Buckle up: there’s about to be yet another merger between Farm Credit System (FCS) associations.
On May 12, Farm Credit of New Mexico announced that it intends to merge into American AgCredit, claiming it’s for “delivering enhanced marketplace stability, increased funding capacity to scale customer operations, better access to technology, and profitability for its customer-owners.”
“Merge into,” rather than “merge with,” is certainly the right phrase to capture this dynamic. Farm Credit of New Mexico is a relatively small association, with about $2 billion in total assets. American AgCredit is a much larger association, with more than $17 billion in total assets. This absorption isn’t anything too new for American AgCredit though: American AgCredit proudly displays its roughly twenty-year history of mergers, in which it merged – or absorbed – five FCS associations, its latest occurring in 2017. As a result, American AgCredit operates in Hawaii, California, Nevada, Colorado, northwestern New Mexico, Kansas and Oklahoma.
American AgCredit’s recent history of mergers in the past 20 or so years is part of a larger trend happening across the System. Twenty-five years ago, there were roughly 200 Farm Credit associations. There are now only 65. Effective this year, Farm Credit East has absorbed Yankee Farm Credit and North Dakota’s AgCountry Farm Credit Services and Farm Credit Services of North Dakota have merged, while North Carolina’s Cape Fear Farm Credit and AgCarolina Farm Credit are exploring a merger as well.
It’s noteworthy that American AgCredit’s announcement doesn’t include any mention of whether there will be a reduction in board size, and consequently, a reduction in representation for each individual farmer customer. Fortunately, this merger is just at the beginning of “a year-long process that includes due diligence, regulatory approval and customer-stockholder approval.”
We’ll see how much the Farm Credit Administration (FCA), the System’s regulator, reviews this proposal when it comes up for consideration. The FCA must consider not only the individual merger, but the rate at which institutions are merging, whether these mergers have an effect on institution governance, and whether the mergers are beneficial for vulnerable farmers that aren’t currently being served adequately by Farm Credit. Congress needs to make sure that the FCA is empowered to take on that task. And if the FCA can’t, or won’t, then Congress needs to pass serious reforms to make sure that it can, and will.