Pub. 3 2014 Issue 8

l e a d i n g a d v o c a t e f o r t h e b a n k i n g i n d u s t r y i n k a n s a s 22 BERT ELY’S FARM CREDIT WATCH ® SHEDDING LIGHT ON THE FARM CREDIT SYSTEM, AMERICA’S LEAST KNOWN GSE ©2014 Bert Ely Every young farmer in America has an FCS loan??? The FCS and the Farm Credit Administration (FCA) attempt to justify the FCS’s tax exemptions and taxpayer-backed funding by claiming to make a special effort to provide credit to young, beginning, and small (YBS) farmers. The FCA defines a young farmer as someone age 35 or younger “as of the date the loan was originally made,” a beginning farmer as having 10 or less years of farming experience on the loan origination date, and a small farmer as someone who “normally generates” less than $250,000 in annual gross sales of agricultural or aquatic products when the loan was originated. One major flaw in the YBS data, which the FCA readily acknowledges, is that YBS loans get double- and triple- counted. For example, a loan to a 32-year-old farmer who has farmed for seven years and has annual agricultural sales of $185,000 is triple-counted in the YBS data—once as an Y, once as a B, and once as a S. Likewise, each loan to a farmer meeting the YBS criteria is tallied as a YBS loan, so if the farmer in this example has a farm mortgage, a production loan, and loans used to buy a tractor and a pick-up truck, the FCS will count those four loans a total of twelve times in its YBS data. Term loans also lead to overstated YBS loan numbers. For example, a 15-year mortgage extended to a 34-year old farmer will get counted as a loan to a young farmer until that farmer turns 49. The FCA could easily eliminate this gross exaggeration of the FCS’s YBS lending but so far it has refused to do so. The YBS exaggeration becomes starkly evident when linking the USDA’s 2012 Census of Agriculture ( http://www.agcensus . usda.gov/Publications/2012/) with the FCS’s YBS data. For example, the FCS claimed that at the end of 2012, it had 170,157 loans outstanding to young farmers (35 or younger) while the USDA census reported that 119,833 full and part- time farmers were 34 or younger. Setting aside the one-year age gap between the two sets of numbers, this data suggests that every “young” farmer in American has at least one FCS loan or, alternatively, some young farmers have several FCS loans while other young farmers have none. Granted the FCS is a very aggressive lender, but it is well known that it has not been aggressive in providing credit to young farmers. Given the FCS’s well-known propensity to lend to larger farmers and agribusinesses, the FCS’s data on its lending to small farmers is suspect, too. At the end of 2012, the FCS had 36,270 loans and loan commitments outstanding to “small” farmers that exceeded $250,000 each. These loans and commitments totaled $18.885 billion, or an average of $521,000 per loan and commitment, more than twice the maximum annual agricultural sales of a “small” farmer. It is quite likely that many of these “small” farmers with large