scale reorganization of the Farm Credit System, which included the establishment of Farm Credit Banks and the Federal Agricultural Mortgage Corporation.
