If the statutory set up provides a benefit for Dairy farmers in the form of lower risk and there is a limited amount of loanable funds, then the lower rate that Dairy farmers receive on their loans is offset by higher rates charged to other borrowers. The lower rate that diary farmers receive on their loans is offset by higher rates charged to other borrowers. Premise 2. is not true given access to international capital markets. The amount of capital available is related to the marginal productivity of capital, as well as currency risk and similar factors. The cost of compensating savers and of administration etc.
Banks pay the going rates for compensating savers and minimise administration and similar costs etc.
Banks bear the risks that their depositors will withdraw their money and that their borrowers will not repay their loans. The former I have inadequate understanding but is irrelevent for the argument and the latter seems fairly simple. Banks charge borrowers for the full costs of 1. and 2. This means they charge borrowers the rate they pay to depositors, the costs of administration etc. and the costs of the risks they bear. The subsidy argument is somewhat difficult to follow and more difficult to believe.