[Federal Register Volume 63, Number 244 (Monday, December 21, 1998)]
[Notices]
[Pages 70406-70407]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-33670]


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FARM CREDIT ADMINISTRATION

[BM-10-DEC-98-03]


Farm Credit System Service to Young, Beginning, and Small Farmers 
and Ranchers

AGENCY: Farm Credit Administration.

ACTION: Policy statement.

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SUMMARY: The Farm Credit Administration (FCA) Board recently adopted a 
policy statement encouraging the Board of Directors of each Farm Credit 
System (FCS or System) institution to renew its commitment to providing 
credit and related services to young, beginning, and small farmers, 
ranchers, and producers or harvesters of aquatic products (YBS 
borrowers). The policy addresses the FCA Board's position on the 
System's YBS service and coordination while maintaining safe and sound 
lending programs.

EFFECTIVE DATE: December 10, 1998.

FOR FURTHER INFORMATION CONTACT:

John J. Hays, Policy Analyst or John C. Moore, Chief Economist, Office 
of Policy and Analysis, Farm Credit Administration, McLean, VA 22102-
5090, (703) 883-4498, TDD (703) 883-4444,
      or
Joy Strickland, Senior Attorney, Office of General Counsel, Farm Credit 
Administration, McLean, VA 22102-5090, (703) 883-4020, TDD (703) 883-
4444.

SUPPLEMENTARY INFORMATION: The FCA Board adopted a policy statement 
concerning YBS borrowers on December 10, 1998. The policy addresses the 
FCA Board's position on the System's YBS service, coordination, and 
safety and soundness.
    The System was founded in order to be a reliable and affordable 
source of credit for farmers and ranchers. As agriculture evolved, the 
System has been granted additional authorities to ensure that it 
remained a competitive and reliable source of credit. One such 
Congressional action was the Farm Credit Act Amendments of 1980 (1980 
Amendments), which required System institutions operating under titles 
I and II of the Act of 1971, as amended, to have programs serving the 
credit and other special needs of YBS farmers. Congress placed special 
emphasis on System institutions coordinating their programs with other 
System institutions, with non-System lenders, governmental entities, 
and other organizations. The amendments also required that the results 
of such programs be reported to us, and that we summarize the System's 
activities in an annual report to Congress.
    We are renewing our focus on the System's YBS programs for several 
reasons: (1) The Congress, YBS borrowers, and the general public expect 
the FCS to have active and effective programs to address this sector of 
rural America; (2) the System's improved financial health places it in 
a much better position to serve these agricultural borrowers; and (3) 
our reporting requirements need to be updated to reflect the current 
circumstances in agriculture. The definitions used by System 
institutions for reporting on the results of their YBS programs have 
not been significantly updated since they were first adopted subsequent 
to the 1980 Amendments.
    Young and beginning farmers are the future for American 
agriculture. Small farmers play an important role too. Each have unique 
needs for credit and other services. We are refocusing our efforts to 
ensure that the System is responsive to YBS borrowers' needs and is a 
reliable lender for future generations. We believe the FCS institutions 
should meet those needs constructively and on a safe and sound basis.
    The policy statement, in its entirety, follows

Policy Statement on Farm Credit System Service to Young, Beginning, 
and Small Farmers and Ranchers

[BM-10-DEC-98-03; FCA-PS-75]

    Effective Date: December 10, 1998.
    Effect on Previous Action: None.
    Source of Authority: Sections 4.19 and 5.17(11) of the Farm Credit 
Act of 1971, as amended.
    The Farm Credit Administration Board Hereby Adopts The Following 
Policy Statement:
    The Farm Credit Administration (FCA) Board issues this policy 
statement concerning Farm Credit System (FCS or System) institutions 
providing sound and constructive credit and related services to young, 
beginning, and small farmers, ranchers, and producers or harvesters of 
aquatic products (YBS borrowers).

I. Public Purpose

    The System was created to fulfill a public purpose to finance 
agriculture. In 1980, Congress obligated System institutions operating 
under titles I and II of the Farm Credit Act of 1971, as amended, to 
establish programs that respond to the credit and related needs of YBS 
borrowers that result in sound, adequate, and constructive credit and 
closely related services.\1\ Each Board of Directors within the System 
should renew its commitment to be a reliable, consistent, and 
constructive lender for YBS borrowers.
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    \1\ Sections 1.1 and 4.19 of the Farm Credit Act of 1971, as 
amended.
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II. Guiding Principles

    YBS Service: We believe that the System currently serves the needs 
of a significant number of YBS borrowers but more can be done. We also 
believe Congress intended special efforts by the System to serve YBS 
borrowers. We expect the Board of Directors of each System institution 
to be actively involved in the oversight of YBS programs. This includes 
establishing goals and objectives and periodically evaluating the 
results of its YBS program.
    We encourage the System to better serve YBS borrowers by looking at 
the existing statutory and regulatory authorities and developing 
innovative and sound programs. Some areas to consider include loan 
participations, capital pooling, and alliances and joint ventures to 
share program successes and risks. We believe these additional efforts 
will benefit the FCS by ensuring a strong customer base in the future 
and believe YBS borrowers will benefit from a reliable FCS.
    YBS Coordination: We believe that System institutions could take 
better advantage of coordinating their YBS activities with other 
parties. Active participation with guarantors such as the United States 
Department of Agriculture and the Small Business Administration can 
help manage an institution's credit risk. Organizations exist in many 
States that bring together lenders and applicants with specific needs 
that are not being addressed through conventional lending. We encourage 
System institutions to explore opportunities to participate with such 
organizations. We believe that well-coordinated programs provide 
additional opportunities to YBS borrowers.
    YBS Safety and Soundness: We believe that lending to YBS borrowers 
can be done on a safe and sound basis. Offering YBS borrowers reliable 
and continual access to credit and services is a critical element of 
the mission of each title I and title II direct lender of the FCS. The 
System is currently in a

[[Page 70407]]

sound financial position and able to better focus its YBS programs as a 
part of its overall loan portfolio management and its risk management 
programs. Each Board of Directors should identify risk parameters for 
YBS lending that are appropriate in relation to the institution's risk-
bearing capacity and its YBS program objectives.

III. Sound YBS Programs and Policies

    Each direct lender association is required to adopt policies that 
establish programs to provide credit and related services to YBS 
borrowers.\2\ Board policies should define the program's purpose and 
objectives, operating parameters for management, delegated and retained 
authorities of the board, exception processes, and requirements for 
reporting to the association's board.
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    \2\ 12 CFR 614.4165
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IV. Definitions

    To better reflect the current demographics of agricultural 
producers, the FCA defines a young farmer as 35 years or younger; a 
beginning farmer as having 10 years or fewer farming, ranching, or 
aquatic experience; and a small farmer as generating less than $250,000 
in annual gross agricultural or aquatic sales. These new definitions 
are effective for the reports filed with the FCA as of December 31, 
1998.

    Dated: December 15, 1998.
Floyd Fithian,
Secretary, Farm Credit Administration Board.
[FR Doc. 98-33670 Filed 12-18-98; 8:45 am]
BILLING CODE 6705-01-P