Farm Credit Continues to Fall Short on YBS Lending

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More than 100 years ago, Congress founded the Farm Credit System (FCS). When it was founded, most American farmers qualified as what are now dubbed “young, beginning and small farmers” (YBS farmers). YBS farmers are those who are younger than 35, have fewer than 10 years of experience, and gross fewer than $250,000 a year. All of America’s farmers, ranchers and producers need access to credit, but none more so than YBS farmers. It’s written plainly in statute: each Farm Credit institution must furnish credit to YBS farmers and keep track of how it serves them.

Every year, the FCS presents to the Farm Credit Administration (FCA), its regulator, a report on its lending to YBS farmers. For 2019, Farm Credit reports that the dollar volume of its “loans increased as well, by 7 percent to young farmers, eight percent to beginning farmers, and 16 percent to small farmers.” But don’t celebrate too soon – those numbers don’t tell the full story.

In 2019, Farm Credit indeed increased how many dollars it loaned to YBS farmers. But think about what that really means. It means that there are more dollars going to YBS farmers. But are more dollars going to more YBS farmers? One way to determine that is through looking at the number of new loans to YBS farmers. In 2019, Farm Credit slightly increased its number of new loans, but only because it lent so little in 2018 and 2017. In 2017 and in 2018, Farm Credit roundly failed to support YBS farmers by extending loans and bringing more of them into the fold.

2019’s modest increases are only increases because of Farm Credit’s steep decline in new YBS loans since 2016. Since then, new loans to young farmers fell nearly 24 percent, new loans to beginning farmers fell nearly 18 percent, and new loans to small farmers fell more than 20 percent. That’s a staggering drop.

Everyone expects Farm Credit to play up its numbers, of course. But this is like a company boasting about how its stock has increased 20 percent after a 60 percent plunge. These numbers have to be examined in context. And when the rose-tinted glasses come off, the numbers look bleak.

This aspiration isn’t some lofty, pie-in-the-sky goal. It’s arguably the central purpose of Farm Credit. It’s so important that it’s enshrined in law. The Farm Credit Act requires that Farm Credit associations “prepare a program for furnishing sound and constructive credit and related services to young, beginning, and small farmers and ranchers.” There’s legal necessity here, beyond the actual material needs of YBS farmers. Farm Credit ignores it at its own peril.

But even though we can see that Farm Credit has been unsuccessful in this respect, it has engineered the counting system such that outside observers don’t see how bad it really is. When it counts each YBS farmer, it treats farmers who are both young and beginning, or young and small, or beginning and small, as two separate farmers. Farmers which satisfy all three definitions count as three separate farmers. That’s ludicrous, and the Farm Credit Council, Farm Credit’s lobbying wing, has fought to preserve that method of counting. Outside observers won’t really be able to know to what extent Farm Credit has abandoned YBS farmers because Farm Credit keeps fighting to inflate the numbers.

It’s one thing to play up successes – that’s expected. It’s another to lobby to maintain an old counting method that artificially inflates the success. Within that context, Farm Credit’s dismal report on its 2019 loans to YBS farmers is even worse.

But Congress is starting to catch on. In the 2018 Farm Bill, Congress required the Government Accountability Office (GAO) to investigate whether the FCS is adequately serving socially-disadvantaged farmers. The GAO found that the FCS underserved them.

There’s still hope that the FCA will mandate a new counting system that will give policymakers the real data they need to keep Farm Credit accountable to the YBS farmers it serves. But if the FCA won’t, then Congress is primed to investigate. It needs to start asking questions, get real answers, and pass substantive reforms. The livelihoods of tens of thousands of YBS farmers hang in the balance.