who finances america’s family farmers?

Who FinancesAmerica’s

Family Farmers?

USDA Agriculture Economics and

Land Ownership Survey

A Review of the Recent

The 1999 Agriculture Economics and

Land Ownership Survey

The Questionnaires Were Completed by Thousands of Farmers and Ranchers and Compiled by the USDA

Provides the Most Current Data About U.S. Farmers and Ranchers

Provides Insight into Where Farm Operators and Owners Get Their Financing

Released by the USDA in August of 2001

Congress created the Farm Credit System (“FCS”) in 1916 as America’s first government-sponsored enterprise (“GSE”). The FCS competes with the private sector by lending directly to farmers, ranchers, rural businesses and rural homeowners. GSE status allows the FCS to borrow money from the public at rates comparable to the federal government. Its earnings are largely tax exempt. While the federal government does not explicitly guarantee bonds that the FCS issues, the government did provide a $4 billion line of credit to stave off the insolvency of the FCS in 1987. Today, the Farm Credit System has over $98 billion in assets and made over $1.4 billion in net income in 2000.

The Farm Credit System

1

Banks are privately owned businesses which are capitalized by investors whose money is at risk. Banks fund their operations primarily by accepting deposits and making loans to farmers, ranchers, rural businesses, and individuals. Banks are the only financial institutions subject to the federal Community Reinvestment Act.

Banks in Rural America

2

Source: 2001 USDA Agriculture Income and Finance Report

0%

10%

20%

30%

40%

1984 1986 1988 1990 1992 1994 1996 1998 2000

Farm Credit SystemBanks

Banks Have Steadily Increased Their Loans to Farmers

Mark

ets

hare

3

The Average American Farm With Debt

Has 615 Acres

Source: USDA Agriculture Economics and Land Ownership Survey

The Average Farm Acreage of:

Bank Customers = 600

FCS Customers = 935

4

The Average Market Value of Farm Products Sold By All Farms With Debt: $168,000

The Average Market Value of Farm Products Sold By Bank Customers: $156,000

The Average Market Value of Farm Products Sold By FCS Customers: $311,000


The Average Family Farmer is aBank Customer

5

Banks74%

Other9%

Farm Credit System17%

Banks Serve Three-Quarters of the Youngest Farm Operators*

*Defined as operators under the age of 35Source: USDA Agriculture Economics and Land Ownership Survey

6

The Farm Credit System is Not Focused

on Beginning Farmers

Over 50 years54%

35 to 50 years38%

Under 35 years 8%


Breakdown of FCS Loan Portfolio by Farmer Age

7


Banks Lend to More Family Farmers*

680,297

91,016169,128

FCS Banks Other

Number of Family Farm Customers

* Sole proprietorships, partnerships and family held farms

8

Small 33%

Large24%

Very Small43%


A Quarter of Farm Credit System Loans Are To Large Farms*

* Farms with $250,000 or more in sales

9


Almost a Quarter of Farm Credit System

Customers Operate America’s Largest Farms

52%

32%

45%

34%

14%

23%

FCSBanks

Very Small Farms

(179 acres or less)

Small Farms (180 to 1000

acres)

Very Large Farms

(Over 1000 acres)

10


Who Serves More Mega-Farms?*

* Farms with $500,000 or more in sales

12.51%

5.43%

Farm Credit System Banks

Percentage of Customers

11

Farm Operators*: Banks Finance More Minorities and Women

Than Anyone

12%

70%

18%

Farm CreditSystem

Banks Other


*A “farm operator” is defined as a person who operates a farm or ranch, either doing the work or making day-to-day decisions about such items as

planting, harvesting, feeding, and marketing. See Appendix A of the AELOS

12

Farm Owners*: Banks Finance More Minorities and Women Than

Anyone


*A “farm owner” is defined as an individual, partnership, corporation, or other entity who owns land used for agricultural purposes. See Appendix A

of the AELOS

27%

52%

21%

Farm CreditSystem

Banks Other

13

The ABA brings together all categories of banking institutions to best represent the interests of this rapidly changing industry. Its membership - which includes community, regional and money center banks and holding companies, as well as savings associations, trust companies and savings banks - makes ABA the largest banking trade association in the country. ABA can be found on the world wide web at http://www.aba.com.

This Review of the 1999 USDA Agriculture Economics and Land Ownership Survey was prepared by the Center for Agricultural and Rural Banking of theAmerican Bankers Association.AELOS data may be found on the USDA website:

http://www.nass.usda.gov/census/census97/aelos/aelos.htm

14

Center for Agricultural and Rural Banking

who finances america’s family farmers?

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