Testimony of the Honorable Kenneth A. Spearman 

Board Chairman and Chief Executive Officer

Farm Credit Administration

Before the U.S. House of Representatives

Committee on Agriculture

December 2, 2015

Introduction

Chairman Conaway, Ranking Member Peterson, and Members of the Committee, I am Kenneth 

A. Spearman, Farm Credit Administration (FCA) Board Chairman and Chief Executive Officer. 

On behalf of my colleagues on the FCA Board, Dallas P. Tonsager of South Dakota, Jeffery S. 

Hall of Kentucky, and all the dedicated men and women of the agency, it is a privilege to appear 

before you today.

FCA is an independent agency responsible for examining and regulating the banks, 

associations, and related entities of the Farm Credit System (FCS or System), including the 

Federal Agricultural Mortgage Corporation (Farmer Mac). The banks and associations of the 

FCS form a nationwide network of borrower-owned financial institutions that provide competitive 

credit to all creditworthy farmers, ranchers, and other eligible borrowers.

FCA Mission

As directed by Congress, FCA’s mission is to ensure a safe, sound, and dependable source of 

credit and related services for agriculture and rural America. We accomplish this mission in two 

important ways. 

First, we protect the safety and soundness of the FCS by examining and supervising all FCS 

institutions, including Farmer Mac, and we ensure that they comply with applicable laws and 

regulations. Our examinations and oversight strategies focus on an institution’s financial 

condition and any material existing or potential risk, as well as on the ability of its board and 

management to direct its operations. We also evaluate each institution’s compliance with laws 

and regulations to ensure that it serves all eligible borrowers, including young, beginning, and 

small farmers and ranchers. If a System institution violates a law or regulation or operates in an 

unsafe or unsound manner, we use our supervisory and enforcement authorities to take 

appropriate corrective action. 

Second, we develop policies and regulations that govern how System institutions conduct their 

business and interact with customers. Our policies and regulations protect System safety and 

soundness; implement the Farm Credit Act; provide minimum requirements for lending, related 

services, investments, capital, and mission; and ensure adequate financial disclosure and 

governance. We approve the corporate charter changes of System institutions, System debt 

issuance, and other financial and operational matters. 

Through the oversight and leadership of the House and Senate Agriculture Committees, many 

important reforms were made to the Farm Credit Administration and the FCS as a result of the 

agricultural credit crisis of the 1980s. This included restructuring FCA as an independent arm’slength regulator with formal enforcement powers, providing borrower rights to System borrowers 

with distressed loans, and establishing the Farm Credit System Insurance Fund (Insurance 

Fund) to protect System investors.
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Since then, the Farm Credit System has restored its financial health and the public trust. Using 

our authority as an arm’s-length regulator, we have contributed to the System’s success by 

ensuring that System institutions adhered to safety and soundness standards. The Insurance 

Fund also helped by restoring investor confidence.

Both the System and FCA learned much during the crisis of the 1980s, and those lessons 

helped build a much stronger Farm Credit System, as well as a stronger regulator. We will 

continue to focus on ensuring that the System remains safe and sound by promulgating 

regulations, providing appropriate guidance, and maintaining strong and proactive examination 

and supervisory programs. With the dynamics and risks in the agricultural and financial sectors 

today, we recognize that FCS institutions must have the appropriate culture, governance, 

policies, procedures, and management controls to effectively identify and manage risks. Today 

the System is a dependable provider of credit to agriculture and rural America as intended by 

Congress.

Farm Credit System Mission

The FCS is a government-sponsored enterprise (GSE) created by Congress in 1916 to provide 

American agriculture with a dependable source of credit. The System’s banks and associations 

form a nationwide network of cooperatively organized lending institutions that are owned and 

controlled by their borrowers, serving all 50 states and the Commonwealth of Puerto Rico. 

The System provides credit and other services to agricultural producers, aquatic producers or 

harvesters and farmer-owned agricultural and aquatic cooperatives. It also makes loans for 

agricultural processing and marketing activities, rural housing, farm-related businesses, rural 

utilities, and foreign and domestic companies involved in international agricultural trade. In 

addition, the System provides funding and discounting services to certain “other financing 

institutions” and forms partnerships with commercial banks to provide credit to agriculture and 

rural America through participations and syndications. 

As required by law, System borrowers own stock or participation certificates in System 

institutions. The FCS had nearly 1 million loans and approximately 500,000 stockholders in 

2014. Approximately 85 percent of the stockholders were farmers or cooperatives with voting 

stock. The remaining 15 percent were nonvoting stockholders, including rural homeowners and 

other financing institutions that borrow from the System. The U.S. Department of Agriculture’s 

latest data show that the System’s market share of farm debt was 39 percent, compared with 41

percent held by commercial banks.

One of FCA’s oversight roles is to ensure that the System, with its mission devoted to 

agriculture and rural America, maintains its presence in the agricultural marketplace to provide 

competitive and dependable credit for all eligible and creditworthy farmers, ranchers, aquatic 

producers or harvesters and agricultural cooperatives. In fact, the System has maintained its 

mission service during the difficult markets of the past years to help producers and rural 

America. When commodity prices soared in early 2008, System institutions stepped forward to 

meet the critical financing needs of the grain elevator industry. They met increased demands for 

financing machinery and higher input costs for producers. The FCS also helped Midwest 

borrowers affected by floods and worked with livestock producers, especially dairy and hog 

producers, as they made difficult decisions during stressful market conditions. Overall the 

System continued to have access to funds and was able to increase its lending to agriculture 

and rural America during a financial crisis and severe recession.
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Condition of the FCS

The FCS remains fundamentally safe and sound and is well positioned to withstand the 

challenges facing U.S. agriculture during the current cyclical downturn. The depth and duration 

of market weakness is unknown, which will continue to present challenges for the System until 

markets rebound.

The U.S. Department of Agriculture is forecasting lower net cash income in 2015 for the second 

consecutive year as receipts for crops and livestock decline in tandem. Continued weak farm 

prices stem primarily from large U.S. and global crop supplies and expanding livestock 

production. Average prices received by farmers for corn and soybean have dropped sharply 

from records posted in 2012 and remain near or below levels last received in 2007.

As a consequence of lower prices, margins for many crop producers in 2015 remain low or 

negative for the third consecutive year. For livestock producers, lower crop prices translate into 

lower feed costs, but profitability has been adversely affected by lower protein product prices, 

particularly for the hog, dairy, and broiler sectors. Lower grain prices have also resulted in 

softening in some farmland markets, specifically in the Midwest.

While the current credit stress level in the System’s loan portfolio is well within its risk-bearing 

capacity, asset quality is expected to decline modestly in 2016 from relatively strong levels in 

2015. Supporting the overall condition of the FCS is moderate loan growth, adequate capital, 

and reliable access to debt capital markets.

The System continues to grow at a moderate pace. As of September 30, 2015, gross loans 

totaled $226.8 billion, up $18.8 billion or 9.0 percent from September 30, 2014. Real estate 

mortgage lending was up $7.0 billion, or 7.2 percent, as demand for cropland continued in 2015. 

Overall, real estate mortgage loans represent 45.7 percent of the System’s loan portfolio. 

Production and intermediate-term lending increased by $2.9 billion or 6.4 percent from the year 

before, and agribusiness lending increased by $4.2 billion or 13.9 percent.

The System also continues to enhance its capital base, which strengthens its financial position 

as low or negative farm returns increase financial stress on borrowers. As of September 30, 

2015, System total capital equaled $48.9 billion, up from $45.8 billion the year before. The 

System’s total capital-to-assets ratio was 16.8 percent as compared with 16.9 percent a year 

earlier. Moreover, more than 82 percent of total capital is in the form of earned surplus. 

The increase in total capital is due in large part to the System’s strong earnings performance. 

For the first nine months of calendar year 2015, the System reported net income of $3.5 billion 

compared with $3.6 billion for the same period of the previous year. The small decline results 

from slightly higher non-interest expenses and provisions for loan losses, which offset an 

increase in net interest income. The increase in net interest income stems from a higher level of 

average earning assets despite an eight-basis-point decline in net interest margin to 2.56

percent. Compression of net interest spread is expected to continue as interest rates change 

and borrowers prepay or reprice loans. 

Credit quality in the System’s loan portfolio continues to be strong. In each calendar year since 

2010, the amount of nonperforming loans has declined, and capital has increased. In the most 

recent period, as of September 30, 2015, nonperforming loans totaled $1.7 billion, or 0.76 

percent of gross loans, as compared with $1.8 billion, or 0.85 percent, for the same quarter a 

year ago. Relative to total capital, nonperforming loans represented 3.5 percent at quarter-end. 
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For historical comparison, at year-end 2010, nonperforming loans as a percentage of capital 

was more than 10 percent. 

Lenders expect an uptick in loan delinquencies and other indicators of loan repayment problems 

as they move into 2016, but a large increase in problematic loans is unforeseen at this point.

With weak margins, more farmers are expected to change their operating structures to reduce 

production costs or rebalance their farm balance sheets by, for example, lengthening loan terms 

or selling unproductive assets.

The System continues to have reliable access to the debt capital markets. Investor demand for 

all System debt products has been positive, allowing the System to continue to issue debt on a 

wide maturity spectrum at very competitive rates. Risk spreads and pricing on System debt 

securities remained favorable relative to corresponding U.S. Treasuries. Further strengthening 

the System’s financial condition is the Insurance Fund, which holds just under $4.0 billion. 

Administered by the Farm Credit System Insurance Corporation, this fund protects investors in 

Systemwide consolidated debt obligations. 

System banks also maintain liquidity reserves to ensure they can withstand market disruptions. 

As of September 30, 2015, the System’s liquidity position equaled 183 days, significantly above 

the 90-day regulatory minimum required for each FCS bank. 

A Changing Risk Profile in Agriculture 

U.S. farmers and ranchers are in the midst of serious belt-tightening. Commodity prices have 

declined sharply while input costs have been slow to adjust downward. Both the crop sector and 

livestock sector are operating generally in price environments that are either squeezing margins 

or pushing them into negative territory for many producers. 

An extended downturn in the farm sector would be a major challenge for U.S. agriculture. In the 

past two years, many farmers have been coping with a declining market by using working 

capital generated during the previous period of strong earnings. As a result, the System has 

recorded relatively low loan losses and maintains a strong financial position to date. However, if 

commodity price weakness extends for another year or two, we expect significant financial 

stress on borrowers as working capital erodes further and as farmers make additional cuts to

capital expenditures, household spending, and operating costs.

Weakness in commodity prices is due to both supply and demand factors. Globally, good 

weather in major producing regions has resulted in large supplies of grain and oilseeds. 

Expanding stocks have insulated many markets from significant price volatility, and in the 

absence of major weather shocks, commodity prices could remain subdued.

In 2015, export demand for U.S. agricultural products has been slowed by the higher value of 

the dollar, which reduces U.S. price competitiveness in foreign markets. Also, while long-run 

trends are positive, modest economic growth tempers demand in major U.S. export markets, 

including China. Exports of high-value commodities, including meat, dairy, fruit, tree nuts, and 

vegetables, are particularly vulnerable to changes in income that drive export growth. Further 

strengthening of the U.S. dollar or a downturn in global economic growth would represent 

additional risk to U.S. farm receipts and loan repayment capacity.

After rising rapidly in recent years, farmland values have leveled off generally, with markets 

either slightly higher or lower, depending on the type of acreage and region of the country. In fall 
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2015 relative to the year earlier, according to surveys conducted by several Federal Reserve 

Banks, the value of irrigated acreage declined in several producing areas, as did farmland in 

Illinois and Iowa. Farmland registered modest gains in the upper Midwest and West, as did

ranchland in most regions. A positive sign for producers who cash-rent land is USDA data 

indicating a decline in cropland rents in the Midwest for the first time in 20 years.

During the next year, many observers expect farmland values to weaken given the outlook for 

commodity markets. However, any downward movement could be limited by investors stepping 

into the market. Impacts of declining land values on the Farm Credit System would be mitigated 

by the System’s underwriting procedures, which have been prudent during the recent run-up in 

land values.

Anticipation for higher interest rates remains part of the economic landscape. Nevertheless, 

rates are expected to remain relatively low and increase very slowly over the next couple of 

years to maintain economic stability. Higher interest costs could put additional pressure on 

producers, especially those with liquidity problems, and any substantial rise in long-term rates 

would have negative effects on land values.

Farm program payments for major crops will assist many grain and oilseed producers through at 

least next year. Farm financial health also benefits from the typical lender practice that requires 

borrowers to obtain crop insurance and use other risk-mitigating strategies for marketing. Over 

time, though, if market prices remain relatively weak, farm program payments will provide less 

assistance to corn, soybean, and other producers who selected Agriculture Risk Coverage as 

revenue guarantees begin to adjust downward. 

Examination Programs for FCS Banks and Associations

FCA is responsible for regulating and supervising the banks, associations, and related entities 

that compose the Farm Credit System. Our examination and oversight programs provide 

strategic, proactive risk supervision of the System. In conducting our institution-specific, riskbased oversight and examination activities, we assign highest priority to institutions that present 

the greatest risk. 

We also perform nationally focused examinations that target specific issues and operational 

areas to monitor the condition and operations of the System as a whole. We actively monitor 

risks that may affect groups of System institutions or the entire System, including risks from the 

agricultural, financial, and economic environment.

Through our oversight, we require System institutions to have the programs, policies, 

procedures, and controls to effectively identify and manage risks. Our oversight program also 

requires compliance with laws and regulations. When institutions are either unable or unwilling 

to address unsafe and unsound practices or to comply with laws and regulations, we take 

appropriate supervisory or enforcement action. We use a comprehensive regulatory and 

supervisory framework to ensure the System’s safety and soundness. FCS institutions, on their 

own and in response to our efforts, continue to improve their risk management systems.

FCA uses the Financial Institution Rating System (FIRS) to assess the safety and soundness 

threats to each System institution. Similar to the systems used by other federal financial 

regulators, the FIRS is a CAMELS-based system, with component ratings for capital, assets, 

management, earnings, liquidity, and sensitivity, all factoring into an overall composite rating. 

System institutions are assigned component and composite ratings based on FCA’s evaluation 
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of quantitative and qualitative factors. FIRS ratings range from 1 for a sound institution to 5 for 

an institution that is likely to fail. 

Although the System’s financial condition remains sound, a small number of individual 

institutions display some weaknesses. These weaknesses stem from several factors that have 

adversely affected some System borrowers. 

As the System’s regulator, we have increased supervisory oversight and dedicated additional 

resources to institutions experiencing stress. As of December 31, 2014, four System institutions 

had a composite FIRS rating of 3 or higher. While these institutions represent less than 1 

percent of System assets and do not meaningfully affect the System’s consolidated 

performance, they require significantly more resources to oversee. 

The chart below includes the System banks and their affiliated associations. The figures in the 

bars reflect the number of institutions by FIRS rating.

26 29 30 

37 

43 44 

50 46 44 

38 

31 32 

14 12 12 10 8 3 

3 2 1 1 1 

0%

20%

40%

60%

80%

100%

12/31/09 12/31/10 12/31/11 12/31/12 12/31/13 12/31/14

Percentage of Rated Institutions

Farm Credit System FIRS Composite Ratings

1 Rating 2 Rating 3 Rating 4 Rating

Source: FCA's FIRS Ratings Database
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Regulatory Activities

Congress has given the FCA Board statutory authority to establish policy, prescribe regulations, 

and issue other guidance to ensure that System institutions comply with the law and operate in 

a safe and sound manner. We are committed to developing balanced, flexible, and legally 

sound regulations. 

Over the past few years, we have revised our regulations to accomplish the following objectives: 

To require each System institution’s business plan to include strategies and actions to serve 

all creditworthy and eligible persons in the institution’s territory. In addition, the regulation 

encourages institutions to serve nontraditional customers, such as women and minorities, 

who often operate within local food systems by producing organic or specialty crops on 

small farms. The regulation also seeks to achieve diversity and inclusion in the workforce of 

System institutions.

To ensure that System funding and liquidity requirements are appropriate and to ensure that 

the discounts applied to investments reflect their marketability. 

To ensure that prudent practices are in place for the safe and sound management of 

System investment portfolios.

To establish a regulatory framework for the reporting of System accounts and exposures to 

FCA. The revisions reaffirm our authority to collect data on System institution accounts and 

exposures, including data on shared assets.

To establish standards for Farmer Mac’s capital planning process. The revised process 

emphasizes the quality and level of capital and annual stress testing.

To increase the level and quality of assets held in Farmer Mac’s liquidity reserve. 

To implement the requirements of the Dodd–Frank Wall Street Reform and Consumer 

Protection Act by imposing margin requirements on noncleared derivatives transactions and 

removing references to credit ratings. 

To implement Title III of the Terrorism Risk Insurance Program Reauthorization Act of 2015 

that grants exceptions from the margin requirements of the final rule for non-cleared swaps.

To implement the provisions of the Biggert–Waters Flood Insurance Reform Act of 2012, as 

well as the additional provisions of the Homeowner Flood Insurance Affordability Act of 

2014. 

To revise regulatory requirements for mergers or consolidations of banks and associations.

To seek public input on FCA regulations that may duplicate other requirements, are not 

effective in achieving the stated objectives, are not based on law, or impose burdens that 

are greater than the benefits received.

Currently, we are working on regulatory projects to accomplish these additional objectives: 

To enhance our risk-based capital adequacy framework to more closely align it with that of 

other federal banking agencies and the Basel Accord. We published a notice of proposed 

rulemaking to solicit comments on amending our regulations to replace the current core and 

total surplus capital standards with a Tier 1/Tier 2 capital framework. 

To clarify and strengthen the standards-of-conduct requirements for System directors, 

employees, and agents.

To strengthen the safety and soundness of the investment activities of System banks by 

more accurately reflecting the risk in particular investments, and to comply with a provision 

of the Dodd–Frank Act by replacing credit rating requirements with other standards of 

creditworthiness. 
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To clarify or change the loan amortization limits for agricultural credit associations and 

production credit associations.

To amend FCA regulations applicable to System lending to conform with the private flood 

insurance provisions of the Biggert–Waters Flood Insurance Reform Act of 2012.

To ensure appropriate and effective risk governance and board oversight at Farmer Mac, 

and to clarify standards-of-conduct and conflict-of-interest requirements. 

To remove reliance on credit ratings from investment eligibility regulations pertaining to 

Farmer Mac and to maintain the quality and availability of Farmer Mac’s liquid investments.

Corporate Activities

The number of FCS institutions has declined over the years as a result of bank and association 

mergers. Generally, System institution mergers result in larger, more cost-efficient and bettercapitalized institutions with broad, diversified asset bases, both by geography and commodity. 

However, these mergers also increase the complexity of the continuing institutions. The 

increased complexity places greater demands on both FCA staff resources, as well as the level 

of expertise required of staff, particularly in areas of regulation, policy, examination, and legal 

interpretation. As of November 1, 2015, the System consisted of the following:

Seventy-five direct-lender associations

Three Farm Credit Banks and one Agricultural Credit Bank

Five service corporations that provide support, technology, leasing, human capital, and 

other services

A funding entity that markets the securities—chiefly bonds and discount notes—that the 

banks sell in the capital markets to raise loan funds 

A GSE with the mission of providing a secondary market for agricultural real estate and rural 

housing mortgage loans 

Federal Agricultural Mortgage Corporation

Congress established Farmer Mac in 1988 to provide a secondary market for agricultural 

mortgage and rural home loans to improve the availability of cost-effective long-term credit and 

liquidity to America’s farmers, ranchers, and rural communities. Farmer Mac creates and 

guarantees securities and other secondary market products that are backed by mortgages on 

farms and rural homes, including certain USDA guaranteed loans. Loan originators that 

participate in Farmer Mac’s secondary market programs include community banks, Farm Credit 

System institutions, mortgage companies, commercial banks, insurance companies, and credit 

unions. The 2008 Farm Bill expanded Farmer Mac’s program authorities by allowing it to 

purchase and guarantee securities backed by eligible rural utility loans made by cooperative 

lenders. 

Through a separate office required by statute (the Office of Secondary Market Oversight), FCA 

examines, regulates, and oversees Farmer Mac’s operations and its safety and soundness. As 

the secondary market GSE devoted to agriculture and rural America, Farmer Mac has the 

statutory authority to, in extraordinary circumstances, issue obligations to the U.S. Treasury 

Department, not to exceed $1.5 billion, to fulfill the guarantee obligations of its guaranteed 

securities. The Insurance Fund does not back Farmer Mac’s securities, and the System is not 

liable for any Farmer Mac obligations.
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Farmer Mac continues to grow its business through an increasing network of rural lenders and 

to strengthen operations to advance its statutory mission. Farmer Mac’s outstanding business 

volume reached $15.6 billion as of September 30, 2015, on a compound annual growth rate of 

12 percent from 1999 to 2014. The number of institutions participating in Farmer Mac programs 

grew 47 percent, from 367 to 542, over the past four years. Farmer Mac recently reported that 

small farm loans contributed 38 percent of the loans related to its Farm & Ranch program. 

Despite the decreasing number of small farms, Farmer Mac has seen an overall increase in the 

dollar volume and number of small farm loans in its programs.

Over the past several quarters, Farmer Mac has improved the quality of its capital base and 

risk-bearing capacity through healthy core earnings and capital restructuring. As of September 

30, 2015, Farmer Mac’s core capital totaled $558.2 million, $115.4 million above the minimum 

capital level required by Farmer Mac’s statutory charter. As of September Farmer Mac’s core 

capital level was $766.3 million, which was $345.0 million above the minimum requirement. The 

decrease in capital in excess of the statutory minimum capital level was due primarily to the 

redemption of $250.0 million of Farmer Mac II LLC preferred stock on March 30, 2015. Farmer 

Mac also issued an aggregate of $150.0 million of noncumulative preferred stock during the first 

half of 2014. 

Lower-quality capital was replaced with higher-quality capital as part of Farmer Mac’s capital 

restructuring initiative and new regulatory requirements. In accordance with FCA’s capital 

planning rule, Farmer Mac has adopted a policy for maintaining a sufficient level of Tier 1 capital 

(consisting of retained earnings, paid-in capital, common stock, qualifying preferred stock and 

accumulated other comprehensive income allocated to investments not included in its four 

business lines). The preferred stock issued in 2014 qualifies as Tier 1 capital whereas the 

Farmer Mac II LLC preferred stock that was redeemed did not qualify as Tier 1 capital. At 

September 30, 2015, Farmer Mac reported a Tier 1 capital ratio of 11.5 percent. Farmer Mac is 

also required to conduct stress tests to evaluate its ability to maintain sufficient capital under 

adverse economic conditions and develop possible strategies to address potential risks to 

capital in accordance with FCA regulations.

Farmer Mac’s credit quality metrics remain favorable. As of September 30, 2015, Farmer Mac’s 

90-day delinquencies increased over the 12-month period but remained low at $36.7 million, or 

0.67 percent of Farm & Ranch volume, compared with $24.7 million, or 0.46 percent, as of 

September 30, 2014. The increase in delinquencies was related to an idiosyncratic borrower 

situation rather than an increasing trend related to a specific commodity or geographic region.

Real estate owned as of September 30, 2015, was $1.4 million, up from $1.2 million a year 

earlier. Farmer Mac reported no delinquencies in its pools of rural utility cooperative loans. On 

September 30, 2015, Farmer Mac’s allowance for losses totaled $10.3 million, compared with 

$10.6 million on September 30, 2014.

Farmer Mac continues to enjoy reliable access to the debt capital markets to support its mission 

of providing financing and liquidity to agriculture and rural markets. To improve its financial 

flexibility in the event of a financial or market disruption, Farmer Mac has taken significant 

measures to increase the quality of its $2.0 billion liquidity investment portfolio. 

Serving Young, Beginning, and Small Farmers and Ranchers

As part of their mission to serve all eligible, creditworthy borrowers, System institutions are 

required to develop programs and make special efforts to serve young, beginning, and small 

(YBS) farmers and ranchers. In 2014, the System continued to show gains in loan dollars 
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outstanding and loan numbers outstanding to YBS producers. From 2013 to 2014, the number 

of new loans made to young and beginning farmers increased approximately 2 percent. 

However, the number of new loans made to small farmers declined 1.4 percent.

For this past year, the total outstanding YBS loans by both number and dollar volume increased 

as a percentage of the System’s total farm loans. These results are encouraging given the high 

costs of starting a farm, the declining number of people entering agriculture, and the rising 

average age of farmers. 

FCA issued a bookletter in August 2007 to encourage institutions to seek ways to better serve 

YBS borrowers. The bookletter provides institutions with more flexibility to lend to YBS 

borrowers and encourages them to use credit enhancements to allow more YBS borrowers to 

qualify for credit. Credit enhancements for YBS borrowers may include 

lower rates or fees for YBS borrowers, 

differential underwriting standards, and 

USDA loan guarantees. 

In response to this guidance, a higher percentage of institutions are committing capital to assist 

in their YBS lending and are using advisory committees to update YBS policies and procedures. 

In addition, many institutions have stepped up their YBS outreach efforts and their coordination 

with outside parties or organizations to serve YBS producers. 

In addition to providing credit to YBS borrowers, FCS institutions offer other financial services to 

YBS borrowers, and many institutions provide special training and educational programs for 

them.

Our efforts to encourage System institutions to emphasize diversity and inclusion and to serve 

producers of local and regional foods also benefit YBS producers. In 2012, to ensure the 

System fulfills its congressional mission to serve all eligible, creditworthy borrowers, we issued a 

regulation requiring institutions to develop human capital and marketing plans that promote 

diversity and inclusion. Because many small and beginning farmers belong to underrepresented 

groups, this regulation helps strengthen service to YBS borrowers. Likewise, a bookletter we 

issued in 2012 to provide guidance regarding service to local and regional foods producers also 

benefits YBS borrowers because many of these producers would be classified as young, 

beginning, or small. 

Working with Financially Stressed Borrowers

Risk is an inherent part of agriculture, and the causes of risk are many: 

Adverse weather 

Changes in government programs 

International trade issues 

Fluctuations in commodity prices

Crop and livestock diseases 

General increase in interest rate environment 

These risks can sometimes make it difficult for borrowers to repay loans. The Farm Credit Act 

provides System borrowers certain rights when they apply for loans and when they have trouble 

repaying loans. For example, the act requires FCS institutions to notify borrowers of the right to 
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seek restructuring of loans before the institutions begin foreclosure. It also provides borrowers 

an opportunity to seek review of certain credit and restructuring decisions. When a System 

institution acquires agricultural property through liquidation, the Farm Credit Act also provides 

borrowers the opportunity to buy or lease back their former properties.

FCA enforces the borrower rights provisions of the Farm Credit Act and examines institutions to 

make sure they are complying with these provisions. We also receive and review complaints 

from borrowers who believe their rights have been denied. Through these efforts, we ensure 

compliance with the law and help FCS institutions continue to provide sound and constructive 

credit and related services to eligible farmers and ranchers. 

Conclusion

We at FCA remain vigilant in our efforts to ensure that the Farm Credit System and Farmer Mac 

remain financially sound and focused on serving agriculture and rural America. While we are 

proud of our record and accomplishments, we remain committed to excellence, effectiveness, 

and cost efficiency, and we will remain focused on our mission of ensuring a safe, sound, and 

dependable source of credit for agriculture and rural America. This concludes my statement. On 

behalf of my colleagues on the FCA Board and at the agency, I thank you for the opportunity to 

share this information.