With Hundreds of Millions of Dollars in Patronage Out the Door, YBS Farmers Still Left Behind

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The numbers don’t lie. Farm Credit institutions continue to use its tax breaks to pay out large dividends to its members while leaving young, beginning and small farmers (YBS) behind. Farm Credit System (FCS) institutions span the country, and Farm Credit associations—the retail operators—are structured as cooperatives: its customers are also the owners of the institution. This should mean that Farm Credit associations are more responsive to the average farmer, especially YBS farmers.

That sounds good in theory, right?

This structure certainly helps privileged farmers who receive massive patronage dividends from Farm Credit institutions. Farm Credit Mid-America is one such institution. This year, it distributed $210 million in patronage dividends: $53 million in Kentucky$63 million in Indiana$57 million in Ohio, and $37 million in Tennessee. 

Farm Credit Mid-America is no small association, boasting more than $29.5 billion in total assets. Its members’ total equity amounts to $5.3 billion, which generated an 8% return in 2021. Its overall income for that year topped $443 million. And on that income, it paid just over $13 million in taxes, for a tax rate of just under 3%. 

That’s a favorable tax rate no matter how you look at it. With that sort of favorable tax treatment, it should almost go without saying that Farm Credit Mid-America needs to go above and beyond to provide reliable and consistent credit to vulnerable farmers, especially YBS farmers. Like many Farm Credit institutions though, Farm Credit Mid-America does not do nearly enough. There are around 257,000 small farmers in Farm Credit Mid-America’s service area, but it serves only around 60,100. That is, Farm Credit Mid-America serves fewer than one in four small farmers in its service area. 

This couldn’t be clearer: Farm Credit Mid-America brought in hundreds of millions of dollars this year while underserving the small farmers that need help the most. Shouldn’t those hundreds of millions in distributions—at least some of them—go toward helping small farmers? Farm Credit Mid-America receives favorable tax treatment, presumably to help those same vulnerable farmers. If it isn’t helping them, why should it receive the favorable tax treatment?  

Congress needs to investigate the relation between large patronage dividends and not doing enough to help small farmers. If Farm Credit is going to enjoy this massive tax break, then it ought to help more small farmers. They deserve it.