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What is Farm Credit?

The term Farm Credit generally refers to the nationwide Farm Credit System, which is a network of borrower-owned lending cooperatives and specialized service organizations that provide credit and related services for agriculture and rural America. Established by Congress in 1916, today it is the nation’s largest source of agricultural financing.

Overview of the Farm Credit System

Watch this video for an informative overview of the Farm Credit System.

Watch this video to learn about our cooperative structure and unique funding model.

Independently Regulated and Self-Insured

The Farm Credit System is independently regulated by the Farm Credit Administration, a federal agency whose board is appointed by the President. While the System is the oldest government-sponsored enterprise (GSE), it differs in many ways from other GSEs. Most significantly, Farm Credit has its own insurance fund, which is administered by the government, to serve as a first line of defense in the event of financial difficulty. In addition, Farm Credit institutions are jointly and severally liable for each other’s debt. This means that if one institution experiences financial difficulties, the other institutions — not the taxpayers — will come to its rescue.

How Farm Credit Money Flows

There are four wholesale Farm Credit banks throughout the nation, including the Farm Credit Bank of Texas. Each bank is owned by a group of local retail cooperatives, which in turn are owned by farmers, ranchers, agricultural co-ops and other eligible borrowers, including agribusinesses, rural landowners and rural homeowners.

The wholesale banks receive their funding from the sale of Farm Credit securities in the capital markets. They in turn provide funding to the local retail cooperatives, which make loans to customers in agriculture and rural America. After their customers pay back their loans, the local lending cooperatives repay the banks, which then reissue the funds to investors.