COMMENTARY
Through good times and bad
When Farm Credit Services of
America (FCSAmerica) pulled the plug
on its proposed sale to Netherlandsbased
Rabobank in mid-October, it
came as welcome relief to many.
Opposition to the sale was loud,
adamant and rapidly building steam
nationally, not just in the four-state
district (Iowa, Nebraska, South Dakota
and Wyoming) served by FCSAmerica.
At a Congressional hearing in
Washington (see page 13) on Sept. 29,
Myron Edleman, a South Dakota cattleman
and president of the grassroots
group Farmers for Farm Credit, testified
that the opposition among his fellow
member-borrowers was “overwhelming.”
A number of major farmer
organizations — the National Farmers
Union and National Association of
Wheat Growers among them — also
weighed in against the deal.
Regardless of the pros and cons of
the proposed sale, it appears that there
was a serious failure to communicate
here. It was incumbent upon the board
to make its case to members and to get
some read on their reaction to liquidating
the co-op before plowing forward.
Indeed, for a step as radical as selling a
co-op, there should be substantial support
before taking any such action.
While members would have eventually
been asked to vote on the proposal,
this was a classic case of putting the
cart before the horse. Many co-ops are
attractive takeover targets for outside
firms, and Rabobank obviously saw this
as an opportunity to enter farm lending
in America’s heartland. It should
serve as a wake up call to other co-ops
to be vigilant.
Widespread concern has also been
expressed that the sale of FCSAmerica
could pull the first thread that would
eventually unwind the entire Farm
Credit System (FCS). All farmers have
a stake in this debate, since the existence
of FCS forces other lenders to
be more competitive. Thus, the FCS
system benefits even non-members in
the same way ag marketing and supply
co-ops have a beneficial impact on
prices and services for both members
and non-members.
The hearing turned the spotlight on
a much broader area than just the
Rabobank deal; it showed sharply
divergent viewpoints regarding the
need for, and role of, a cooperative system
of farm lending in rural America.
Commercial banking industry trade
groups say “mission creep” has been
going on for years, and that the FCS is
no longer serving its intended farm
niche. As such, FCS should have its
charter yanked, or at least severely
scaled back, they say.
The FCS and its backers’ stance is
the polar opposite: they say the charter
needs to be expanded to allow it to
serve more rural Americans with more
services.
Given the uproar over just the proposed
sale of one of its member institutions,
the odds of Congress yanking the
FCS charter seems remote, to put it
mildly. Some have speculated that the
real strategy of the banking groups in
making these arguments is to keep FCS
from gaining increased lending flexibility,
not taking away what it already has.
The commercial bankers say they
are more than willing to meet any and
all farm credit needs in America, but
the track record shows that when the
going gets rough for farmers, so does
the interest of too many of these
lenders. The farmer owned and directed
FCS, on the other hand, will always
be there, through good times and bad,
with its mission to serve farmers, not
outside investors.
Some have commented that
FCSAmerica was an inviting target for
takeover because it has accumulated
large unallocated reserves. This situation
has been at least partially addressed
by a recent announcement that the coop
is allocating some of these funds
back to members.
The Congressional hearing was a key
event for co-ops in the early years of the
21st century. It showed how fervent producers
still are about controlling their
fate through cooperatives that they own
and direct. Among the nation’s network
of farmer-owned cooperatives, none is
more vital than their FCS associations.
Any actions taken that could directly or
indirectly raise farmers’ cost of capital,
or reduce its availability in times of economic
stress, would be precisely the
wrong step at the wrong time.
Dan Campbell, editor
