The Farm Credit System (FCS) has a legal obligation to support young, beginning and small farmers (YBS) by providing them with sound and reliable credit. This is the most important function of the System — to preserve and maintain the future of American agriculture. If the United States government, or any government-sponsored enterprise (GSE) like Farm Credit, wishes to serve farmers, it must serve the country’s more vulnerable farmers – YBS farmers.
But new numbers are out, and they show that Farm Credit is continuing to fail its most important mission year after year.
In 2018, Farm Credit failed YBS farmers. The numbers in the Farm Credit Funding Corporation’s annual reports don’t lie (2018 annual report, 2017 annual report). The number of loans outstanding to YBS farmers fell in every category: 5.5% for young, 3.4% for beginning and nearly 7% for small. That’s more than 10,000 loans for young farmers, more than 9,000 for beginning, and 34,000 for small farmers.
The drop in new loans to YBS farmers is even worse: nearly 18% for young, nearly 15.5% for beginning, and more than 16% for small. That’s a drop in 10,000, loans for young, 11,000 loans for beginning and 22,000 for small.
Outstanding loans of less than $50,000 have also plummeted. YBS farmers desperately need these loans – it could be the difference between keeping their operation running or having to sell the farm. The total number of outstanding loans less than $50,000 fell more than 23%, and the total dollar amount fell more than 29%. The total number of new loans less than $50,000 fell by nearly 48%, and the total dollar amount fell by 30.5%.
The FCS’s regulator, the Farm Credit Administration (FCA), believes that “the decrease in the number of new and outstanding loans was primarily driven by the way System institutions have been tracking loan participations.” Its explanation for such a plunge in numbers is what amounts to a clerical change. Sorry, but reasonable observers don’t buy that.
The Farm Credit System failed YBS farmers in 2018. Fewer YBS farmers received new loans from the Farm Credit System. The YBS farmers who have outstanding loans are now fewer. And for those critical loans of $50,000 or less, the number of loans and number of dollars loaned decreased drastically. Farm Credit failed.
This has all happened while, according to the FCA, the total loan dollar volume (i.e. the amount of money loaned out) has increased by 3.2%. So there’s more money going out in loans – who is actually getting it if it isn’t YBS farmers?
It’s not too hard to find out what kinds of entities benefit from Farm Credit’s expansion – real estate investment trusts (REITs) which own “server farms,” purchasers of luxury properties in Hawaii and multinational corporations that need to shore up their foreign ventures.
This is nothing new. The Farm Credit System failed to adequately serve YBS farmers in 2017.
Farm Credit is a GSE. It has a public mission. YBS farmers are a part of the public, and are identified as a part which needs extra support from Farm Credit specifically. Farm Credit has failed to fulfill that mission.
The FCA seems willing to accept and propagate excuses that most wouldn’t swallow. It’s up to Congress to take this issue head-on: more oversight hearings, more inquiries and more explanations. Congress should demand nothing less.