The Farm Credit System is designed and authorized to serve all of agriculture. We’re proud of our support for ag-related borrowers, who range from young, beginning and small farmers to very large, complex corporate entities.
Although most of the loans we make fall into one of those first categories, we also serve our nation’s large agribusinesses, which play a critical role in the success of the overall agriculture industry. Just like small mom and pop operations, they too need access to a reliable and competitively priced source of credit.
Competition Good for Agriculture
Our competitors often mischaracterize Farm Credit’s mission as serving just beginning and small farmers, or as a lender of last resort, serving those who can’t qualify for credit elsewhere. Naturally they would prefer not to have competition. But that is exactly why Congress established the Farm Credit System — to be a competitive counterbalance to conventional financial institutions. Such competition gives the agriculture industry more access to capital at a lower cost.
We serve creditworthy borrowers in all segments of agriculture and rural America. Without Farm Credit, affordable credit would not be so readily available to those segments.
Serving All Sizes
The reality of modern agricultural production is that most commercial-size operations, which produce the majority of our food and fiber, require substantial credit, as do rural infrastructure providers, agricultural cooperatives and other agribusinesses. Loans that finance large operations create jobs and generate economic activity throughout the agriculture industry.
Farm Credit often partners with commercial banks to make these types of loans, which benefits both lenders and their borrowers. Working together, bankers and A Lender for All of Agriculture By Stan Ray Farm Credit lenders collaborate on loans in order to manage and reduce their concentration of risk in terms of geography, industry and account exposure. This is accomplished every day through the purchase and sale of large loan participations by lenders — an activity that illustrates the increasing need for the banking industry and the Farm Credit System to work together to meet the growing credit requirements of rural America.
Never the Lender of Last Resort
Because Farm Credit is structured as a cooperative system, we are owned by the people who borrow money from us. As such, each Farm Credit lending institution has a fiduciary responsibility to operate in a safe and sound manner. No one wants to be a stockholder of a business that makes poor financial decisions, because a poorly managed operation ultimately devalues the equity and value that stockholders derive from that business.
As locally owned cooperatives, Farm Credit associations understand this concept very well and maintain high credit standards to ensure that all memberstockholders are protected. What’s more, the federal government holds our cooperatives to that standard through a regulatory agency, the Farm Credit Administration, which has the authority to shut us down if we don’t meet those standards.
When Congress established the Farm Credit System almost 100 years ago, it never intended to create a lender of last resort. Instead, our nation’s elected officials created a financially strong network of locally owned cooperatives with high credit standards, effective lending practices and manageable risk, for the purpose of serving the whole of agriculture and rural America for generations to come.
- Stan Ray