Agricultural Credit: Institutions and Issues
April 21, 2021
A variety of lenders from the federal government to commercial banks make loans to farmers.
The federal government provides credit assistance to farmers who cannot obtain loans elsewhere,
Jim Monke
and helps assure credit availability across rural areas. At Congress’s direction, federal farm loan
Specialist in Agricultural
programs target beginning farmers and socially disadvantaged groups based on race, ethnicity, or
Policy
gender.

Description of Lenders

The U.S. Department of Agriculture (USDA) Farm Service Agency (FSA) is a small but
important lender for family-sized farms that do not qualify for credit elsewhere. FSA also guarantees payments on some
loans made by other lenders. At the end of FY2019, FSA had a portfolio of $12 billion of direct loans to 87,000 borrowers
and loan guarantees of $16 billion for 39,000 borrowers. Thus, out of the $423 billion market for farm debt, FSA had a direct
market share of 3% of loans and loan guarantees that covered about another 5% of the market. For FY2021, annual
appropriations support $9.9 billion of new FSA direct loans and guarantees.
The Farm Credit System (FCS) has the next-largest amount of government intervention. FCS is a private lender with a
federal charter and a statutory mandate to serve creditworthy farmers, certain agribusinesses, cooperatives, and rural
homeowners in towns with less than 2,500 population. At the end of 2020, FCS had a total loan portfolio of $315 billion,
including over $190 billion of farm loans (43% of farm debt). As a government-sponsored enterprise (GSE), FCS has tax
advantages and lower costs of funds. Capital is raised through the sale of bonds on Wall Street. Four large banks allocate
funds to 67 regional credit associations that, in turn, make loans to eligible creditworthy borrowers.
Another GSE for farm loans is Farmer Mac, a privately held secondary market. Farmer Mac purchases agricultural mortgages
and issues guarantees on mortgage-backed securities that are bought by investors. Other agricultural lenders without
government support or mandates include commercial banks (40% market share of farm debt); individuals, merchants, and
dealers (8%); and life insurance companies (4%). Commercial banks’ and FCS’s shares of farm debt have grown in recent
years as others’ shares have decreased.
Farm Sector Balance Sheet
The farm sector’s balance sheet has remained strong in recent years. Inflation-adjusted debt levels and debt-to-asset ratios
(debts divided by assets) are below peak stress levels during the 1980s (figure). The delinquency rates on FSA direct and
guaranteed loans have remained fairly steady in recent years through the trade disruption and the COVID-19 pandemic.
About 30% of all U.S. farms have farm debt.
Farm Debt-to-Asset Ratio
Since 2018, more of net farm income has come from the
government in the form of trade aid payments and COVID-
19 assistance. During the pandemic, USDA has suspended
new foreclosures on farm loans. FSA borrowers may use a
Disaster Set-Aside (DSA) provision to move a loan
payment to the end of the loan or extend an annual
operating loan by a year.
Issues in Agricultural Credit
A 2019 Government Accountability Office report found
that socially disadvantaged farmers had proportionately
fewer FSA direct and guaranteed loans than other farmers,
and that socially disadvantaged farmers continued to face
difficulties because of historic, systemic discrimination.
The American Rescue Plan Act of 2021 (P.L. 117-2)

contains a provision to pay socially disadvantaged farmers
Source: CRS, using USDA Economic Research Service data.
120% of their balances on FSA direct loans, FSA
Notes: 2021 is the USDA forecast.
guaranteed loans, and Farm Storage Facility Loans as of
Congressional Research Service

Agricultural Credit: Institutions and Issues

January 1, 2021. The payment is intended to retire loan balances and cover tax liabilities and fees, since debt forgiveness is
subject to income taxes. The provision uses a definition of socially disadvantaged farmer that includes only racial and ethnic
minorities, which is narrower than the definition used to make farm loans that also includes gender. The Congressional
Budget Office estimates the debt forgiveness provision will cost $4 billion.
Competition between FCS and commercial banks remains an issue in agricultural lending. FCS is unique among the GSEs ,
because it is a retail lender making loans directly to farmers and thus is in direct competition with commercial banks.
Because of this direct competition for creditworthy borrowers, FCS and commercial banks often have an adversarial
relationship in the policy realm. Commercial banks assert unfair competition from FCS for borrowers because of tax
advantages that can lower the relative cost of funds for FCS. FCS counters b y citing its statutory mandate to serve only
agricultural borrowers and despite economic conditions. Commercial banks and FCS both support the FSA loan guarantee
program and do not see FSA as a competitor because FSA allows them to make and service loans that otherwise might not be
possible at acceptable risk levels.

Congressional Research Service

Agricultural Credit: Institutions and Issues

Description of Government-Related Farm Lenders
The federal government has a long history of assisting farmers with obtaining loans for farming.
This intervention has been justified at one time or another by many factors, including the
presence of asymmetric information among lenders or between lenders and farmers,1 the lack of
competition in some rural areas, insufficient lending resources, and the desire for targeted lending
to disadvantaged groups (such as smal farms or farmers who are social y disadvantaged based on
race, ethnicity, or gender).2
Several types of lenders make loans to farmers. Some are government entities or have a statutory
mandate to serve agriculture. The one most closely controlled by the federal government is the
Farm Service Agency (FSA) in the U.S. Department of Agriculture (USDA). FSA receives federal
appropriations to make direct loans to farmers and to issue guarantees on loans made by other
lenders to farmers who are unable to obtain credit elsewhere.
The lender with the next-largest amount of government intervention is Farm Credit System
(FCS). It is a private, government-sponsored enterprise (GSE) with a federal charter and a
statutory mandate to serve only agriculture-related borrowers.3 FCS makes loans to creditworthy
farmers and is not a lender of last resort. Third is Farmer Mac, another privately held GSE, which
provides a secondary market for agricultural loans by resel ing these loans to private investors.4
Other lenders do not have direct government involvement in their funding or existence. These
lenders include commercial banks, life insurance companies, individuals, merchants, and dealers.
USDA Farm Service Agency
FSA is considered a lender of last resort because it makes direct farm ownership and operating
loans to family-sized farms that are unable to obtain credit elsewhere. FSA also guarantees timely
payment of principal and interest on qualified loans made by commercial banks and FCS. Farm
bil s modify the permanent authority for FSA’s lending activities in 7 U.S.C. 1921 et seq. At the
end of FY2019, FSA had a portfolio of $12 bil ion of direct loans to 87,000 borrowers and loan
guarantees of $16 bil ion for 39,000 borrowers.5 FSA direct loans were about 3% of the market
for farm debt and FSA loan guarantees covered about another 5% of the market.
During FY2021, an appropriation of $68 mil ion in budget authority (plus $307 mil ion for
salaries and expenses) is supporting $9.9 bil ion of new direct loans and guarantees.6 Direct farm

1 Asymmetric information is a type of market failure that arises when parties have different insights about a transaction.
2 Charles Moss, Agricultural Finance (New York: Routledge, 2013).
3 A government-sponsored enterprise (GSE) is a federally chartered, nongovernment entity with certain benefits (such
as tax exemption, implicit federal guarantees, or risk management tools) that overcome barriers to private markets in
achieving a stated goal. For the Farm Credit System (FCS), its charter is limited to serving agriculture-related
businesses and rural homeowners. Other examples of GSEs include the Federal National Mortgage Association (Fannie
Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), Federal Home Loan Bank System, and Federal
Agricultural Mortgage Corporation (Farmer Mac).
4 A secondary market purchases qualified loans from originating lenders, pools them, and may sell them to investors as
securities or hold them in its own portfolio. T his provides a risk management option that let s lenders make more loans
and satisfy regulatory requirements.
5 U.S. Department of Agriculture (USDA), Farm Service Agency (FSA), “Farm Loan Programs Loan Servicing Data,”
at https://www.fsa.usda.gov/programs-and-services/farm-loan-programs/program-data.
6 CRS Report R46437, Agriculture and Related Agencies: FY2021 Appropriations.
Congressional Research Service

1

Agricultural Credit: Institutions and Issues

ownership loans (real estate) are limited to $600,000 per borrower, direct operating loans are
limited to $400,000, and microloans are limited to $50,000 for both ownership and operating
loans. Guaranteed loans may be up to $1.776 mil ion (adjusted for inflation). Direct emergency
loans up to $500,000 are available for disasters if the farm suffers a 30% loss in a designated or
contiguous county.7
Part of the FSA loan program is reserved for beginning farmers and ranchers (7 U.S.C. 1994
(b)(2)). For direct loans, 75% of the funding for farm ownership loans and 50% of operating loans
are reserved for the first 11 months of the fiscal year. For guaranteed loans, 40% is reserved for
farm ownership and operating loans for the first half of the fiscal year. Funds also are targeted to
farmers who are “social y disadvantaged” by race, gender, and ethnicity (7 U.S.C. 2003). Using
these provisions, FSA is known as a lender of first opportunity for many borrowers.8
Farm Credit System
Congress established FCS in 1916 to provide a dependable and affordable source of credit to rural
areas at a time when commercial lenders avoided farm loans. FCS is not a government agency,
nor is it guaranteed by the U.S. government; it is a network of borrower-owned lending
institutions operating as a GSE. It is not a lender of last resort but a for-profit lender with a
statutory mandate to serve agriculture. Funds are raised through the sale of bonds on Wal Street.
Four large banks al ocate these funds to 67 credit associations that, in turn, make loans to eligible
creditworthy borrowers.
Statutes and oversight by the House and Senate Agriculture Committees determine the scope of
FCS activity (Farm Credit Act of 1971, as amended; 12 U.S.C. 2001 et seq.). Benefits such as tax
exemptions for FCS lenders and bondholders also are provided. Loan eligibility is limited to
farmers, certain farm-related agribusinesses, rural homeowners in towns with a population of
fewer than 2,500, and cooperatives.9 The federal regulator is the Farm Credit Administration
(FCA).10
At the end of FY2020, FCS had a total portfolio of $315 bil ion of loans, including over $190
bil ion of farm loans.11 FCS holds about 43% of the share of farm debt.
Farmer Mac
Farmer Mac is a GSE that is a secondary market for agricultural loans. Some consider Farmer
Mac to be related to FCS because FCA regulates both Farmer Mac and FCS, and both were
created by the same legislation; however, Farmer Mac is financial y and organizational y a
separate entity from FCS. Farmer Mac purchases mortgages from lenders and guarantees
mortgage-backed securities that are bought by investors.12

7 FSA, “Farm Loan Program,” at http://www.fsa.usda.gov/dafl.
8 CRS In Focus IF10641, Farm Bill Primer: Federal Programs Supporting New Farmers.
9 CRS Report RS21278, Farm Credit System .
10 CRS In Focus IF10767, Farm Credit Administration and Its Board Members.
11 Federal Farm Credit Banks Funding Corporation, 2020 Annual Information Statem ent of the Farm Credit System ,
March 2021.
12 CRS In Focus IF11595, Farmer Mac and Its Board Members.
Congressional Research Service

2

link to page 7 link to page 7

Agricultural Credit: Institutions and Issues

Current Situation
Market Shares of Farm Debt
Figure 1 shows that, based on USDA data for 2019, FCS and commercial banks provide most of
the farm credit (43% and 40%, respectively) followed by individuals and others (8%) and by life
insurance companies (4%).13 FSA provides about 3% of farm debt through direct loans. FSA also
guarantees about another 5% of the market through loans that are made by commercial banks and
FCS.
The total amount of farm debt ($432 bil ion at the end of 2020) is concentrated relatively more in
real estate debt (64%) than in non-real estate debt (36%). FCS is the largest lender for real estate
(47%). Commercial banks are the largest lender for non-real estate loans (46%).
As Figure 1 shows, both commercial banks’ and FCS’s shares have grown since the 1980s as
other lenders’ shares have decreased. Commercial banks held relatively little farm real estate debt
through 1985 but now hold a sizeable amount, which has increased their share of total farm debt.
The share of loans from “individuals and others” has steadily decreased over time, following
fewer private contracts for farm real estate and despite an increasing mix of dealer financing. FSA
holds a much smal er share of farm debt today than it held during the 1980s farm financial crisis.
Figure 1. Market Shares by Lender of Total Farm Debt, 1960-2019

Source: Congressional Research Service (CRS), using year-end data from the U.S. Department
of Agriculture (USDA) Economic Research Service (ERS), as of February 5, 2021.
Notes: Percentages on the right are for 2019. FSA = Farm Service Agency. Shares in the graph are for
direct loans. Guarantees are not shown (FSA guarantees about 5% of farm loans that are included in
the shares of commercial banks and the Farm Credit System).

13 USDA, Economic Research Service (ERS), “Farm Income and Wealth Statistics,” at http://www.ers.usda.gov/data-
products/farm-income-and-wealth-statistics.aspx. Hereinafter, ERS, “ Farm Income and Wealth Statistics.”
Congressional Research Service

3

link to page 8 link to page 8 link to page 9 link to page 9

Agricultural Credit: Institutions and Issues

The Farm Balance Sheet
As a whole, farm assets have remained strong and grown steadily since the end of the 1980s,
though inflation-adjusted growth has slowed since 2014. At the end of 2020, farm sector assets
totaled $3.1 tril ion, according to USDA (Figure 2), which was 4% below their 2014 peak in
inflation-adjusted terms. Real estate accounted for about 82% of total farm assets in 2020;
machinery and vehicles were the next-largest category, at about 9% of the total.14 USDA forecasts
that farm assets wil increase by 1.8% in 2021.
Farm debt reached a historic high of $432 bil ion at the end of 2020 (Figure 3). About 30% of
U.S. farms have farm debt.15 USDA forecasts that debt wil increase by 2.2% in 2021. In
inflation-adjusted terms, this forecast debt is approaching, but remains below, the peak level of
farm debt in the 1980s.
Figure 2. Farm Assets
Figure 3. Farm Debt

Source: CRS, using ERS data.
Source: CRS, using ERS data.
Notes: 2021 is forecast, as of February 5, 2021.
Notes: 2021 is forecast, as of February 5, 2021.
Financial risk to a sector is indicated when the debt-to-asset ratio (debts divided by assets) is
high. Farm debt-to-asset ratio levels have declined fairly steadily since the farm crisis of the
1980s (Figure 4). When farm asset growth paused in 2009-2010, the debt-to-asset ratio rose
before returning to a historic low in 2012. The debt-to-asset ratio has been slowly rising due to
lower farm incomes, trade disruption, and the COVID-19 pandemic, although the farm sector is
not as highly leveraged as it was in the 1980s.
Another indicator of leverage is the debt-to-income ratio (debt divided by net income, or the
number of years of current income to cover debt; Figure 5). The farm debt-to-income ratio is
more variable than the debt-to-asset ratio. The decline in net farm income from 2013 to 2016
caused the ratio to rise to levels not seen since the 1980s, until high income from government
payments in 2020 returned the ratio to near its 10-year average.

14 ERS, “Farm Income and Wealt h Statistics.”
15 ERS, “Debt Use By U.S Farm Businesses, 1992-2011,” EIB-122, April 2014, p. 3. Updated by ERS in special
tabulations for the author, March 5, 2021.
Congressional Research Service

4

link to page 9

Agricultural Credit: Institutions and Issues

Figure 4. Farm Debt-to-Asset Ratio
Figure 5. Farm Debt-to-Income Ratio

Source: CRS, using ERS data.
Source: CRS, using ERS data.
Notes: 2021 is forecast, as of February 5, 2021.
Notes: 2021 is forecast, as of February 5, 2021.
Figure 6. Net Farm Income and
Government Payments
Net farm income has become more variable,
especial y since 2000 (Figure 6). Net farm
income reached highs in 2011 and 2013 but
fel below the 10-year average for the next six
years, through 2019. Large government
payments in 2020 raised farm income to a
near high absolute level and improved
farmers’ debt-repayment capacity during the
pandemic. Although government payments to
farmers have risen from decades ago,
however, these payments do not always offset
income variability when net farm income

fal s. Since 2018, an increasing portion of net
Source: CRS, using ERS data.
farm income has come from the government
Notes: 2021 is forecast, as of February 5, 2021.
in the form of trade aid payments and COVID-19 assistance.16 A forecast decline in government
payments in 2021 may reduce net farm income.
Delinquency Rates on Farm Loans
During the COVID-19 pandemic, USDA has suspended loan accelerations (i.e., the requirement
for immediate repayment) and new foreclosures on farm loans. FSA also temporarily expanded
the Disaster Set-Aside (DSA) provision to al ow more payment flexibility. The DSA provision
al ows a borrower to move a loan payment to the end of the loan or, in the case of an annual
operating loan, to extend the payment by a year. Interest continues to accrue on the deferred

16 CRS In Focus IF11770, U.S. Farm Income Outlook: February 2021 Forecast.
Congressional Research Service

5

link to page 10

Agricultural Credit: Institutions and Issues

principal; neither the interest nor the principal is forgiven.17 About 4,000 borrowers used the DSA
provision in 2020.18
Delinquency rates include loans that are 30 days or more past due and are stil accruing interest.
The delinquency rate on FSA direct loans is about 5% (of loan portfolio value) and has remained
fairly steady through the trade disruption and the pandemic, despite FSA being a lender of last
resort. The delinquency rate on FSA guaranteed loans is lower, at about 1.6%, arguably reflecting
the comparatively higher quality of these loans made by other lenders (Figure 7).
A more severe measure of loan performance problems is nonperforming loans: nonaccrual loans
and interest-accruing loans 90 days or more past due. These loans are more in jeopardy than
delinquent loans and represent a smal er subset of loans. The nonperforming rate on farm loans at
commercial banks rose after the financial crisis in 2009 but recovered through 2016. Lower farm
incomes in recent years, along with trade disruption and the pandemic, have again increased the
rate of nonperforming loans, but not to the levels of a decade ago. At FCS, nonperforming loans
recovered after the 2007-2009 financial crisis and have remained steady through the period of
lower farm income after 2013, owing in part to trade disruption and the pandemic.
Figure 7. Delinquent and Nonperforming Agricultural Loans

Sources: Compiled by CRS, using USDA, FSA, ”Farm Loan Programs Loan Servicing Data,” at
https://www.fsa.usda.gov/programs-and-services/farm-loan-programs/progra m-data/index; Federal Reserve
Bank of Kansas City, Commercial Bank Cal Report Data, “Delinquent Farm Loans”; and Federal Farm
Credit Banks Funding Corporation, “Information Statements: Nonperforming Assets.”
Notes: FCS = Farm Credit System; FSA = USDA Farm Service Agency. Delinquencies include nonaccrual
loans and accruing loans that are 30 days or more past due. Nonperforming loans include nonaccrual loans
and accruing loans 90 days or more past due. Percentages are of dol ar amounts of loans.

17 CRS Insight IN11415, COVID-19 and USDA Farm Loan Flexibilities.
18 Based on CRS communication with the deputy administrator for Farm Loans Programs, USDA FSA, March 26,
2021.
Congressional Research Service

6

Agricultural Credit: Institutions and Issues

Issues in Agricultural Credit
Debt Forgiveness for Socially Disadvantaged Farmers
The American Rescue Plan Act of 2021 (P.L. 117-2) contains a provision (§1005) to pay social y
disadvantaged farmers 120% of their outstanding FSA direct loans, FSA guaranteed loans, and
Farm Storage Facility Loans (made by the Commodity Credit Corporation) as of January 1, 2021.
The payment is intended to retire loan balances and cover tax liabilities and fees, since debt
forgiveness is subject to income taxes. The provision uses a definition of socially disadvantaged
farmer that includes racial and ethnic minorities (7 U.S.C. §2279(a)); this definition is narrower
than the one used for targeting social y disadvantaged farmers in the farm loan programs, which
also includes gender (7 U.S.C. §2003).
The Congressional Budget Office estimates the debt forgiveness provision wil cost $4 bil ion.
A 2019 Government Accountability Office (GAO) report, which was mandated by the 2018 farm
bil (P.L. 115-334, §5416), observed that despite specific preferences, social y disadvantaged
farmers and ranchers had proportionately fewer FSA direct and guaranteed loans than non-
social y disadvantaged producers. GAO found that social y disadvantaged farmers and ranchers
face difficulties in obtaining farm loans and highlighted the historic, systemic discrimination
against such farmers.19
Data that describe annual FSA lending to social y disadvantaged borrowers do not reflect the
impact of the debt relief provision for racial minorities, since gender is included in the loan
program data.20 Agricultural Census data indicate that White women comprise a majority of this
social y disadvantaged category.21
Competition Between Farm Credit System and Commercial Banks
FCS is unique among the GSEs because it is a retail lender making loans directly to farmers and
thus is in direct competition with commercial banks. Because of this direct competition for
creditworthy borrowers, FCS and commercial banks often have an adversarial relationship in the
policy realm. Commercial banks assert unfair competition from FCS for borrowers because of tax
advantages that can lower the relative cost of funds for FCS.22 Commercial banks often cal for
increased congressional oversight. FCS counters by citing its statutory mandate (and limitations)
to serve agricultural borrowers in good times and in bad times.23
In contrast, FSA’s loan programs are supported by both FCS and commercial banks. FSA is not
regarded as a competitor, since it serves farmers who otherwise may not be able to obtain credit.
Commercial banks and FCS particularly support the FSA loan guarantee program, because it

19 Government Accountability Office (GAO), Agricultural Lending: Information on Credit and Outreach to Socially
Disadvantaged Farm ers and Ranchers Is Lim ited, GAO-19-539, July 11, 2019. Hereinafter, GAO-19-539.
20 FSA, “Program Data,” at https://www.fsa.usda.gov/programs-and-services/farm-loan-programs/program-data.
21 “T able 1. Producers Identified as Socially Disadvantaged Farmers and Ranchers (SDFR), 2017,” in GAO -19-539, p.
6.
22 For example, letter from the American Bankers Association to the House and Senate Agriculture Committees,
February 2, 2015.
23 For example, letter from the Farm Credit Council to the House and Senate Agriculture Committees, February 5,
2015.
Congressional Research Service

7

link to page 12 link to page 12 link to page 12 link to page 12 Agricultural Credit: Institutions and Issues

al ows them to make and service loans that otherwise might not be possible (or to do so at a
reduced level of risk).
Term Limits on USDA Farm Loans
Congress added term limits to the USDA farm loan program in 1992 and 1996 to restrict
eligibility for government farm loans and to encourage farmers to “graduate” to commercial
loans. The term limits place a maximum number of years that farmers are eligible for certain
types of FSA loans or guarantees. However, until the end of 2010, Congress had suspended
enforcement of term limits on guaranteed operating loans to prevent some farmers from being
denied credit. The 2014 farm bil (P.L. 113-79) eliminated the term limit on guaranteed operating
loans (Table 1).
Table 1. Term Limits on Farm Service Agency (FSA) Loans
(maximum number of years that farmers are eligible for loans)
Guaranteed Loans Term
Type of FSA Loan
Direct Loans Term Limits
Limits
Farm Operating Loans
6 years, plus possible 2-year extensiona
No term limitb
Farm Ownership Loans
10 yearsc
No term limit
Source: CRS, based on statute and unpublished USDA data.
Notes: Term limits are different from the maximum maturity or duration of an individual loan, which may be as
long as 40 years for a farm ownership loan or as short as 1 year for a farm operating loan.
a. Direct operating loans are limited to a six-year period. In certain cases, borrowers may qualify for a one-
time, two-year extension (7 U.S.C. 1941(c)(1)(C) and (c)(4)).
b. The 2014 farm bil (P.L. 113-79) permanently removed this term limit. Guaranteed operating loans had been
limited to a 15-year period, though enforcement was suspended by statute through 2010.
c. A borrower is eligible to receive new direct farm ownership (real estate) loans for a maximum of 10 years
after the first loan is made (7 U.S.C. 1922(b)(1)(C)). The repayment term may exceed the term limit.

Author Information

Jim Monke

Specialist in Agricultural Policy

Congressional Research Service

8

Agricultural Credit: Institutions and Issues

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should n ot be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in
its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or
material from a third party, you may need to obtain the permission of the copyright holder if you wish to
copy or otherwise use copyrighted material.

Congressional Research Service
R46768 · VERSION 1 · NEW
9