Proposed Merger in North Dakota Shows Farm Credit Continues to Prioritize Profits Over Farmers

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The sweep of consolidations in the Farm Credit System (FCS), one that recently resulted in the disappearance of Farm Credit Services of Hawaii into American AgCredit, continues.

The Farm Credit System (FCS) spans the country, and each of its associations serve specific regions and the farmers in them. There’s been a well-documented wave of consolidations in recent years: Yankee Farm Credit in Vermont and New Hampshire is set to be absorbed by Farm Credit East, serving New Jersey all the way up to Maine; Farm Credit Services of Hawaii was suddenly absorbed by American AgCredit, serving Oklahoma, Kansas, Colorado, Nevada, and California; and Compeer Financial, a behemoth association with $25.5 billion in total assets, was forged from three FCS associations in Illinois, Wisconsin and Minnesota.

Let’s hope this trend doesn’t become the rule.

In North Dakota, two Farm Credit associations, AgCountry Farm Credit Services and Farm Credit Services of North Dakota, recently announced that they are taking the first steps toward a merger.  The associations’ announcement includes a few claimed benefits of the proposed merger: “expanded service offerings, ongoing strong commitment to local communities, increased innovation, improved long-term operating efficiencies, and ultimately, increased value and customer experience for our combined customers/member-owners.”

These are broad claims which merit some analysis. Taking the claims at face value, the merger will supposedly bring expanded service offerings, long-term operating efficiencies, increased innovation and most likely as a consequence, increased value. Now certainly, long-term operating efficiencies can come about by operating at scale, but that usually comes from removing redundancies, meaning a reduction in staff or offices. But the announcement reads that “the associations do not anticipate any changes in branch locations or branch staffing due to this proposed merger.”

Supposing that’s true, then where will the operating efficiencies come from? And setting aside supposition, the latest merger analyzed by Reform Farm Credit, that of Yankee Farm Credit and Farm Credit East, will likely result in the closure of at least one branch in the region. Isn’t it likely, given these claims, that the same will be the case for this merger? If so, then how will there be expanded service offerings and increased customer experience?

The reasoning behind the claims in this announcement wither under the most cursory scrutiny. What’s more likely is that there will be a reduction in staff and offices with better long-term operating efficiencies, but a worse experience for farmers as customers.

For these reasons alone, policymakers at the Farm Credit Administration (FCA), the FCS’s regulator, and Congress should be wary of further Farm Credit consolidations. But one problem sticks out as the most worrisome: reduced representation on each institution’s board. As Farm Credit associations consolidate, there are fewer spaces for individual farmer-members to serve in leadership and steer the strategic direction of each association. Local control is a good thing, and it’s disappointing to see the FCA allow Farm Credit institutions to remove local control from the farmers, ranchers and producers who know best about their credit needs.

The FCA has the authority to investigate these mergers to understand the circumstances behind them. If it won’t do that, then Congress should investigate and get to the bottom of this. Farmers deserve representation and easy access to credit. If Farm Credit won’t grant that easily, then Congress must step in.