Reform Farm Credit

Shocking Merger Between Yankee Farm Credit & Farm Credit East Reveals FCA’s Lack of Disclosure & Consideration of Harmful Effects on Farmers, Ranchers & Producers

It comes as a shock to hear that Yankee Farm Credit, serving Vermont and parts of New York and New Hampshire, will soon be merged with Farm Credit East, which covers New Jersey all the way to Maine. Yankee Farm Credit holds $586 million in total loans to Farm Credit East’s $8.2 billion. Though it’s dubbed a “strategic merger,” it’s better characterized as outright consolidation – Yankee Farm Credit and Farm Credit East are barely in the same league.

Farm Credit System (FCS) associations’ main role in the System is to lend directly to customers. To do so, they receive funds from Farm Credit banks, which in turn receive funding from the Farm Credit Banks Funding Corporation. The Funding Corporation sells bonds to private investors, who buy them knowing that they have the implicit guarantee of the federal government. From private investors and federal guarantee, customers are supposed to have access to stable – but more importantly, local – credit, lent by associations with a thorough understanding of the needs of local farmers.

No doubt, this consolidation will cause disruption to the farmers and producers who have a relationship with Yankee Farm Credit. Yankee Farm Credit will now join an organization that spans the Northeast, with oversight from a funding bank based in Colorado that also serves associations in Hawaii, the West Coast and the Rockies. This is hardly local service.

The Chair of Yankee Farm Credit offers the following reason for the “strategic merger”:

“It’s something to consider because, of course, as dairies consolidate, which is definitely the trend as we’re seeing … the loans get bigger also, and in Yankee’s position, we have a hold limitation of $6 million,” she says. “So when a loan … an entity combines, maybe another farm or two other farms, and now their loans are $20 million or bigger, we can only hold $6 million of that, so we must participate out the balance, and so our ability to make earned interest on those loans becomes less.”

On its face, that reason makes sense. But these consolidations have a human impact that the Chair mostly ignores:

“Kane-Stebbins says that most customers won’t notice a difference, and that they’ll be working with the same loan officer as before. But the merger will likely result in the closure of at least one branch, the Yankee branch in Chazy, N.Y., which Kane-Stebbins says has been closed from time to time in the past.”

It doesn’t matter if the branch has been closed from time to time in the past. Now, more and more farmers and producers in a large chunk of upstate New York will have to now drive much further just to get their credit needs fulfilled if they are going to stay with their current lender. That’s not right, and that cannot be downplayed for convenience’s sake: it’s going to be harder for them to get farm credit from Farm Credit!

But the reason for the consolidation given by Yankee Farm Credit’s Chair reveals something else. Farm Credit East is absorbing Yankee Farm Credit because there are fewer small farms to lend to. If Farm Credit hadn’t failed small farmers for so many years, this problem would have been less likely – there would be more small farmers, and there’d be less consolidation making it harder for the remaining small farmers to keep their farms in business. They would be more connected with their local branch, which could better respond to their specific needs.

Farm Credit consolidation is a troubling trend that has only continued since the late 1980s, when there were 400 associations. Only a few years ago, Badgerland Financial, 1st Farm Credit Services and AgStar Financial Services merged into Compeer Financial. In 2015, Farm Credit Services of Southwest merged with Farm Credit West after it announced its financial statements could no longer be relied upon. In 2019, Farm Credit Services of Hawaii disappeared and merged with American AgCredit. On January 1, 2021, Farm Credit of Western Oklahoma and AgPreference merged into Farm Credit West of Oklahoma. Just months after, Yankee Farm Credit will consolidate into Farm Credit East. There will be only 66 associations remaining.

The trend should not be fewer, and larger, FCS institutions. And to make matters worse, Farm Credit’s regulator, the Farm Credit Administration (FCA), doesn’t appear to have given any notice or mention of this new “strategic merger” at its latest board meeting. Shouldn’t the FCA deliberate over whether the merger is appropriate? Shouldn’t it have that power if it doesn’t? And if it does, why hasn’t it been forthcoming about this information to the public?

Congress needs to examine the FCA’s lack of disclosure about consolidations, and the effects of Farm Credit consolidation on the ability of farmers, ranchers and producers to access farm credit from FCS institutions so that they aren’t left behind. If Congress doesn’t put a stop to it, it may soon be too late.




FCA Board Let Farm Credit Get Away with Serious Violations in First Quarter, American Farmers & Taxpayers to Pay the Price


As a government-sponsored enterprise (GSE), the Farm Credit System (FCS) answers to a regulator, the Farm Credit Administration (FCA). With nominal oversight from the FCA, the FCS often gets away with a lot. It can’t get everything that it wants, but what it gets is bad enough for America’s farmers and taxpayers.

There are few better places to see this in action than the FCA Board’s quarterly reviews of the System. For the first quarter of 2021, the FCA let Farm Credit get away with two violations: one direct and with precedent, the other unquestioned.

On April 7, the FCA Board voted to approve a request by Compeer Financial, a large Farm Credit association with nearly $25 billion in total assets, to purchase bonds from an intermediate care facility. This isn’t without precedent: in September of 2019, the FCA permitted AgCredit, ACA in Ohio to purchase bonds issued by a skilled nursing and rehabilitation facility in rural Wyoming. And before that, the FCA permitted investment in a rural hospital and was grilled by the House Agriculture Committee for doing so.

It was only last month that the Board Chair of the FCA noted to the House Appropriations Agriculture Subcommittee that the System “bump[s] against our authority.” This is yet another link in the chain leading Farm Credit to becoming Health Care Credit. The FCA has allowed Farm Credit to make this transformation and has provided little substantive reasoning for why Farm Credit should be lending to health care facilities. If Congress deems it necessary for Farm Credit to delve into health care, then it should revisit its foundation.

What the FCA didn’t question – rather than what it approved – is just as perplexing. Farm Credit revealed in its report that 88.8 percent of its lending portfolio is not in rural infrastructure. You wouldn’t have known that by the way Farm Credit discusses rural infrastructure. Farm Credit brings up infrastructure, particularly broadband, frequently. And to justify its lending to large telecoms providing broadband services, it employs the “similar entity rule,” which allows Farm Credit to lend to an ineligible entity that has similar operations to an eligible entity. This is for diversification, as one Farm Credit CEO put it: “I respectfully submit that similar entity participations help fulfill Farm Credit’s mission by providing a vital source of diversification.”

Are we really expected to believe that lending to Verizon or another huge telecom is necessary for diversification in the System? Aren’t there other sources of diversification that don’t “bump against [our] authority”? With rural infrastructure composing less than 12 percent of the Farm Credit’s portfolio, is it necessary to use the similar entity rule for diversification? Isn’t that provided by cattle, cash grains, food products, forestry, field crops etc.?

It’s hard to not call foul here. The FCA is both actively and passively allowing Farm Credit to stray from its mission: actively by permitting associations to expand into health care, and passively by not calling out Farm Credit for its bogus claims that it needs the similar entity rule for diversification. If the FCA is going to continue on this track, then Congress needs to revisit what “Farm Credit” really means.


FCS Escapes Scrutiny of its Failures to Support YBS and SD Farmers

On March 24, Farm Credit lucked out at a key congressional hearing.  The House Appropriations Committee’s Subcommittee on Agriculture, Rural Development, Food and Drug Administration and Related Agencies held an oversight hearing featuring the Farm Credit Administration (FCA), the Farm Credit System’s (FCS) regulator.

The FCS escaped full examination of its failure to adequately support young, beginning and small farmers (YBS farmers), its errant loans for “non-agricultural purposes”, and its out-of-control problem with institution consolidation.

But it didn’t escape all sticky points. Rep. Betty McCollum (D-MN) asked a question about the FCS’s foray into health care:

“One of those inequities is a lack of access for rural Americans’ to good health care…Compeer Financial Farm Credit has joined with local banks, credit unions and the USDA in a public-private partnership to help finance critical access hospitals and senior living facilities. These partnerships were happening prior to the pandemic… I think we need to see more of these innovative partnerships that can not only strengthen the rural health care system, but also help with long, overdue infrastructure needs…Currently the FCA’s board of directors must provide specific individual approval for each community facility investment made by institutions…what can you do to enhance and expand the Farm Credit System’s ability to increase these partnerships?”

Glen Smith, Chair of the FCA Board of Directors, replied:

“I couldn’t agree with you more, Congresswoman, about the need for good health care facilities in rural areas…At times we bump up against our authority, if that could be expanded on by Congress we’d be all for it.”

There is a reason why Farm Credit often bumps against its authority: time and again, it lends outside of the scope of its mission to support farmers, ranchers and producers. Health care facilities are worthy of investment. But are they worthy of investment from Farm Credit? Aren’t there other lenders who can provide this sort of investment? Rep. McCollum mentioned that banks, credit unions, and the USDA have joined with Compeer Financial – an FCS institution – to finance access to health care facilities. Surely there are enough private institutions to accomplish this, right? Why should Congress authorize an expansion of Farm Credit’s mission when it’s already failing its core mission to foster American agriculture by supporting young, beginning, and small farmers, ranchers and producers?

That’s not the only area where Farm Credit is failing. Rep. Barbara Lee (D-CA) raised concerns about a Government Accountability Office (GAO) report on Farm Credit’s inadequate lending to socially-disadvantaged farmers and ranchers:

“It was determined and reported from this GAO study that socially-disadvantaged farmers and ranchers (SDFR) receive a disproportionately small share of farm loans, and so I’m wondering about some of these barriers that have caused this lack of access to resources and how you’re beginning to address this based on the GAO recommendations.”

Chairman Smith replied:

“The Farm Credit System is in business to lend to all credit-worthy borrowers, large or small, and oftentimes those urban, startup enterprises are small enterprises. In 2014, FCA put out a directive to system institutions to develop and analyze a plan on the demographics of the area, including socially-disadvantaged groups, how engaged they are in lending activities and come up with a plan for outreach to those groups. This plan is regularly examined by our FCA examiners. I believe our emphasis on young, beginning and small farmers is in part an answer to reach out to those socially-disadvantaged groups as well.”

The GAO’s July 2019 report found that:

“Despite some outreach, some SDFR advocates we spoke with said that Farm Credit System associations’ outreach has had limited effects on the amount of credit provided to SDFRs and SDFRs’ familiarity with the system. One SDFR advocate we spoke with said that while some Farm Credit System associations engage with socially disadvantaged communities, the outreach has not increased the diversity of the system’s borrowers. Others said that Farm Credit System outreach to SDFR communities has been insufficient and that some SDFRs are still not aware of the Farm Credit System.”

Clearly, Farm Credit institutions are not doing nearly enough to solve this problem. According to Chairman Smith, FCA issued a directive to Farm Credit institutions to develop a plan to address this in 2014. Their plan is regularly examined by FCA examiners. And in 2019, the GAO’s audit revealed that the plan is insufficient. And to say that Farm Credit institutions’ YBS programs are sufficient to address this problem is risible when the System is failing to support its YBS farmers. 

What is Farm Credit’s answer here? Why hasn’t it improved its outreach to socially-disadvantaged farmers and ranchers? If the YBS program is sufficient to handle this issue (it isn’t), then how does it explain its failure to support YBS farmers?

Above all, this hearing demonstrated that Farm Credit has more than it can handle. Farm Credit is trying to expand the bounds of acceptable lending, aggressively turning to health care to such a degree that it may as well be called Health Care Credit. At the same time, it’s failing to help both YBS farmers and socially-disadvantaged farmers. Farm Credit needs to get back to focusing on farmers, ranchers and producers, and lawmakers need to keep Farm Credit true to its mission.


Farm Credit Needs Independent Regulators to Watch the Watchmen

Farm Credit System (FCS) institutions span the country, extending questionable loans, raking in gobs of cash, and doing so with only light regulation by the Farm Credit Administration (FCA), an independent agency within the executive branch. Congress, in turn, oversees the FCA’s regulatory program.

Continue Reading


Farm Credit Consolidations Leave Farmers with Less Local Control

The Farm Credit System (FCS) primarily serves its customers through individual associations. For the most part, each association has a defined territory, and this patchwork of different territories covers the entire country. But over the past few decades, the number of associations has dropped considerably – the result of a wave of consolidations – resulting in a loss of local control.

Continue Reading


High Profits, Low Taxes: How Farm Credit Cashes in on Tax Breaks While Failing Farmers

Imagine a sprawling, nationwide network of businesses with $365 billion in assets, paying only a minuscule amount of taxes, undercutting its competition, and not receiving the congressional oversight it deserves. 

Imagine no more – this is the Farm Credit System’s reality (FCS). 

Continue Reading


New Year’s Resolutions for Farm Credit and the FCA

The end of 2020 and the beginning of 2021 brings us a time-honored tradition – New Year’s resolutions! Reform Farm Credit has a few to share with the Farm Credit System (FCS) and its regulator, the Farm Credit Administration (FCA).

First, and this shouldn’t come as any surprise, the FCS needs to stop any sort of “lending for nonagricultural purchases.” Farmers need credit for more than just farming, but Farm Credit shouldn’t be extending loans for any purpose other than to sustain agriculture. This is on the FCA too: enforce the spirit of the Farm Credit Act, and stop FCS lenders from lending outside of their mission.

Continue Reading


Year in Review: Reform Farm Credit

It’s the end of 2020, and with 2021 fast approaching, many are looking in the rearview mirror at this year’s most memorable events. Reform Farm Credit is no exception. For the Farm Credit System (FCS), 2020 has been a year packed with memorable news. 

Earlier this year, Farm Credit acknowledged that Farm Credit Services of Hawaii was defunct – it was absorbed by American AgCredit based in California. While the number of associations dwindles, the overall size of the System grows larger and larger, ballooning from $353 billion in September 2019 to nearly $385 billion in September 2020

Continue Reading


Farm Credit Loans Help Global Packaging Firm Refinance Euro Senior Notes

The Farm Credit System (FCS), a nationwide network of lenders backed by the federal government to support farmers, has a knack for finding clients right on the edge of what constitutes “agriculture.” These clients are just close enough to net Farm Credit a steady profit, but they’re taken on at the expense of the young, beginning and small farmers that Farm Credit was created to serve.

This time, Farm Credit has extended financing to Ohio-based Greif, Inc., a “global leader in industrial packaging products and services.” CoBank, the largest FCS institution, will lead other System lenders in a syndicated deal for $225 million, on which Greif estimates it will pay less than three percent in interest.

Continue Reading


New CoBank Loan Highlights Need for Farm Credit Oversight

If there’s one thing you can trust the Farm Credit System (FCS) to do, it’s to stretch the rules – especially the “similar entity” rule – and twist the spirit of Farm Credit’s mission. Its explicit mission in the Farm Credit Act: “improving the income and well-being of American farmers and ranchers by furnishing sound, adequate, and constructive credit and closely related services to them, their cooperatives, and to selected farm-related businesses necessary for efficient farm operations.” But year after year, this last clause has been twisted and tortured to support Farm Credit’s unrestrained, out-of-bounds growth.

Continue Reading



Help us Reform Farm Credit

Scroll to top