The 90th Anniversary of the Farm Credit System

1
The 90th Anniversary of theFarm Credit System
2
HOW FARM CREDIT CAME TO BE. . .
3
Farm Landscape of the Early 1900s

• Total U.S. Population 75,994,266
• Estimated Farm Population 29,414,000
• Farmers 38 of Labor Force
• Number of Farms 5,740,000
• Average Acres 147
• North Dakota, Kansas, and Minnesota chief wheat
  states durum wheat becomes important commercial
  crop
• 35 states and territories require tuberculin
  testing of all cattle entering
• 1900 1920s continued agricultural settlement
  on the Great Plains
• Grain production reaches into the most arid
  sections of the Great Plains

4
The Early 1900s...

• In 1906, San Francisco had a major earthquake
  fire, over 250,000 people--more than half of San
  Francisco's population--became homeless
• In the summer of 1907, the American economy was
  showing signs of weakness as a number of
  businesses and Wall Street brokerages went
  bankrupt
• As early as 1908, President Theodore Roosevelts
  Country Life Commission recommended a
  cooperative system that would provide
  agricultural credit on Fair Terms
• Credit for farmers was a steadily growing rural
  issue
• 1913 - The Federal Reserve Act is passed
• The influenza epidemic of 1918 killed an
  estimated 50 million people, more people than
  died in World War I

5
The Mission of Farm Credit

• Creation of the Farm Credit System coincided with
  World War I, a very prosperous time for American
  farmers due to the demand for food in Europe
• Prices collapsed after the war, and among the
  resulting economic problems were severe shortages
  of long- and short-term credit for farmers if
  available, it was often very expensive
• Recognizing the importance of agriculture to our
  nation's economy, Congress passed the Federal
  Farm Loan Act which was signed into law by U.S.
  President Woodrow Wilson on July 17, 1916
• Farm Credit is one of the nation's oldest
  financial institutions, created to provide for
  the farmer-owned cooperative system of making
  credit available to farmers and ranchers and
  their cooperatives, for rural residences, and to
  associations and other entities upon which
  farming operations are dependent, in order to
  provide for an adequate and flexible flow of
  money into rural areas

6
The Birthplace of Farm Credit

• The System was born through the Farm Loan Act of
  1916 as a GSE
• Funding of the loans came from the U.S. Treasury
• Provided seed money for System to lend (5 entry
  fee)
• 280 acres was collateral for the nation's first
  Federal Land Bank loan made on April 10, 1917, to
  farmer-stockman, A. L. Stockwell
• In 1917, Wichita was granted the first of 12
  Federal Land Bank charters nationwide and charged
  with developing lending programs in Kansas,
  Oklahoma, Colorado, and New Mexico
• Charters were also granted to St. Paul,
  Louisville, St. Louis, and eight other Federal
  Land Banks

7
The U.S. in the 1920s...

• 1920 - Post War Recession
• Average Annual Salary 1,236
• Unemployment 5.2
• Quart of milk costs 14 cents and a loaf of bread
  costs 9 cents
• Women get the right to vote in 1920
• Prohibition begins - prohibiting making, selling,
  possession, and use of alcohol this was not
  repealed until 1933
• Movie houses become common in rural areas radio
  broadcasts begin
• People loved to dance, especially the Charleston,
  Fox-trot, and the Shimmy
• Penicillin and discovery of insulin for diabetics
  were some of the major breakthroughs in medicine
  and science
• Babe Ruth signs a three-year contract with NY
  Yankees for 52,000 highest ever
• The peanut butter and jelly sandwich became
  famous in 1922
• The first talking movie, The Jazz Singer,
  released in 1927
• Spirit of St. Louis and pilot, Charles Lindbergh,
  land in Paris 
• 1929 - the stock market crashes and the Great
  Depression begins
• The 1 book on the bestseller list was a Miss
  Manners book by Emily Post

8
Farm Landscape of the 1920s

• Total Population 105,710,620
• Farm Population 31,614,269
• Farmers 27 of Labor Force
• Number of Farms 6,454,000
• Average Acres 148
• Agricultural exports in the 1920s reach 1.94
  billion or 42 of total exports
• Farm production gradually grows from expanded use
  of mechanized power
• Truckers begin to capture trade in perishables
  and dairy products
• 1920 31,000 students are enrolled in
  agricultural courses
• 1926 Cotton stripper was developed
• 1926 First Hybrid-seed corn company organized
• 1928 Future Farmers of America founded
• 1929 The National Council of Farmers
  Cooperatives organized

9
Farm Credit in the 1920s...

• 1923 The Fiscal Agency Office opened in
  Washington, DC, to manage the sale of Farm Credit
  bonds moved to New York City in 1929
• Congress responded with the Agricultural Credit
  Act of 1923, adding 12 Federal Intermediate
  Credit Banks (FICBs) to the Farm Credit System to
  fund banks for short-term producer credit needs
  however, these were flawed by procedural and
  geographic problems, and a long and complicated
  loan approval process
• 1926 - Federal Land Bank bonds outstanding
  exceeded 1 billion for the first time

10
Agriculture Legislation of the 1920s...

• 1920-32 Cooperative movement spreads
• 1922 - Capper-Volstad Act authorized the creation
  of farmer cooperatives
• 1929 Agricultural Marketing Act helped finance
  and develop farmer cooperatives

11
The U.S. in the 1930s

• Average Annual Salary 1,368
• Unemployment rises to 25
• Milk costs 15 cents a quart and a loaf of bread
  is 9 cents
• 1929-30 - Great Depression begins
• In 1931 the "Star Spangled Banner" became our
  national anthem
• The world's tallest building, the Empire State
  Building, was opened by President Hoover in New
  York
• President Roosevelt introduces the New Deal to
  America in the effort to end the Depression
• American woman pilot, Amelia Earhart, disappeared
  on a flight around the world in July of 1938
• America panics when it tuned into War of the
  Worlds broadcast by Orson Wells
• Campbell's introduced chicken noodle soup in a
  can some of the other new foods of the 30s
  were the famous Spam, Fritos, and Twinkies

12
Farm Landscape of the 1930s

• Total Population 122,775,046
• Farm Population 30,455,350
• Farmers 21 of Labor Force
• Number of Farms 6,295,000
• Average Acres 157
• Irrigated Acres 14,633,252
• Agricultural exports in the 1930s fall to 765
  million or 32 of total exports
• Farm income prices hit rock bottom in 1932
• The Dust Bowl brings devastation to numerous
  farmers
• Farmers default on loans, many loans in
  foreclosure, and many farmers lose their land
• Farm Credit experiencing significant loan losses
  government assistance provided
• Rural Electrification Act (REA) brought
  electricity to rural America
• Farm to markets roads emphasized in Federal road
  building

13
Farm Credit in the 1930s...

• 1933 - Farm Credit Act authorized Production
  Credit Associations and created 13 Banks for
  Cooperatives
• 1933 Farm Credit Administration (FCA) created
  by executive order

14
Agriculture Legislation of the 1930s

• 1933 Agricultural Adjustment Act initiates crop
  and marketing controls
• In 1935, Social Security was enacted
• 1938 Agricultural Adjustment Act provides
  acreage allotments and quotas, granary, and
  price-supporting loans, regional research
  laboratories and Federal Crop Insurance!

15
The U.S. in the 1940s

• Unemployment is 8,120,000 or 6.1 in 1940
• National debt 43 billion
• Average Annual Salary 1,299
• Minimum Wage .43 per hour
• 55 of U.S. homes have indoor plumbing
• The Japanese bomb Peal Harbor December 7, 1941,
  and the U.S. enters World War II. World War II
  changed the order of world power the U.S. and
  Russia become super powers
• Unemployment almost disappeared as most men were
  drafted, the government reclassified 55 of jobs,
  allowing minorities and women to fill them
• Automobile production temporarily ceased in 1942,
  and rationing of food supplies began in 1943
• Economic recovery from wartime
• 1946 - The baby boom began with the birth of
  3,400,000 babies
• The first meeting of the United Nations is held
  on January 10, 1946
• Big bands dominated the radio with legends such
  as Duke Ellington, Bing Crosby, and Frank Sinatra
  
• General Mills and Pillsbury introduce instant
  cake mixes

16
Farm Landscape of the 1940s

• Total Population 131,820,000
• Farm Population 30,840,000
• Farmers 18 of Labor Force
• Number of Farms 6,102,000
• Average Acres 175
• Irrigated Acres 17,942,968
• Agricultural exports 2.42 billion or 22 of
  total exports
• 58 of all farms have cars
• 25 have phones
• 33 have electricity
• 584,000 students enrolled in agricultural courses
• Increased use of herbicides and pesticides
• Acreage of crops, such as oats, required for
  horse and mule feed drop as farms use more
  tractors
• Many former southern sharecroppers migrate to
  jobs in cities

17
Farm Credit in the 1940s...

• 1947 The Federal Land Banks paid off federal
  capital

18
Agricultural Legislation of the 1940s

• 1941 Stegall Agreement provides price support
  to expand production for non-basic commodities
• 1942-49 - Price controls and food rationing
  during wartime emergency
• 1948-49 - Agricultural Act incorporates principle
  of flexible price support and provides change in
  parity formula
• 1949 - International Wheat Program

19
The U.S. in the 1950s

• Unemployed 3,288,000
• Car Sales 6,665,800
• Average Annual Salary 2,992
• Labor Force Male/Female 5/2
• Loaf of bread costs .14
• President Harry Truman approves production of the
  hydrogen bomb
• Racial segregation ruled unconstitutional by the
  U.S. Supreme Court
• The AFL-CIO merged creating an organization with
  15 million members
• The Federal Highway Act is signed in 1956,
  marking the beginning of work on the interstate
  highway system
• The Cold War begins, and the fear of Communism
  was very powerful in the United States
• In 1956 Dr. Jonas Salk developed the vaccine for
  polio
• Explorer 1, the first U.S. satellite,
  successfully orbits the earth in 1958
• Alaska and Hawaii become the forty-ninth and
  fiftieth states in 1959
• Television changed the way we lived in the
  1950's the hula-hoop, Barbie doll, American
  Bandstand, I Love Lucy, Dr. Seuss, The Ed
  Sullivan Show, McDonald's hamburgers, Elvis and
  the Peanuts comic strip were all introduced
  during this decade

20
Farm Landscapeof the 1950s

• Total Population 151,684,000
• Farm Population 25,058,000
• Farmers 12.2 of Labor Force
• Number of Farms 5,388,000
• Average Acres 216
• Irrigated Acres 25,634,869
• Agricultural Exports 3.53 billion or 22 of
  total exports
• One farmer supplies food for 15.5 persons
• Commercial fertilizer used 22,340,666 tons per
  year
• 70.9 of all farms have cars, 49 have phones,
  93 have electricity
• In 1954 the number of tractors on farms exceeds
  the number of horses and mules for the first time
• Trucks and barges compete successfully for
  agricultural products as railroad rates rise
• Late 50s Anhydrous ammonia increasingly used
  as cheap source of nitrogen, boosting yields
• Many rural areas lose population as farm family
  members seek outside work

21
Agriculture Legislation of the 1950s

• Agricultural Trade Development and Assistance Act
  (Food for Peace)
• 1956 Legislation provides for Great Plains
  Conservation Program
• Social Security extended to farm operators
• 1955 National Farmers Organization Formed
• Debates about level farm price support and
  surplus
• Increased emphasis on rural development and
  renewal
• 1957 Poultry Inspection Act
• 1958 Humane Slaughter Act

22
The U.S. in the 1960s

• Unemployment 3,852,000
• National Debt 286.3 billion
• Average Annual Salary 4,743
• Minimum wage hits 1.00
• 21.3 auto deaths per 100,000
• 70 million children from post-war baby boom
  become teenagers and young adults 850,00 enter
  college
• Civil rights movement made great changes in
  society
• The Presidential Commission of the Status of
  Women gave birth to the womens lib movement
• Respect for authority declined among youth, and
  crime rates soared to 9 times the rate of the
  1950s
• President John F Kennedy, after serving less than
  two years in office, was assassinated in 1963
• 1969 First man on the moon Neil Armstrong
• The Vietnam War begins

23
Farm Landscape of the 1960s

• Total Population 180,007,000
• Farm Population 15,635,000
• Farmers 8.3 of Labor Force
• Number of Farms 3,711,000
• Average Acres 303
• Irrigated Acres 33,829,000
• One farmer supplies food for 25.8 persons
• Agricultural exports 5.76 billion or 22.9 of
  total exports
• 83 of all farms have phones
• 98.4 have electricity
• Financial condition of railroads deteriorate
  rail abandonments accelerate agricultural
  shipments by cargo planes increase
• Soybean acreage expands as an alternative to
  other crops
• By 1968 96 of cotton harvested mechanically

24
Farm Credit in the 1960s

• PCAs and Banks for Cooperatives paid off federal
  capital

25
Agriculture Legislation of the 1960s

• 1961 Inception of the Peace Corps where
  volunteers serve their country in the cause of
  peace by living and working in developing
  countries
• 1964 Trade Expansion Act
• 1964 Wilderness Act
• 1964 Food Stamp Act
• 1966 Federal minimum wage extended to some farm
  workers
• The Government uses food surpluses for the needy
  at home and abroad State legislation to keep
  land in farming gains impetus

26
The U.S. in the 1970s

• Unemployment 4,088,000
• National Debt 382 billion
• Average Annual Salary 7,564
• Milk .33 a quart and bread .24 a loaf
• Major trends in the 60s continued into the 70s
  a growing disillusionment of government, advances
  in civil rights, increased influence of the
  women's movement, a heightened concern for the
  environment, and increased space exploration
• The Vietnam War was the longest military conflict
  in U.S. history beginning in 1969 and not ending
  until 1975
• The Watergate scandal on August 8, 1974, Richard
  Nixon becomes the first U.S. president to resign
  - Vice President Gerald R. Ford will later pardon
  Nixon of all charges related to the Watergate
  case
• 40,000 young people gathered at a rock festival
  called Woodstock
• Interest rates climbed to 18 and beyond

27
Farm Landscape of the 1970s

• Total Population 204,335,000
• Farm Population 9,712,000
• Farmers 4.6 of Labor Force
• Number of Farms 2.780, 000
• Average Acres 390
• Agricultural exports 19.8 billion a year or 19
  of total exports
• 7,994 cooperatives with 6.2 million members
• One farmer supplies food for 47.7 persons
• 853,000 students enrolled in agricultural courses
• Farmers organize tractor-cade in Washington
  D.C. as part of the American Agricultural
  Movement
• Inflation increases, while economic growth slows
• 1972 Russian wheat sale brings higher prices
• Grain embargo against Soviet Union following
  invasion of Afghanistan

28
Farm Credit in the 1970s...

• 1971 - Farm Credit Act updated the Systems
  charter, expanded lending authorities, including
  leasing, rural home lending, and farm related
  business lending

29
Agriculture Legislation of the 1970s

• 1972 Rural Development Act
• 1972 Clean Water Act
• 1973 Agriculture and Consumer Protection Act
  emphasizes maintaining or increasing instead of
  controlling production

30
The U.S. in the 1980s

• National Debt reached 2,000,000,000
• Average Annual Salary 15,757
• Minimum Wage 3.10
• Attendance at movies reached 20 million per week
• The country falls into a recession after all time
  high interest rates
• Columbia the first reusable space shuttle was
  launched in 1981 in 1986 the space shuttle
  Challenger exploded, killing 7 astronauts
• Research money allowed for studies and new
  treatments in heart, cancer, and DNA
• Prisons overflowed and violent crimes tripled
  between 1960 and 1980
• Families changed drastically more divorces,
  unmarrieds living together and more single parent
  families
• Two-earner family was more common more women
  earned college degrees, married, and had fewer
  children

31
Farm Landscape of the 1980s

• Total Population 227,020,000
• Farm Population 6,051,000
• Farmers 3.4 of Labor Force
• Number of Farms 2,439,510
• Average Acres 426
• Irrigated Acres 50,350,000
• 90 of all farms have electricity, 98.6 have
  phones
• 1981 Interest rates reach all time high prime
  rate 21
• 1982 - Farmland values peak
• 1982-86 - Farmers experienced severe credit
  problems due to low prices, high interest rates,
  and high farm expenses - many farms end up in
  foreclosure
• 1985 USDA scientist indicates that agricultural
  chemicals infiltrate ground water more than
  previously thought
• 1987 - Farmland values bottom out after a 6-year
  decline, signaling both a turnaround in the farm
  economy and increased competition with other
  countries' exports
• Ethanol technology developed
• Scientists warn that global warming may affect
  the future viability of American farming one of
  the worst droughts in the Nation's history hits
  Midwestern farmers

32
Farm Credit in the 1980s

• Federal Land Bank of Jackson, Mississippi, goes
  into receivership and is dissolved
• Legislation allowed for the Farm Credit System to
  receive financial assistance from the U.S.
  Treasury and created the Farm Credit Insurance
  Fund
• 1988 Co Bank was created by stockholder vote
• 1988 Federal Intermediate Credit Banks and
  Federal Land Banks merged to create Farm Credit
  Banks

33
Agriculture Legislation of the 1980s

• 1980 - Railroad and trucking deregulated and
  European grain and animal exports become more
  competitive with U.S. products
• 1981 U.S. Agricultural exports peak at 43.8
  billion, then decline in 1987 President Reagan
  lifts the embargo against the Soviet Union
• 1983 USDA implements a payment in kind program,
  resulting in the third largest acreage reduction
  ever
• 1988 The U.S. Canada trade accord initiates
  free trade in all commodities

34
The U.S. in the 1990s

• 1990 - The Hubble telescope was sent to take
  pictures of planets and other space objects
• 1991 The collapse of the Soviet Union
• 1993 World Trade Center bombed
• 1993 Use of Internet grows and Net.com stocks
  take off
• 1996 Mad cow disease hits Britain
• 1997 - Scientists clone sheep
• At midnight on December 31, 1999, the world held
  their breath to see if the Y2K bug would crash
  the worlds computer systems

35
Farm Landscape of the 1990s

• Total Population 261,423,000
• Farm Population 2,987,552
• Farmers 2.6 of labor force
• Number of Farms 2,143,150
• Average Acres 461 irrigated acres 49,404,000
• Net farm income reaches a record 54.9 billion
• Agricultural exports set record at 60.4 billion
• 1990 Rural counties gain population after
  losing ground in the 1980s
• Concentration grows in farm inputs industry and
  among processors and shippers more farms turn to
  production and marketing contracts, increasing
  vertical integration
• Biotechnology brings important new developments
  in dairy, corn, and other commodities
  genetically engineered crops and livestock appear
• Hog prices hit depression era low of 8 cents
• Major livestock consolidation, livestock waste
  becomes a major issue
• 1997-98 - Tobacco industry settles lawsuits aid
  proposed to tobacco farmers
• USDA meat inspection programs modernized in
  response to food safety

36
Farm Credit in the 1990s

• Federal financial assistance to the Farm Credit
  System was defused (full payment of principal, 11
  years ahead of schedule)
• 1992 AgriBank formed by the consolidation of
  the Farm Credit Banks of St. Paul and St. Louis
• 1994 - Farm Credit Bank of Louisville merged into
  AgriBank
• 1994 - AgAmerica formed by the consolidation of
  the Farm Credit Banks of Omaha and Spokane
• 1995 - AgFirst Farm Credit Bank formed by the
  consolidation of the Farm Credit Banks to
  Baltimore and Columbia
• 1997 - AgAmerica, FCB, and Western Farm Credit
  Bank under joint management
• 1998 FCA Philosophy Statement Introduced
• 1999 CoBank and St. Paul Bank for Cooperatives
  merged

37
Agriculture Legislation of the 1990s

• The Federal Agriculture Improvement Reform Act
  of 1996, a milestone in U.S. agricultural policy,
  provides new farm sector law for 1996-2002,
  fundamentally redesigning income support programs
  discontinuing supply management programs for
  producers of many commodities
• New Acts focus is on market orientation and
  global trade

38
The U.S. in the 2000s

• The National Debt reaches record high of 8.352
  trillion
• The 2000 Bush Gore Presidential Election caused
  much controversy as the results were extremely
  close
• The rising deficit, the viability of Social
  Security Medicare, and rising health care costs
  are major political issues
• HIV/Aids become a major health care focus
• September 11, 2001, attacks (often referred to as
  9/11) were a series of coordinated terrorist
  attacks upon the USA approximately 3,000 people
  died in the attacks
• The Department of Homeland Security was created
  to fight terrorism
• The Sarbanes-Oxley Act (SOX) of 2002 came as a
  result of the large corporate financial scandals
  involving Enron, WorldCom, etc.
• The 2003 invasion of Iraq, termed "Operation
  Iraqi Freedom" by the US administration, began on
  March 20th
• High gasoline and oil prices are a major concern
  in the U.S. - national average gasoline price per
  gallon (2.90 on April 23) approaches the record
  high of 3.21 per gallon set in 1981 (adjusted
  for inflation)

39
Farm Landscape of the 2000s

• Total Population 296,410,404 in 2005
• Farm Population 951,810
• Farmers .73 of Labor Force
• Number of Farms 2,113,470
• Average Acres 441
• Net farm income reaches a record 82.5 billion in
  2004
• Agricultural exports set record at 62.4 billion
• U.S. policy provides incentives for ethanol
  production
• BSE Mad Cow disease hit U.S. December 2003
• Biotechnology made genetically engineered crops
  possible
• The presence of soybean rust appears in U.S.
  November 2004

40
Farm Credit in the 2000s

• AgAmerica (Omaha) merger with AgriBank, FCB
• Mission Related Investments (MRI) authority
  clarified

41
Agriculture Legislation of the 2000s

• The 2002 Farm Act was signed into law by the
  President on May 13, 2002
• Production flexibility contract payments are
  replaced by direct payments
• The marketing loan program is retained, although
  loan rates were adjusted
• Loan rates for wheat and feed grains were
  increased and the loan rate for soybeans was
  reduced
• A new counter-cyclical payment is established to
  provide an improved farm income safety net for
  producers of wheat, feed grains, rice, cotton,
  and oilseeds
• Additional commodity program changes were made
  for dairy, sugar, and peanuts

42
Moving Forward
43
HORIZONS Three Phases

• Assess the Marketplace
• Reach Consensus on Desired Changes
• Implementation

44
Premise of the Marketplace Assessment Our
Mission Is Not Changing

• To help maintain the quality of life in rural
  America and on the farm through constant
  commitment to competitive lending, expert
  financial services and advice, and a feeling of
  partnership with its customers

45
Key Question

• What changes to Farm Credits authorities
  areessential to maintaining thequality of life
  in rural America?

46
Summary of the 23 Recommendations

• Enhance the ability of the System to serve the
  funding and service needs of all farmers, both
  full and part time
• Provide the System with greater ability to serve
  agriculturally related businesses
• Allow the System to invest in rural America
  consistent with its mission
• Expand partnering with banks and others to
  finance similar entities and other ag businesses
• Enhance ability to finance rural homes

47
Effect on AgriBank and Employees?

• Bright future for the System
• Expands the market for our associations and their
  need for products and services from AgriBank
• Requires our support and expertise