Is Farm Credit Out of Touch?

Share on twitter
Share on linkedin
Share on facebook
Share on reddit

Compeer Financial – if you heard that name, would you think of a local Farm Credit association helping local young, beginning and small farmers and ranchers?

It may come as a surprise, but Compeer Financial is a Farm Credit System (FCS) association. And this $20 billion behemoth is posting record profits. For the first quarter of 2018 alone, it reaped nearly $103 million in profits. That’s a lot of profit, more than one might expect for a Farm Credit association. But this is a mega-association, spanning three states. You can’t help but ask – if it’s that big, does it really know its customers, the challenges they face and the realities on the ground?

There are approximately 70 Farm Credit associations nationwide. These associations were created to serve farmers, ranchers and producers at the local level – they provide real estate loans (often for non-farming purposes), operating loans and accounts that function as checking accounts (despite being prohibited and uninsured to boot!).

Associations are supposed to be responsive to the needs of individual farmers, ranchers and producers. They need to be decentralized and local. They do not need to be giant entities with nearly $20 billion in assets. Large entities simply aren’t the best at responding to the local, on-the-ground needs of their customers – small entities are better suited to that task.

It should be considered a problem when Farm Credit associations get this large. And in the case of Compeer Financial, it’s entirely unclear why it was even created to be this large! Compeer Financial is the result of a merger that took place last year between three Farm Credit associations: Badgerland Financial, AgStar Financial Services and 1st Farm Credit Services. Each of these associations were better equipped to serve the needs of their local farmers and ranchers. They did not need to be merged into a behemoth, where the leadership is removed from the realities of local farmers and ranchers.

There’s a simple solution: put a cap on the total asset size of Farm Credit associations. If a Farm Credit association gets too big, it should split into multiple associations, ones that are local enough to relate to their customers and provide the best advice on maintaining the financial strength of their farms and ranches.

There’s an opportunity here to make things right. As it considers the new Farm Bill, Congress should also consider including provisions to keep Farm Credit associations local and accountable to the farmers, ranchers and producers who are their customers. Fairness demands it.