{"id":57344,"date":"2023-05-15T13:12:21","date_gmt":"2023-05-15T17:12:21","guid":{"rendered":"https:\/\/sustainableagriculture.net\/?p=57344"},"modified":"2023-05-15T13:12:23","modified_gmt":"2023-05-15T17:12:23","slug":"why-congress-should-mandate-a-farm-credit-grant","status":"publish","type":"post","link":"https:\/\/sustainableagriculture.net\/blog\/why-congress-should-mandate-a-farm-credit-grant\/","title":{"rendered":"Why Congress Should Mandate a Farm Credit Grant"},"content":{"rendered":"
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Photo credit: USDA\/Preston Keres<\/figcaption><\/figure>\n<\/div>\n\n\n

The Farm Credit System (FCS), agriculture\u2019s government sponsored enterprise (GSE), is a nationwide network of customer-owned lenders with a mission to support rural communities and agriculture. The National Sustainable Agriculture Coalition (NSAC) 2023 Farm Bill Platform<\/a> includes a proposal<\/a> that requires FCS, agriculture\u2019s GSE, to grant 15 percent of its annual profits to support underserved producers and food systems enterprises. These grants will build upon successful programs already facilitated by some Farm Credit associations and help fulfill its mission and public mandate to serve young, beginning, and small farmers and ranchers.\u00a0<\/p>\n\n\n\n

Background<\/strong><\/h4>\n\n\n\n

FCS is one of the country’s biggest lenders for agriculture and rural communities, holding approximately 44 percent of farm debt<\/a>. A quasi-private lender, Farm Credit\u2019s GSE status includes significant tax advantages and lower costs of funds due to its implied federal government guarantee. In 2022 Farm Credit reported $7.3 billion in net income, reflecting these GSE advantages. Last year, with our proposal, a 15 percent grant would have equaled almost $1.1 billion flowing to rural communities. <\/p>\n\n\n\n

An FCS grant program is in-line with what Congress requires of our nation\u2019s housing GSEs. Congress mandates high-impact grant programs from the Federal Home Loan Banks (FHLBs), Freddie Mae and Freddie Mac. The FHLBs\u2019\u00a0 Affordable Housing Program<\/a> (AHP) has granted over $6 billion in grants while arguably strengthening the GSEs. In fact, the FHLBs did not oppose an effort in Congress last year to increase the grant requirement to 15 percent of annual net income. Some FHLBs, such as Chicago, are voluntarily increasing their grant program contributions.\u00a0<\/p>\n\n\n\n

Of note, a University of Florida study<\/a> on the economic benefits of FHLB-Atlanta’s AHP found that \u201cfor every $1 million invested in AHP, $14.3 million of housing is constructed or rehabilitated and 158 jobs are created.\u201d <\/em>When including the economic multiplier effect, every $1 million of AHP helps generate $24.6 million in economic activity. A 2018 Florida State University study<\/a> of all FHLB AHP programs found that \u201c… for every dollar of AHP-enhanced funding, there is a multiplier effect of $33.68 in Rental, Home Construction and Rehabilitation, and of $30.04 in Home Purchases.\u201d <\/em>Fannie Mae and Freddie Mac are required to grant 4.2 basis points (or .042%) of the principal balance of new loan purchases to the Housing Trust Fund and the Capital Magnet Fund<\/a>. The 2022 grant amount was $1.1 billion.<\/p>\n\n\n\n

As evidenced by successful programs required of housing GSEs, a Farm Credit grant mandate will likely produce a positive economic spillover effect that could grow Farm Credit\u2019s overall profitability and help its current member-borrowers by providing even more income to share.  <\/p>\n\n\n\n

Existing Farm Credit Grant Programs <\/strong><\/h4>\n\n\n\n

Several Farm Credit associations already offer innovative, niche programs to support underserved farmers. A congressionally mandated FCS grant presents an opportunity for these programs to be replicated and expanded – which helps maximize the public\u2019s investment in agriculture\u2019s GSE.<\/p>\n\n\n\n

Existing Farm Credit grant programs include:<\/p>\n\n\n\n