Farm Credit Loans Help Global Packaging Firm Refinance Euro Senior Notes

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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.

CoBank is authorized by law to make this loan, and Greif, which “manages timber properties in the southeastern United States,” wouldn’t be the first large-scale timber company to receive a loan from CoBank. In 2015, CoBank extended $550 million to Rayonier, Inc. to salvage Matariki JV, a foreign subsidiary based in New Zealand.

Greif’s needs are similar: “strategically positioned in over 40 countries,” Greif is using the funds to refinance its “existing 7.375% Euro 200 million senior notes, which mature that month.” There’s a pattern here, and no policymaker or taxpayer should like it. CoBank is lending money with an implicit guarantee of the federal government to companies which are using that money to fund or pay off debts arising overseas.

None of this is illegal, and that’s precisely the problem. Farm Credit has a specific mandate to support young, beginning and small farmers, a mandate that it has failed to fulfill at least three years in a row. Instead of fulfilling that mandate, it extends taxpayer-backed funds to companies which are effectively sending the money overseas.

Maybe these deals are more profitable than lending to YBS farmers. But if that’s the case, then what’s the point of giving Farm Credit a massive tax subsidy? In 2019, Farm Credit had a net income of $5.45 billion but only paid $108 million in combined federal, state and local taxes. Farm Credit needs to make a choice: keep its subsidy and lend to young, beginning and small farmers, or lose its subsidy and continue lending to businesses that are barely related to agriculture. It can’t have both.

The Farm Credit Administration (FCA), Farm Credit’s regulator, can step in to provide a solution, and there are plenty it could implement that would protect young, beginning and small farmers and taxpayers alike. But without intervention and meaningful regulation, Farm Credit will only be more brazen. And if the FCA cannot muster the will to keep Farm Credit in check, then Congress must.