The Farm Credit System (FCS) is a national lending network focused on supporting the agricultural sector. It consists of cooperative banks and associations that offer loans to individuals and businesses across the U.S. The FCS plays a vital role in aiding rural communities and various organizations, from small family farms to large corporations with international reach.
How Farm Credit System Works?
The FCS is made up of 72 self-governing financial institutions owned by their customers. These institutions offer loans and various services to U.S. farmers, ranchers, agribusinesses, commercial fishers, greenhouse operators, and cooperatives run by farmers. Additionally, the Farm Credit System helps with loans for rural home buyers and those providing infrastructure. It plays a vital role in funding the agribusiness sector, which traditional lenders often view as high-risk. Each member institution is managed by a Board of Directors elected by its customers.
The Farm Credit System supports the agriculture sector by offering various resources, including financial products like credit life insurance, crop insurance, accounting tools, and cash management services. They also provide leasing options that enable customers to buy and finance vehicles, farm equipment, and other necessary supplies.
FCS plays a vital role in rural areas where national and regional banks often lack a presence, ensuring that these communities receive essential credit. This support helps keep rural areas vibrant and thriving. Additionally, the organization is committed to making sure American agriculture stays competitive in the global market.
Importantly, the Farm Credit System operates independently of government funding or tax dollars. Instead, it generates funds by selling debt securities in the market. The money from loans is used to acquire and maintain the products and supplies needed by the communities they serve.
The History
The organization has a history that goes back over a century. It all started in 1916 when Congress set up the FCS through legislation that created the Federal Land Bank System (FLB). Just under a year later, they issued their first loan. During the Great Depression, the system grew and was credited with helping to save numerous American farms during that tough time.
In 1953, the Farm Credit Act established the FCA as part of the executive branch, paving the way for its independence. Initially, the federal government funded the FCS to provide a reliable credit source for American agriculture. Now, it operates on its own and is owned by its member-borrowers. Thanks to its size and reach, member-borrowers can access credit and favorable borrowing terms that might not be available to them otherwise, particularly for small farms or those with limited resources.
Conclusion
The Farm Credit System plays a vital role in the U.S. agricultural sector by offering important financial services and helping to support the stability and development of rural areas.