Farm Credit Administration

Farm Credit Administration (FCA), an independent agency of the executive branch of the federal government that supervises and coordinates the Farm Credit System for American agriculture. The Farm Credit Act of 1971, which superseded all previous legislation, established the FCA to provide long-term and short-term credit to farmers and their cooperatives. Long-term mortgage loans help farmers acquire property or refinance existing debts; short-term loans are needed to finance crop and livestock production and marketing. In addition, the FCA makes emergency crop and feed loans to farmers who cannot obtain funds from other sources.

Credit used by farmers and cooperatives derives from the FCA through a network of farm credit banks, federal land bank associations, production credit associations, and banks for cooperatives. The farm credit banks make loans to agricultural cooperatives for periods ranging from six months to three years. The loans are secured by warehouse receipts for crops or by liens on livestock. The land banks function as credit wholesalers, raising funds in the investment markets through the sale of bonds and lending the money to farmers at low interest rates. Production credit associations finance short-term credit associations, and banks for cooperatives finance cooperative marketing. Other components of the Farm Credit system include the Agricultural Credit Bank, agricultural credit associations, and federal land credit associations.

History

Originally established in 1916 in response to farmer requests for liberal credit facilities and low interest rates, what is now the FCA initially provided a system for mortgage credit: 12 regional farm land banks were set up, with most of the original capital supplied by the government. It was intended that the farmer-borrowers should ultimately own the banks. An act of 1923 further extended federal aid to farmers, establishing 12 intermediate credit banks (one in the district of each land bank), with capital supplied by the government.

Six years later the whole structure of the land banks was severely hit by the great depression of 1929, with falling prices of farm products, increased debt delinquencies, and decline in the value of farms. In 1932 the government invested $125 million in the bonds of the land banks to bolster them and thus again became the majority stockholder. All then existing federal agricultural-credit organizations were unified into one agency, the FCA. Congress authorized that agency to extend the system of farm-mortgage credit. Funds were made available for loans on easy terms for first or second mortgages—the so-called land bank commissioner loans—to debtors whose collateral was so low in value or so encumbered by debt as to make refinancing by the land banks unfeasible. In 1933 the FCA was also authorized to establish 12 production credit corporations and banks for cooperatives. The result was a centralized source of farm credit.

A part of the Dept. of Agriculture after 1939, the FCA again became an independent agency in 1953. During the farm crisis of the 1980s, the FCA Amendments Act (1985) gave the FCA more regulatory authority over the farm credit system and established a full-time FCA board of three persons, who are appointed for six-year terms.