Agriculture lending comprises of companies that provide loans and other credit and financing products to agricultural enterprises.
The Farm Credit System (System) is a network of borrower-owned lending institutions and related service organizations serving all 50 states and the Commonwealth of Puerto Rico. These institutions specialize in providing credit and related services to farmers, ranchers, and producers or harvesters of aquatic products. Loans may also be made to finance the processing and marketing activities of these borrowers. In addition, loans may be made to rural homeowners, certain farm-related businesses, and agricultural, aquatic, and public utility cooperatives.
All System banks and associations are governed by boards of directors elected by the stockholders who are farmer-borrowers of each institution. Additionally, Federal law requires that at least one member of the board be elected from outside the System by the other directors. System institutions, unlike commercial banks or thrifts, do not take deposits.
As of April 1, 2006, the System was composed of the following lending institutions:
Four Farm Credit Banks (FCBs) that provide loan funds to 80 Agricultural Credit Association (ACAs), and 11 Federal Land Credit Associations (FLCAs). ACAS make short-, intermediate-and long-term loans and FLCAs make long-term loans.
One Agricultural Credit Bank (ACB), which has the authority of an FCB and provides loan funds to 5 ACAs. In addition, the ACB makes loans of all kinds to agricultural, aquatic, and public utility cooperatives and is authorized to finance U.S. agricultural exports and provide international banking services for farmer-owned cooperatives.
The following System entities also are examined and regulated by FCA: The Federal Farm Credit Banks Funding Corporation (Funding Corporation) is an entity owned by the System banks that markets the securities the banks sell to raise loan funds. System institutions obtain the majority of their loan funds through the sale of these securities in the Nation's capital markets. These securities, chiefly bonds and discount notes, are offered by the Funding Corporation through a nationwide group of securities dealers and dealer banks.
The Farm Credit System Financial Assistance Corporation (Assistance Corporation) was created by the Agricultural Credit Act of 1987 and chartered in 1988. It provided needed capital to the System through the purchase of preferred stock issued by System institutions that received financial assistance authorized by the Farm Credit System Assistance Board. Approximately $1.26 billion in funds were provided by the Assistance Corporation, and its authority to raise additional funds expired on December 31, 1992. This entity is managed by the same board of directors as the Funding Corporation and will continue to operate until all funds used to provide the assistance are repaid.
The Federal Agricultural Mortgage Corporation, also known as Farmer Mac, provides a secondary market for agricultural real estate and rural housing mortgages. It guarantees prompt payment of principal and interest on securities representing interests in, or obligations backed by, mortgage loans secured by first liens on agricultural real estate or rural housing. It also guarantees securities backed by the "guaranteed portions" of farm ownership and operating loans, rural business and community development loans, and certain other loans guaranteed by the U.S. Department of Agriculture. Farmer Mac also purchases or commits to purchase qualified loans or securities backed by qualified loans directly from lenders.
Service corporations organized under Section 4.25 of the Farm Credit Act of 1971, as amended, are also examined and regulated by the FCA. These include the following:
AgVantis, Inc. provides technology-related and other support services to the associations affiliated with U.S. AgBank, FCB. AgVantis, which was chartered by FCA on August 3, 2001, is owned by the bank and its affiliated associations.
The Farm Credit Finance Corporation of Puerto Rico uses tax incentives offered to investors to provide low-interest funding (other than that from the Funding Corporation) to the Puerto Rico Farm Credit, ACA.
The Farm Credit Leasing Services Corporation (Leasing Corporation) provides equipment leasing services to eligible borrowers, including agricultural producers, cooperatives, and rural utilities. The Leasing Corporation is owned by CoBank, ACB.
Farm Credit Financial Partners, Inc, provides support services to associations affiliated with CoBank, ACB.
The FCS Building Association (FCSBA) acquires, manages, and maintains facilities to house FCA's headquarters and field office staff. The FCSBA was formed in 1981 and is owned by the Farm Credit System banks. The FCA Board oversees the FCSBA's activities on behalf of its owners.
Farmer Mac Programs
Farmer Mac conducts business through two programs - Farmer Mac I and Farmer Mac II.
In Farmer Mac I, Farmer Mac purchases, or commits to purchase, qualified agricultural or rural housing mortgage loans (Qualified Loans) or obligations backed by Qualified Loans.
In Farmer Mac II, Farmer Mac purchases the guaranteed portions (Guaranteed Portions) of farm ownership and farm operating loans, rural business and industry and community facility loans, and certain other loans guaranteed by the U.S. Department of Agriculture
Farmer Mac guarantees on-time payments of loan principal and interest on securities backed by Qualified Loans or Guaranteed Portions and either retains those securities in its portfolio or sells them in the secondary capital markets.