Prospective Trends in Farm Credit and Fund Availability: Implications for Agricultural Banking

Farm Credit markets in the United States are excellent testimony to high performance over the long term in providing credit and related services to the farm sector, and to timely innovation of new financial institutions, instruments, and practices for meeting farmers' capital and credit needs. These markets evolved from strong reliance a century ago on country or frontier,banks, local merchants, land mortgage companies, and life insurance companies, to now include the Cooperative Farm Credit System, U.S. government lending agencies and credit programs, local-regional-national credit programs of many farm input suppliers, and a dual banking system with monetary control by the Federal Reserve System. The result is a diverse set of credit sources for farmers that differ in their sources of funds, degree of specialization in farm lending, legal and regulatory environment, and degree of government affiliation. Considerable financing by individuals, especially sellers of farm land, occurs as well. Major evolutionary features of the farm credit market are the relatively large size and the regional or national orientation of many of the intermediaries involved. The Farm Credit System has characteristics of a national branch banking organization of very large size. Life insurance companies have regional or national orientations in farm lending. So do credit programs of merchants and dealers. Even local offices of the Federal government are branches of a large national organization. Money center banks, regional banks, many branch banks, and Federal Reserve Banks also are large in size, and in many cases are considered part of the national financial markets. The consequences of large size and regional or national orienta-tions are largely favorable for financing agriculture. These organiza