Farm Credit System (FCS): What it Means, How it Works, History

What is the Farm Credit System (FCS)?

The Farm Credit System (FCS) is a nationwide lending network which specializes in serving the agricultural community. It is made up of cooperative banks and associations who provide credit to individuals and businesses throughout the United States. The FCS assists the rural community and organizations of all types and sizes, ranging from small family farms to corporations with global operations.

How the Farm Credit System (FCS) Works

The FCS consists of 72 independent and customer-owned financial institutions. These institutions provide financing and related services to U.S. farmers, ranchers, agribusinesses, commercial fishers, greenhouse operators, and farmer-owned cooperatives. The Farm Credit System also assists in loans to rural home buyers and infrastructure providers. The Farm Credit System is a crucial source of funding for the agribusiness industry which is seen as high-risk by traditional lenders. Each of the member institutions of the FCS has management through a customer chosen Board of Directors. 

The FCS makes loans for a variety of purposes, including:

• Agricultural processing and marketing activities
• Rural housing initiatives
• Farm-related businesses
• Construction and improvement of rural utilities
• Financing and promoting the global exports of products
• Purchasing land to operate farms
• Purchasing equipment and building the facilities necessary to the agriculture industry

The Farm Credit System helps the agriculture industry with resources including financial products such as credit life insurance, crop insurance, accounting tools and cash management services. The organization also provides access to leasing programs that allow customers to purchase and finance vehicles, farm equipment, and other supplies.

The FCS provides access to critically needed credit in rural areas where national and regional banks typically do not have a presence. That, in turn, helps support rural communities and keeps them healthy and thriving. The organization’s mission today also focuses on ensuring that American agriculture remains competitive in global markets.

The Farm Credit System does not run off of government funding or tax dollars. The FCS raises funds through the sale of debt securities on the market. Loan proceeds help to purchase and maintain the products and supplies needed by the people the FCS serves. 

History of the Farm Credit System

The organization’s roots trace back more than 100 years. It originated when Congress created the FCS in 1916 through legislation establishing the Federal Land Bank System (FLB). The group issued its first loan less than a year later. The system expanded during the Great Depression and received credit for helping to save many American farms during that period.

The Farm Credit Act of 1953 established the FCA as one of the agencies that falls under the executive branch, setting it on a course towards independence. The federal government initially funded the FCS to ensure American agriculture had a dependable source of credit. It is now self-funding and owned by its member-borrowers. The organization’s size and scope allow member-borrowers to have access to credit sources and attractive borrowing terms that might not otherwise be available to them, especially in the case of small farms or those with limited resources.