Farmers, ranchers and producers have tough jobs. Agriculture as a profession is naturally unpredictable – weather events affect crop yields, and crop yields directly affect what farmers earn on the market for what they produce.
And now farmers are in trouble.
Capital Press reports that “The Farm Credit System of ag lenders has seen a spike in troubled loans as many farmers struggle with low prices, even as profits have grown for the banks [sic] themselves.” Shockingly, the System has seen “Non-performing assets, such as loans that are past due, shot up about 20 percent during the system’s first three quarters of 2018, to $2.4 billion, while the level of charged-off bad debt more than doubled, from $21 million to $53 million.”
The Farm Credit System (FCS) is a government-sponsored network of financial cooperatives backed by American taxpayers. It was created over a century ago to address uncertainty in agriculture by providing all farmers, especially young, beginning and small farmers, with reliable access to credit, ensuring that all farmers have the flexibility to continue their operations.
Why is it making money off of struggling farmers? Shouldn’t alarm bells be ringing if there’s been a 20 percent increase in non-performing assets and more than a 100 percent increase in charged-off bad debt?
According to the Farm Credit Administration (FCA), Farm Credit’s regulator, this isn’t cause for too much concern. “The system is financially sound,” says Hal Johnson, the FCA’s senior financial analyst, “but certain ag sectors have been under stress for several years.”
Farm Credit’s own regulator recognizes that farmers have been struggling for several years, but still says that the System is fundamentally sound – no further explanation provided on exactly how it is sound.
Instead of raking in profits at the expense of farmers, Farm Credit – a government-backed and by extension taxpayer-backed entity – should be providing more support for farmers, especially the young, beginning and small farmers it failed in 2017 and in years prior.
Unfortunately, none of this should come as a surprise. In the 1980s, the Farm Credit crisis led to a taxpayer-backed rescue package of $4 billion, which kept Farm Credit afloat. But with a new headwind on the horizon, Farm Credit needs to be watched carefully.
Though it should be cracking down on Farm Credit, the FCA most likely won’t take the steps necessary to make sure America’s farmers, ranchers and producers aren’t left sinking while Farm Credit hogs the life raft. Congress needs to step in and demand accountability – America’s farmers and taxpayers should demand it.