Remarks by

The Honorable Jill Long Thompson

Board Chair and CEO, Farm Credit Administration

AgFirst Farm Credit Bank Annual Meeting

Washington, D.C.

July 14, 2014

Good morning. Thank you for your kind introduction, Chairman Spiers. And thank you for your 

invitation to speak this morning at the 2014 annual meeting of the AgFirst Farm Credit Bank. I 

also thank FCA staff for their help in arranging for me to be here today.

Since I spoke with you a year ago, there have been a number of positive developments in 

agriculture. After long, contentious negotiations, Congress finally passed a Farm Bill, alleviating 

some of the uncertainties that farmers and farm lenders have to manage. 

Another positive development is the continued improvement in the performance and condition of 

the Farm Credit System. And the AgFirst District is no exception. 

While total loan volume increased slightly in 2013, the District’s criticized loan volume declined 

considerably. Nearly 93 percent of the combined association district retail portfolio was 

classified as acceptable at year-end 2013, up from 90 percent a year ago and up substantially 

from several years ago when the financial crisis was in full swing. 

I believe it would be accurate to attribute this higher credit quality, at least in part, to your loan 

portfolio management. According to our examiners, you have continued to improve such

management over the past several years, especially in the area of collateral risk. It sounds like 

the Collateral Risk Focus Group, which you established in late 2012, has served you well. And, 

as we’ve seen with the recent softening of land values, collateral risk was a legitimate concern. 

Your District has also benefitted from the relief that protein producers received when grain 

prices declined at the end of last year. But, of course, stresses have increased in other sectors. 

Citrus greening is a threat to many of your borrowers in Florida, and the PED virus is a threat to 

pork producers everywhere. However, by continuing to monitor your portfolios carefully, you can 

manage the effects that these diseases may have on the safety and soundness of your 

institutions.

I am also pleased to recognize your District, in particular, for the emphasis you place on serving 

young, beginning, small, (YBS) and minority farmers. This emphasis is paying off. As you know, 

the ratio of young and beginning farmer loans to all other farm loans in the AgFirst District

increased from 2012 to 2013. That’s important progress. 

I was also impressed to learn your bank’s Ag Biz Planner curriculum continues to expand. Since 

AgFirst Farm Credit Bank established the program five years ago, more than 500 young, 

beginning, small, and minority farmers have enrolled in it, and I understand that this number 
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may grow substantially as more and more System institutions begin using it. This is a wonderful 

way for you to serve YBS and minority farmers. By providing training and development for these 

producers, you can help increase their chances for business success. 

Not only has the Bank increased its focus on YBS and minority farmers, so too have several 

associations in the AgFirst District. According to our examiners, several AgFirst associations 

have improved their ability to measure and serve underrepresented markets in their territories. 

For example, through its Farm Fresh Financing program, MidAtlantic Farm Credit offers special 

underwriting standards for very small and new farmers. And by the end of 2013, the association 

had $81 million in the program. 

Your district has also provided important outreach to the local and regional foods industry. 

Earlier this year, at the spring conference of the National Good Food Network, I was pleased to 

recognize MidAtlantic for its efforts in this regard. In a partnership with Temple University, the 

association conducted a study of local foods systems, and it is sharing what it has learned with 

other institutions in the Farm Credit System. Already, it has made more than 300 loans to food 

hubs and other businesses in the local foods system. 

Another area in which the AgFirst District has made important strides is in the area of 

governance. In the wake of the recent financial crisis, corporate conduct has become the 

subject of much public debate. As the independent, arm’s-length regulator of the Farm Credit 

System, we responded by increasing our emphasis on standards of conduct and ethics. Thank 

you for your responsiveness to this guidance. 

According to FCA examiners, institutions in the AgFirst District have stepped up governance 

training for boards of directors, and standards of conduct officials throughout the district have 

been meeting regularly to discuss issues of common interest. These are important steps. They 

will lead to better-informed and more effective boards of directors.

Since its founding in 1916, the System has helped four generations of American farmers. As 

members of the Farm Credit System, you can be very proud of your role in the growth and 

success of American agriculture.

And even though our nation has fewer farmers today than it did when the System was founded, 

it has exponentially more mouths to feed, making agriculture and agricultural credit every bit as 

relevant today as it was back then. In fact, as long as people continue to eat, we will continue to 

need farmers and lenders who understand the particular needs and challenges of farmerborrowers.

A couple of weeks ago I testified before the House Agriculture Subcommittee on Livestock, 

Rural Development and Credit, and I received several questions regarding System loans that 

some considered to be outside the realm of the System’s mission. In my testimony, I pointed out 

the legality of these loans. 
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However, I will also note that sometimes it’s not enough to just be right—you must ensure that 

your actions also appear to be right. We sometimes refer to this as managing reputation risk. 

That’s why I encourage all System institutions to continue emphasizing your mission to serve 

agriculture and rural America and to tirelessly seek ways to fulfill this mission more completely 

and effectively. We must strive for a nation in which every creditworthy farmer and rancher who 

seeks credit can receive it—whether the farmer has 10 acres or 10,000, whether the farmer is 

male or female, black or white. 

Sticking to your mission is one important way that you can manage reputation risk. Another 

important way is to tell your story—not just to potential borrowers but to the broader public. You 

must help the public understand the critical role the System plays in agriculture. 

I even encourage you to remind the public of the importance of agriculture. You might think this 

point goes without saying. After all, everyone eats. But human beings have a talent for taking 

things for granted. That’s why it’s important to remind people that agriculture is the source of 

every meal they eat. 

And agriculture is also critical to sustaining our national economy. Agricultural products, 

particularly wheat and soybeans, contribute significantly to our nation’s exports. The U.S.

agricultural industry is an important reason that we are the strongest economy in the world. 

And who meets almost half of the nation’s agricultural credit needs? You do. 

It’s a little-known fact that the Farm Credit System is an important reason the United States is 

among the world’s top agricultural producers. Without access to affordable credit, farmers could 

not have purchased the land, machinery, pesticides, and fertilizers they needed to expand their 

operations. The Farm Credit System helped make this possible. 

This is the story of the Farm Credit System. It’s a powerful story, a compelling story. And the 

more you tell this story, the better our democratic nation can understand what the Farm Credit 

System is and why we continue to need the System. 

One of the reasons the System has remained relevant over the past 100 years is that it has 

continuously evolved. It had to. The industry it serves is constantly changing. Over the years, 

farm equipment and technology have become more sophisticated, leading to dramatically higher

yields. And the size of farms has increased as the number of farms has decreased. 

As I mentioned in my remarks to you last year, one of the major changes in agriculture in recent 

years has been the rise in consumer demand for local foods and organic products. Because of 

this demand, many smart, hard-working people are seeking to become farmers. And unlike 

most System customers, many of these people have no previous ties to farming. To begin 

farming, they must start from scratch. But thanks to this new demand for local and organic 

foods, they have a real chance of being successful. 
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I commend those of you who are reaching out to these producers and developing loan products 

and programs to meet their needs. You must, of course, ensure that these would-be borrowers 

are creditworthy, but, to give them a fair chance, you may need to adopt new ways to measure 

their creditworthiness.

In expanding your service to underrepresented markets, you are helping serve your public 

mission, and you are broadening the System’s relevance in the marketplace. This is good

progress, and I encourage you to continue on this path. 

While you meet the needs of these producers, however, you must continue to serve the farmerborrowers with whom your institutions have long had relationships. Because of factors like 

weather, pests, and crop and livestock disease, meeting the credit needs of farmers and 

ranchers has never been easy, and the effects of climate change may make it more difficult still.

As the regulator of the Farm Credit System, we will do all we can to support your mission and to 

protect your safety and soundness. In May, for example, we issued a proposed rule to more 

closely align our capital requirements with those of other Federal banking agencies and the 

Basel Accord. This will benefit the System by strengthening its capital reserves and making 

System investments more attractive to investors. 

And last year, we issued a revised liquidity regulation requiring each bank to maintain higherquality liquidity, as well as a supplemental liquidity buffer. The rule helps ensure that System 

banks keep liquidity to continue operating if their access to the capital markets is temporarily 

interrupted. 

These are just a few of the ways we are working to provide the System with a constructive 

regulatory framework—one that doesn’t unnecessarily restrict the System but provides the 

parameters it needs to serve its mission safely. 

Through our examinations of System institutions, we help managers and directors see potential 

risks they might have missed, and we help ensure that their institutions comply with all laws and 

regulations. We also monitor conditions in the agricultural and banking sectors, always watching 

the skies for trouble.

We, the Agency, and you, the System, share the same goal of ensuring a safe, sound, and 

constructive source of credit for America’s farmers and ranchers, but we cannot operate as 

partners, per se. Why not? Because the Farm Credit Administration is required by law to be an 

independent, arm’s-length regulator.

In fact, I would argue that the System actually needs us to be an independent arm’s length 

regulator. If your borrowers, if Congress, and if the general public perceive us to be a “pocket 

regulator,” their confidence in the checks and balances on the Farm Credit System weakens.
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Public perception is a powerful thing. Seeing that the System has an independent, arm’s-length 

regulator gives investors in System debt more confidence in the safety and soundness of their 

investments; it gives borrowers more confidence that they will receive fair treatment; and it gives 

Congress more confidence that the System will fulfill the mission for which it was created. It all 

comes back to reputation.

AgFirst can be very proud of its achievements over the past year, and I hope you will build on 

these achievements in the coming year. Keep your management standards high; watch out for 

reputation risks; and continue to seek ways to reach out to YBS producers and 

underrepresented groups. 

Thank you.