Farming’s tough. Any farmer, rancher or producer will tell you that it’s hard to make a living off of agriculture, and that’s especially true for young, beginning and small farmers. Because of this, Congress requires the Farm Credit System (FCS) to make loans to young, beginning and small farmers and to report their lending data annually. This is all to ensure that those farmers have access to the credit they need, and that American agriculture will continue to thrive in the future.
The FCS is not prioritizing ensuring availability of credit to young, beginning and small (YBS) farmers.
The Farm Credit Administration (FCA), the FCS’s regulator, prepares an annual report tracking the FCS’s mandatory lending to YBS farmers. The FCA is late preparing the FY2017 report – fortunately, the Federal Farm Credit Banks Funding Corporation (FFCBFC), which sells Farm Credit bonds to investors, keeps track of the data too.
It’s not good: between 2016 and 2017, the YBS portion of all of the FCS’s new loan volume (dollar amount of lending) fell across the board: the share of new loan volume to young farmers fell from 11.7 percent to 11.1 percent; to beginning farmers from 16 percent to 15 percent; and to small farmers from 15.4 to 14.4 percent. The end result is that YBS farmers are receiving fewer dollars loaned to them.
That’s bad, but what’s worse is that the actual number of new loans also decreased. Farmers feel the impact. Young farmers saw an 11.6 percent drop in the number of new loans from FCS. Beginning farmers saw 9.8 percent fewer new loans originated by FCS. And small farmers saw an 11.9 percent drop in the number of new FCS loans. The FCS is not prioritizing lending to YBS famers – made clear by the falling share of new loan volume to these farmers, and the more disheartening fact that fewer YBS farmers are actually receiving loans from the FCS.
This is terrible. New loan rates have fallen across the board to the lowest levels seen since 2013. And it’s important to remember that these numbers are already inflated. When the FCS counts loans to YBS farmers, it counts the loan recipient as a separate borrower under each category; a 30 year-old farmer with five years of experience who makes $200,000 in gross sales counts as a young farmer, a beginning farmer and a small farmer. And if he has three lines of credit, he counts as nine farmers, according to the counting scheme the FCS currently uses.
The numbers are inflated, but still dismally low, and any progress Farm Credit thinks it has made since 2013 has been wiped away. YBS farmers are still not getting the support they need.
Farming is tough enough, and young, beginning and small farmers already face distinct disadvantages: young and beginning farmers don’t have as much experience in agriculture, and small farmers don’t have the economies of scale that help farmers with larger operations. Farm Credit’s job is to furnish “sound and constructive credit” to level the playing field. And, fortunately, it is required to provide annual reports so that Congress can see if it’s doing so.
Farm Credit needs to answer for this drastic, across-the-board decrease in credit to YBS farmers. Of all its functions, furnishing credit to YBS farmers is its most important. And for 2017, it has failed. Congress needs to step in and demand answers before this gets out of hand.
