Farm Credit is Out of Bound and Out of Date

The Farm Credit System (FCS) is renowned for its mission creep and lending outside the bounds of the law. One only needs to look at its loans to huge telecoms, technology real estate investment trusts (REITs) and customers looking to buy luxury houses. It’s pretty clear that Farm Credit is way out of bounds.

But is it also out of date too?

Farm Credit is just one piece of the agricultural credit environment, which has undergone immense transformation since it was first established in 1916. It was created to always be a source of credit for farmers and producers, no matter the health of the economy as a whole. Though it’s structure’s been changed slightly over its 100+ years, it has mostly stayed the same: the FCS has four banks, which each have a number of associations under their jurisdiction. The banks serve as a backstop and sometimes as a lender for associations, and the FCS’s associations – around 70 nationwide –  are supposed to serve the needs of farmers and producers on the ground. There’s a clear hierarchy – banks are above associations.

But one fact shows just how out of date it is: one association, FCS America, is bigger than Farm Credit Bank of Texas – $27 to $23 billion.

It’s strange to see a breakdown in the hierarchy – why is an association bigger than one of the four banks? Associations are supposed to be local lenders helping farmers and producers, and banks are supposed to fund the associations. What’s happening?

The System is not functioning as was originally intended. Associations are merging into larger and larger entities that don’t serve the best interests of local farmers and producers. One of the four banks, the pillars of the FCS, is tiny compared to the other banks, which range from $32 billion to $133 billion. There’s a disconnect here – the old structure of the System does not meet the needs of the farmers and ranchers it’s supposed to support.

Congress should consider this carefully. The System and its defenders are resistant to change, and they will fight to keep the status quo. But the old structure is showing its shortcomings – what should be small is big, and what should be big is small. Farmers and producers, especially young, beginning and small farmers and producers are going to bear the brunt of the System’s inefficiencies. Congress needs to examine the System’s structure and make extensive reforms, before it’s too late.

Farm Credit is Out of Bound and Out of Date

The Farm Credit System (FCS) is renowned for its mission creep and lending outside the bounds of the law. One only needs to look at its loans to huge telecoms, technology real estate investment trusts (REITs) and customers looking to buy luxury houses. It’s pretty clear that Farm Credit is way out of bounds.

But is it also out of date too?

Farm Credit is just one piece of the agricultural credit environment, which has undergone immense transformation since it was first established in 1916. It was created to always be a source of credit for farmers and producers, no matter the health of the economy as a whole. Though it’s structure’s been changed slightly over its 100+ years, it has mostly stayed the same: the FCS has four banks, which each have a number of associations under their jurisdiction. The banks serve as a backstop and sometimes as a lender for associations, and the FCS’s associations – around 70 nationwide –  are supposed to serve the needs of farmers and producers on the ground. There’s a clear hierarchy – banks are above associations.

But one fact shows just how out of date it is: one association, FCS America, is bigger than Farm Credit Bank of Texas – $27 to $23 billion.

It’s strange to see a breakdown in the hierarchy – why is an association bigger than one of the four banks? Associations are supposed to be local lenders helping farmers and producers, and banks are supposed to fund the associations. What’s happening?

The System is not functioning as was originally intended. Associations are merging into larger and larger entities that don’t serve the best interests of local farmers and producers. One of the four banks, the pillars of the FCS, is tiny compared to the other banks, which range from $32 billion to $133 billion. There’s a disconnect here – the old structure of the System does not meet the needs of the farmers and ranchers it’s supposed to support.

Congress should consider this carefully. The System and its defenders are resistant to change, and they will fight to keep the status quo. But the old structure is showing its shortcomings – what should be small is big, and what should be big is small. Farmers and producers, especially young, beginning and small farmers and producers are going to bear the brunt of the System’s inefficiencies. Congress needs to examine the System’s structure and make extensive reforms, before it’s too late.

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