The Challenges of Financing Rural America
Nancy C. Pellett
Chairman of the Board and CEO
The Farm Credit Administration

In 1933, Franklin D. Roosevelt created The Farm Credit Administration (FCA) to address the severe credit crisis afflicting the agriculture sector during the Great Depression. It was designed to be a cooperative — an organization owned, managed and governed by the people that do business with it. Over the past 75 years, the Farm Credit Administration has evolved into the entity that regulates the Farm Credit System which provides direct loatns to farmers. While our responsibilities at FCA differ today from our responsibilities in 1933, the ultimate mission is the same: To ensure a safe, sound and dependable source of credit for agriculture and rural America.

The Farm Credit System, which provides loans directly to farmers, is the largest agriculture lender in the U.S., with assets of about $180 billion in 2007. As its regulator, the Farm Credit System has a strong capital base. It is important that FCA take care in its regulation and oversight activities to ensure that the Farm Credit System continues to accomplish its objectives. At FCA we accomplish our mission in two ways. We create regulation for the Farm Credit System institutions to follow and we examine, through audits, Farm Credit System institutions.

Agriculture’s fortunes rise and fall with the cycles in the American economy — and at present most of us in agriculture are optimistic. Cash receipts from grain and soybeans increased 40 percent in 2007. Some projections show a similar increase in 2008. As always, increased commodity prices are quickly reflected by increased rent and land prices. As a result, the major grain exchanges have increased margin requirements and set higher daily trading limits that have required not only more credit but have also required it very quickly.

The increased demand for crops used in food and feed for livestock complicates decisions farmers must make about what to produce as well as their decisions about marketing it. I can’t remember a time when we have had the across-the-board increases in food prices such as those we are currently experiencing. I concur with those who suggest we have had a cheap food policy in the U.S. and consumers have been shielded from sharp price increases. With the prospect that food prices may continue to rise, there are likely to be reactions in the supermarket as well as in farm policy. I believe agriculture is one of the brighter sectors of the U.S. economy.

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