The Farm Credit System (FCS) is a national financial cooperative providing loans to farmers, cooperatives, rural homeowners, agribusinesses, and rural utility systems. In 2002 the FCS made over $62 billion in loans to 500,000 borrowers and provided approximately one-fourth of the credit extended to U.S. agricultural producers.
The Farm Credit System, the earliest governmentsponsored enterprise (GSE), sells FCS bonds and notes and then lends funds through a network of 200 Farm Credit lending institutions. The Farm Credit Administration (FCA) based in McLean, Virginia, is an independent federal regulator responsible for examining and ensuring the FCS’s financial soundness. The FCA’s three-member board of directors are nominated by the U.S. president and confirmed by the Senate.
To people not involved in agriculture, the FCS is a maze of acronyms. To anyone involved in agriculture, the FCS is a major source of government support and funding. The FCS includes a variety of financial institutions including Farm Credit Banks, CoBank, Federal Land Bank Associations (FLBAs), Federal Land Credit Associations (FLCAs), Production Credit Associations (PCAs), Agricultural Credit Associations (ACAs), and Farm Credit Council (FCC).
There are six Farm Credit Banks (FCBs), including AgAmerica and Western FCBs (western and northwestern U.S.), Agribank, FCB (midwestern states), AgFirst, FCB (primarily southeastern U.S.), FCB of Wichita (southcentral states), and FCB of Texas (Louisiana to parts of New Mexico). The FCBs provide financial services and finds to local associations, which in turn lend those funds to agricultural and rural borrowers.
The CoBank, created in 1989 through the merger of 10 of the 12 district cooperative banks, is one of three Banks for Cooperatives. A Bank for Cooperatives in turn provides lending and other financial services to farmer-owned cooperatives and rural utility systems.
The Federal Land Bank Associations (FLBAs) are affiliates of the Farm Credit Bank and provide long-term mortgage loans to farmers, ranchers, and rural homebuyers. The Federal Land Credits Associations (FLCAs) provide lending for long-term loans. The Production Credit Associations (PCAs) provide short- and intermediate-term loans to farmers and ranchers. The Agricultural Credit Associations (ACAs), formed through mergers, are the successors to the FLBAs and PCAs, providing long- and short-term agricultural and rural loans. The Farm Credit Council (FCC) is the national trade association of the FCS, representing the interests of the FCS with respect to federal agricultural policies and providing insurance and business services to the FCS.
The history of the Farm Credit System began with the Country Life Commission created by President Theodore Roosevelt in 1908. At that time, lending for agricultural real estate was extremely limited. In 1913 federal law prohibited national banks from making loans with maturities greater than five years. (The government was attempting to reduce interest-rate risk in banking and reduce bank failures after the crash of 1907.) The Commission’s report eventually led to the passage of the Federal Farm Loan Act of 1916, which created the 12 Federal Land Banks, using $125 million in government funds and private capital to create credit institutions for agricultural producers. The land banks prospered with World War I and increased demand for food products but collapsed in the postwar economic decline. In response Congress created 12 Federal Intermediate Credit Banks, but they faltered with the Great Depression. The Agricultural Marketing Act of 1929 provided support prices for agricultural products and financial support for agricultural cooperatives. By 1933 the government consolidated federal farm programs into the Farm Credit Administration, creating the basis for today’s Farm Credit System.
Historically, support for U.S. agriculture has been strong, based on widespread political representation. In recent decades, as agricultural interests have been supplanted by manufacturing, technology, service industries, and greater consumer interests, support for farm programs have been sometimes challenged in the political arena. In response the Farm Credit System has come under greater scrutiny to become financially sound and self-sustaining.
See also government-sponsored enterprises.