It comes as a shock to hear that Yankee Farm Credit, serving Vermont and parts of New York and New Hampshire, will soon be merged with Farm Credit East, which covers New Jersey all the way to Maine. Yankee Farm Credit holds $586 million in total loans to Farm Credit East’s $8.2 billion. Though it’s dubbed a “strategic merger,” it’s better characterized as outright consolidation – Yankee Farm Credit and Farm Credit East are barely in the same league.
Farm Credit System (FCS) associations’ main role in the System is to lend directly to customers. To do so, they receive funds from Farm Credit banks, which in turn receive funding from the Farm Credit Banks Funding Corporation. The Funding Corporation sells bonds to private investors, who buy them knowing that they have the implicit guarantee of the federal government. From private investors and federal guarantee, customers are supposed to have access to stable – but more importantly, local – credit, lent by associations with a thorough understanding of the needs of local farmers.
No doubt, this consolidation will cause disruption to the farmers and producers who have a relationship with Yankee Farm Credit. Yankee Farm Credit will now join an organization that spans the Northeast, with oversight from a funding bank based in Colorado that also serves associations in Hawaii, the West Coast and the Rockies. This is hardly local service.
The Chair of Yankee Farm Credit offers the following reason for the “strategic merger”:
“It’s something to consider because, of course, as dairies consolidate, which is definitely the trend as we’re seeing … the loans get bigger also, and in Yankee’s position, we have a hold limitation of $6 million,” she says. “So when a loan … an entity combines, maybe another farm or two other farms, and now their loans are $20 million or bigger, we can only hold $6 million of that, so we must participate out the balance, and so our ability to make earned interest on those loans becomes less.”
On its face, that reason makes sense. But these consolidations have a human impact that the Chair mostly ignores:
“Kane-Stebbins says that most customers won’t notice a difference, and that they’ll be working with the same loan officer as before. But the merger will likely result in the closure of at least one branch, the Yankee branch in Chazy, N.Y., which Kane-Stebbins says has been closed from time to time in the past.”
It doesn’t matter if the branch has been closed from time to time in the past. Now, more and more farmers and producers in a large chunk of upstate New York will have to now drive much further just to get their credit needs fulfilled if they are going to stay with their current lender. That’s not right, and that cannot be downplayed for convenience’s sake: it’s going to be harder for them to get farm credit from Farm Credit!
But the reason for the consolidation given by Yankee Farm Credit’s Chair reveals something else. Farm Credit East is absorbing Yankee Farm Credit because there are fewer small farms to lend to. If Farm Credit hadn’t failed small farmers for so many years, this problem would have been less likely – there would be more small farmers, and there’d be less consolidation making it harder for the remaining small farmers to keep their farms in business. They would be more connected with their local branch, which could better respond to their specific needs.
Farm Credit consolidation is a troubling trend that has only continued since the late 1980s, when there were 400 associations. Only a few years ago, Badgerland Financial, 1st Farm Credit Services and AgStar Financial Services merged into Compeer Financial. In 2015, Farm Credit Services of Southwest merged with Farm Credit West after it announced its financial statements could no longer be relied upon. In 2019, Farm Credit Services of Hawaii disappeared and merged with American AgCredit. On January 1, 2021, Farm Credit of Western Oklahoma and AgPreference merged into Farm Credit West of Oklahoma. Just months after, Yankee Farm Credit will consolidate into Farm Credit East. There will be only 66 associations remaining.
The trend should not be fewer, and larger, FCS institutions. And to make matters worse, Farm Credit’s regulator, the Farm Credit Administration (FCA), doesn’t appear to have given any notice or mention of this new “strategic merger” at its latest board meeting. Shouldn’t the FCA deliberate over whether the merger is appropriate? Shouldn’t it have that power if it doesn’t? And if it does, why hasn’t it been forthcoming about this information to the public?
Congress needs to examine the FCA’s lack of disclosure about consolidations, and the effects of Farm Credit consolidation on the ability of farmers, ranchers and producers to access farm credit from FCS institutions so that they aren’t left behind. If Congress doesn’t put a stop to it, it may soon be too late.