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JUSTIFICATION STATEMENT

PURPOSE STATEMENT

The Administration supervises, examines, and provides facilities and services to a coordinated system of farm credit banks and associations making loans to farmers and their cooperatives. A fundamental principle of supervision is the encouragement and development of agricultural cooperative agencies, with complete farmer ownership the ultimate objective of the agencies supervised. Services and facilities furnished by the Administration facilitate the operations of the several agencies and their progress toward farmer ownership. Typical services are: custody of collateral for bonds and debentures, assistance in financing and investments, credit analysis, development of land appraisal standards and policies, preparation of reports and budgets, and preparation and distribution of information on farm credit. All expenses of these activities are paid by assessments collected from the banks and associations of the farm credit system.

Since December 4, 1953, the Administration has been an independent agency under the direction of a Federal Farm Credit Board (12 U.S.C. 636b). The Administration, originally created by Executive Order No. 6084 on May 27, 1933, was transferred to the Department of Agriculture on July 1, 1939, by Reorganization Plan No. 1.

On December 31, 1964, the Administration had 214 full-time employees, approximately half of whom were located in the field. These field employees are farm loan registrars, reviewing appraisers, and farm credit examiners.

ADMINISTRATIVE EXPENSES

(Authorization for the obligation of assessments collected from farm credit banks and associations)

Thousands Limitation (revised) 1965, and base for 1966_

$2,931 Budget estimate, 1966_

2, 990

Change----

+59 The increase of $59,000 for 1966 over 1965 is necessary to cover the cost of vacancies which will be filled for the full year 1966.

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Supervision and examination of farm credit banks and associations

The Farm Credit Administration is a supervisory agency established to provide the banks and associations of the farm credit system with centralized and coordinated supervision and examination, and to furnish facilities and services deemed essential to the operation of the system and its progress toward complete farmer ownership.

The Farm Credit Act of 1953 reestablished the Farm Credit Administration as an independent agency. It created a Federal Farm Credit Board responsible for the direction, supervision, and control of the Administration and its operations (12 U.S.C. 636b). The Board consists of 13 members. Twelve are ap pointed by the President with the advice and consent of the Senate. The 13th is designated by the Secretary of Agriculture. In making appointments to the

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Board, the President considers nominations made by Federal land bank associations, production credit associations, and borrowing farmer cooperatives in each of the 12 farm credit districts. The act reaffirmed the concept of progressively greater borrower participation in the management, control and ultimate ownership of the credit agencies supervised by Farm Credit Administration. Progress toward this objective since December 4, 1953, the effective date of the act, and other developments are outlined in the section headed “The Farm Credit System."

Significance of the program.—Effective Farm Credit Administration supervision and examination have contributed to the establishment of the farm credit system. The system has developed sound administrative management and the facilities and services made available by the Administration have enabled it to serve farmers effectively. The steady increase in the number of farmers participating in cooperative credit indicates their confidence in the farm credit system, and demonstrates that with effective leadership such a credit system is desirable and feasible. Objectives of the farm credit system which can be attained best through coordinated effort are to: assure farmers a permanent source of credit by strengthening the farm credit banks and associations; assure dependable sources of loan funds, which are of first importance to any credit system, by maintaining the confidence of investors in farm credit bank securities through adherence to sound credit principles and maintenance of strong financial structures; and accomplish the retirement of Government capital without impairing the system's ability to provide for the sound credit needs of agriculture.

TABLES REFLECTING TRENDS IN AGRICULTURAL CREDIT

Prices received and paid by farmers and farm income, United States

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Indexes (1910-14=100]

Farm income 1
(in billions of dollars)

Calendar year

Farm product prices received

Prices
paid by
farmers

Parity
ratio

Gross
income

Production
expenses

Net income

1940 1950 1955. 1956 1957 1958 1959. 1960 1961. 1962 1963

100 258 232 230 235 250 240 238 240 244 242 236

124 256 276 278 286 294 298 300 302 307 312 313

81
101
84
83
82
85
81
80
79
79
78
76

$11.0
32.5
33. 3
34.6
34.4
37.9
37.5
37.9
39.6
41.0
41.7
41.9

$6.7
19.3
21.8
22.6
23.4
25.3
26.2
26.2
27.0

$4.3 13.2 11.5 12.0 11.0 12.6 11.3 11.7 12.6 12.6 12.5 12.5

28.4

1964 2

29.2
29.4

1 Includes Government payments. Excludes changes in farm inventories.
: Preliminary.

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* Preliminary.

Value of livestock, farm equipment, crops on hand, and household furnishings. • Excludes CCC price-support loans.

Amount of loans outstanding to farmers and percent of total held, by types of lenders,

United States, Jan. 1, 1964 and 1963 1

Jan, 1, 1964

Jan. 1, 1963

Type of lender

Amount (millions)

Percent of

total

Amount (millions)

Percent of

total

$3, 281
3,778
2, 356

601
6,776

19.5
22.5
14.0

3.6
40.4

$3,023
3, 391
2,054

585
6, 107

19.9 22.4 13.5

3.9 40.3

16, 792

100.0

15, 160

100.0

Real estate loans:

Federal land banks..
Insurance companies.
Commercial banks.
Farmers Home Administration..
Individuals and others..

Total...
Non-real-estate loans:

Production credit associations..
Federal intermediate credit banks 3
Commercial banks 4.
Farmers Home Administration..
Individuals and others...

Total. ---
Total loans to farmers:

Held by farm credit banks.
Held by other lenders..

Total loans.

2,105

126 6, 642

592 6, 720

13.0

.8 41.0

3.7 41.5

1,839

110 5, 971

554 6,020

12.7

.8 41.2

3.8 41.5

16,185

100.0

14, 494

100.0

5,512 27, 465

16.7 83. 3

4,972 24, 682

16.8 83.2

32, 977

100.0

29, 654

100.0

148 States only.
? Revised.

Loans to and discounts for financing institutions other than PCA's only.
• Excludes loans guaranteed by Commodity Credit Corporation,
Source: V.8. Department of Agriculture.

1

Loans made to agriculture by the Farm Credit banks and associations

[In millions of dollars)

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Loans outstanding to agriculture held by the Farm Credit banks and associations

[In millions of dollars]

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LENDING FUNDS OF THE FARM CREDIT BANKS AND ASSOCIATIONS The lending funds used by the Farm Credit system are obtained primarily from the sale in the investment market of bonds and debentures of the Farm Credit banks. In this way, the Farm Credit banks and associations provide an effective link between farmer-borrowers and the investing public. The Farm Credit securities-consolidated Federal farm-loan bonds, consolidated Federal intermediate credit bank debentures, and consolidated debentures of the banks for cooperatives are not guaranteed by the Government either as to principal or interest but are secured principally by notes and mortgages deposited as collateral with the Farm Credit Administration. These securities are considered by the market to be prime investments.

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Selected comparative data on Federal land banks and Federal land bank associations

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FEDERAL LAND BANKS
Gross assets.
Loans outstanding:

Number

Amount.
Loans closed during year ended:

Number..

Amount. Repayments of loans during year ended 1. Real estate and sheriffs' certificates acquired during year ended:

Number

Investment. Real estate and sheriffs' certificates disposed of during year ended:

Number..

Investment
Real estate and sheriffs' certificates on hand:

Number.

Investment
Bonds outstanding-
Net worth:

Capital stock owned by borrowers.
Legal reserve
Surplus reserve
Earned surplus
Total net worth.

FEDERAL LAND BANK ASSOCIATIONS
Number of associations..
Net worth:

Capital stock owned by borrowers.
Legal reserve and surplus..
Total net worth --

1 Includes principal matured, special principal payments, loans paid off prior to maturity.

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