Huge FCS Merger Leaves Compeer Financial High on the Hog

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It’s done.

Please give a warm welcome to the Farm Credit System’s (FCS) newest, third largest association, Compeer Financial.

On June 27, the Farm Credit Administration (FCA) Board gave approval for the creation of Compeer Financial through a merger of Badgerland Financial, 1st Farm Credit Services and AgStar Financial Services. “The merger, proposed last September, was finalized on July 1 after 18 months of discussion and voting by the new organization’s 43,000-plus member-owners, of whom about 16,000 are in Wisconsin,” reported The Wisconsin State Journal

The issues arising from this merger are manifold.

For one, should Compeer, or any FCS association for that matter, be allowed to offer tax and accounting services? Isn’t there some benefit to a customer-owner in having a separation between their business interests and their personal accountant? As it stands, this service presents ample opportunities for conflicts of interest to arise. And more to the point, should the FCS, in addition to strangling small, community farm banks out of the market, now be allowed to do the same to accountants?

Secondly, should a single association have 43,000 member-owners? Shouldn’t associations be localized so that they can be attuned to the needs of their member-owners? If a small, localized association is already part of the overall FCS, what benefit is there to consolidating smaller associations? Associations are already under the jurisdiction of the four funding banks (CoBank, AgFirst, AgriBank and Farm Credit Bank of Texas). It seems unnecessary and harmful to separate farmers, ranchers and producers from their own independent, local association that can respond best to the needs of its local customer-owners.

Finally, should that much capital be consolidated in one institution? According to the Journal, Compeer will now hold $19 billion in total assets, behind Farm Credit Mid-America at $22.6 billion and Farm Credit Services of America at $26.3 billion. That’s an extraordinary amount of capital for a cooperative association to hold – that puts each of these institutions on an economy of scale that means it will be harder for community farm banks to compete – meaning that once these FCS associations have choked the competition out of the market they’ll be free to run it as they please.

These are only a few of the problems that could come about from this rushed merger. No doubt, there will be many unforeseen consequences that will mean reduced quality of service for farmers, ranchers and producers from northern Illinois up to the middle of Minnesota.

But there’s an easy solution to prevent this reduced quality of service: Congress, rein in the FCA – ensure that it’s enforcing existing statutes and regulations and acting in accordance with the spirit of the Farm Credit Act. And if it isn’t, amend the Farm Credit Act so that young, beginning and small farmers, ranchers and producers are getting the support they need.