Farm Credit System lending to young, beginning and small farmers and ranchers continues to increase
Source: The Land Report Wire
May 24, 2007
McLEAN, Va., — A report on the 2006 performance of the Farm Credit System (FCS or System) in meeting its congressional mandate to provide constructive credit and related services to young, beginning and small (YBS) farmers and ranchers was presented today to the Farm Credit Administration (FCA or Agency) Board.
The overall trend for YBS lending for each of the three borrower categories continued to be positive, with the dollar value of loans made during the year showing solid gains from 2005 levels. The number of new loans was up for beginning and young farmers and was flat for small farmers. However, the growth rate in the YBS categories as a percentage of the System’s total new loan dollars was down slightly for 2006. Small farmers continued to receive the largest share — 54 percent — of the System’s new loan numbers during the year.
The report, prepared by Office of Regulatory Policy (ORP) staff, is part of the FCA Board’s continuing effort to ensure that the FCS responds to the credit needs of these farmers and ranchers. In 2001, the Board instituted new YBS definitions and reporting requirements for the System. In March 2004, the FCA Board approved a regulation strengthening YBS programs and policies at System banks and associations. Congress established the YBS mission in the 1980 amendments to the Farm Credit Act. The amendments called for (1) each FCS association to have a program for furnishing sound, constructive credit and related services to YBS borrowers and (2) each Farm Credit Bank to report annually to FCA on its district YBS activities.
At the end of 2006, the System held 140,209 loans to young farmers, defined as aged 35 or younger, totaling $15.4 billion. This volume is up 11 percent from 2005. During 2006, 46,459 new loans totaling $5.5 billion were made to young farmers, which represented 17.0 percent of all new loans the System made during the year and 10.5 percent of the new loan dollar volume. The number of new loans made to young farmers during 2006 was 9.7 percent higher than in 2005, and the volume of new loans was 8.7 percent higher.
Beginning farmer loans held by System institutions, defined as those made to farmers with 10 or fewer years of farming experience, amounted to 189,223 loans totaling $25.4 billion at year-end 2006. Also during 2006, 57,838 new loans totaling $9.3 billion were made to beginning farmers, which represented 21.2 percent of all new loans and 17.8 percent of new loan dollar volume. The number of new loans made to beginning farmers during 2006 was 5.4 percent higher than in 2005, and the volume of new loans was 12.3 percent higher.
FCS institutions had 465,951 loans outstanding totaling $36.3 billion to small farmers, defined as those with gross annual sales of less than $250,000, at the end of 2006. During the year, 148,025 new loans were made to small farmers for a total of $11.6 billion. New loans to small farmers represented 54.3 percent of all new loans and 22.2 percent of new loan volume. Although the number of new loans made during 2006 was essentially unchanged from 2005, the volume of new loans increased 6.0 percent.
Economic and demographic factors have led to a decline in the number of small and young farmers in the farming population. As a result, the System’s potential YBS lending market has declined. To encourage lending to these farmers, many associations report the use of special underwriting standards, lower interest rates, or other programs aimed at YBS borrowers. The report concludes that continuing analysis is needed and is underway to better understand how the System’s performance in meeting its YBS mission is affected by economic and demographic changes.
Systemwide data on YBS lending and data by individual associations are available on the Agency’s Web site at www.fca.gov.
