Federal Farm Credit System (FFCS)

The Federal Farm Credit System (FFCS) is a network of financial institutions which provide credit and financing for farming and agriculture in the United States. The FFCS is a crucial source of funding for the agribusiness which is seen as high-risk by traditional lenders. For example, even if a farmer has excellent credit and a strategic business plan, a season of drought, unseasonable temperatures, or unexpected international conflicts can drastically affect their bottom line. The FFCS provides farmers and rural homeowners with credit that they would not, otherwise, be likely to attain through a commercial lender. 

The Federal Farm Credit System (FFCS) has evolved and grown significantly in the past 100 years. In 1916, Congress passed the Federal Farm Loan Act, establishing Federal Land Banks (FLBs) in a dozen districts around the country. The Act also created hundreds of National Farm Loan Associations (NFLAs). These entities form the basis of what would become known as the Federal Farm Credit System.

The Farm Loan Act created a way for farmers to secure long-term loans. Later, the Agricultural Credits Act of 1923, created a dozen Federal Intermediate Credit Banks (FICBs) which allow farmers to get discounted, short-term loans through cooperatives. By 1968, repayment of all capital lent through the Federal Farm Credit System was complete. Repayment of these funds meant that the financial institutions of the system were now entirely farmer-owned.

The 1970s saw a huge boom for U.S. farmers as demand for U.S. agricultural products grew. Land values also began to climb. The demand for agricultural lending skyrocketed during this time. However, the boom ultimately led to production surpluses, lower crop prices, and up to 300,000 farmers on the brink of failure.

In 1985, the Federal Farm Credit System (FFCS) posted losses of $2.7 billion. A year later, the deficit stood at $1.9 billion. This debt represented the most substantial failure in the history of any U.S. financial institution.

Congress stepped in with the 1985 Farm Credit Amendments Act. Further reforms came with the 1987 Agricultural Credit Act. Together, these two Acts brought federal oversight, regulation, and enforcement, along with $4 billion in federal assistance through the use of agriculture credits to the FFCS. At this time, the Federal Agricultural Mortgage Corporation (FAMC), also known as Farmer Mac, was created.

By 2005, all financial assistance which the Federal Farm Credit System (FFCS) institutions received from the U.S. Treasury as bailouts were fully repaid, including interest. Today, the FFCS consists of:

• Three Farm Credit Banks (FCBs)
• 72 Agricultural Credit Associations(ACAs)
• one Federal Land Credit Association (FLCA)
• one Agricultural Credit Bank (CoBank).

The CoBank can provide loans to Agricultural Credit Associations, the Federal Land Credit Association, agricultural cooperatives, rural utilities and aquatic cooperatives. It also helps to finance imports and exports of U.S. agricultural products and provides international banking services for farmer-owned cooperatives.