[Federal Register Volume 84, Number 35 (Thursday, February 21, 2019)]
[Proposed Rules]
[Pages 5389-5392]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-02884]
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FARM CREDIT ADMINISTRATION
12 CFR Part 614
RIN 3052-AD32
Advance Notice of Proposed Rulemaking--Young, Beginning, and
Small Farmers and Ranchers
AGENCY: Farm Credit Administration.
ACTION: Advance notice of proposed rulemaking.
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SUMMARY: The Farm Credit Administration (FCA, Agency, we, our) is
requesting comments on ways to collect, evaluate, and report data on
how the Farm Credit System (FCS or System) is fulfilling its mission to
finance and provide services to young, beginning, and small (YBS)
farmers, ranchers, and producers or harvesters of aquatic products (YBS
Farmer(s)). Additionally, we are seeking comments on how FCA should
define or clarify key terms associated with the collection and
reporting of YBS data.
DATES: You may send comments on or before May 22, 2019.
ADDRESSES: We offer a variety of methods for you to submit comments on
this advance notice of proposed rulemaking (ANPRM). For accuracy and
efficiency reasons, commenters are encouraged to submit comments by
email or through the Agency's website. As facsimiles (fax) are
difficult for us to process and achieve compliance with section 508 of
the Rehabilitation Act, we are no longer accepting comments submitted
by fax. Regardless of the method you use, please do not submit your
comment multiple times via different methods. You may submit comments
by any of the following methods:
Email: Send us an email at [email protected].
FCA website: https://www.fca.gov/. Click inside the ``I
want to . . .'' field near the top of the page; select ``comment on a
pending regulation'' from the dropdown menu; and click ``Go.''
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Mail: Barry F. Mardock, Deputy Director, Office of
Regulatory Policy, Farm Credit Administration, 1501 Farm Credit Drive,
McLean, VA 22102-5090.
You may review copies of all comments we receive at our office in
McLean, Virginia, or on our website at http://www.fca.gov. Once you are
in the website, click inside the ``I want to . . .'' field near the top
of the page; select ``find comment on pending regulation'' from the
dropdown menu; and click ``Go.'' We will show your comments as
submitted, but for technical reasons we may omit items such as logos
and special characters. Identifying information that you provide, such
as phone numbers and addresses, will be publicly available. However, we
will attempt to remove
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email addresses to help reduce internet spam.
FOR FURTHER INFORMATION CONTACT: Salvatore Iannetta, Office of
Regulatory Policy, (703) 883-4326, David Grahn, Office of General
Counsel, (703) 883-4145, TTY (703) 883-4056, Farm Credit
Administration, 1501 Farm Credit Drive, McLean, VA 22102-5090.
SUPPLEMENTARY INFORMATION:
I. Objective
The purpose of this ANPRM is to gather public input on how FCA
might:
Improve the accuracy, transparency, and process by which
FCA ensures that YBS Farmer data is properly collected and reported by
the FCS.
Clarify the definitions of terms related to the
collection, reporting, and identification of YBS Farmer data.
Ensure the definitions of YBS Farmers and related terms
remain relevant and reflective of the evolving agricultural economy.
Evaluate the effectiveness of each FCS institution's YBS
program to achieve its mission of serving YBS Farmers.
II. Background
The Farm Credit Act of 1971, as amended (Act), requires each System
association to prepare a program for furnishing sound and constructive
credit and related services to YBS Farmers. Annually, each district
bank reports to FCA on the operations and achievements by the
associations under the YBS programs. We provide a summary and analysis
of the results in our annual report to Congress on the condition of the
System. We are reviewing the methods used to collect and report YBS
data to ensure that it is accurate, complete, and can be used reliably
in conjunction with other related data reported by the System. As part
of our review, we are seeking comments on methods and practices that
could be used to improve the collection and reporting of YBS Farmer
data and the oversight of such.
The Act \1\ authorizes the FCS \2\ to provide financing and
services to farmers and ranchers across the country and Puerto Rico
through FCS banks and associations (collectively referred to as
``Institutions''). The Act also provides FCA, an independent agency in
the executive branch of the Government, authority to regulate and
examine these Institutions.\3\ The System is organized around four
banks that each supervise and provide funding to associations within
each bank's district. Except for the authority of CoBank, ACB, to
finance and provide services to agricultural cooperatives under title
III of the Act, agricultural lending and other related services are
provided primarily through the associations.\4\
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\1\ See, 12 U.S.C. 2001 et seq.
\2\ The System is comprised of borrower-owned banks,
associations, and service entities that collectively provide
financing and other services to support agriculture and agriculture
related operations as well as certain related industries that
support U.S. agriculture.
\3\ See sections 5.7 and 5.9 of the Act (12 U.S.C. 2241 and
2243).
\4\ CoBank, pursuant to title III of the Act, also has authority
to provide financing to certain rural utilities projects. More
detailed information on the structure of the FCS can be found on at
https://www.fca.gov/.
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In establishing the FCS as a government sponsored enterprise,
Congress provided farmers and ranchers with an option of obtaining
financing through borrower-owned cooperatives that give them the
ability to participate in the ownership, management, and control of
their lender and to ensure that a source of financing dedicated to
their needs remains available.\5\ One of the specific Congressionally
required responsibilities of the System is provided in section 4.19 of
the Act (12 U.S.C. 2207), which requires FCS associations to have a
program ``for furnishing sound and constructive credit and related
services to young, beginning, and small farmers and ranchers''.\6\ In
addition, this section requires that FCS banks report annually to FCA
about the operations and achievements of the associations' lending and
service programs for YBS Farmers.\7\ FCA's regulations that implement
these requirements are located at 12 CFR 614.4165. FCA prepares an
annual report on the quantitative and qualitative results achieved by
the System and submits this information to Congress when FCA submits
its annual report on the condition of the System. FCA has provided
guidance and clarification on the System's YBS mission responsibilities
through bookletter (BL) 040 Revised--Providing Sound and Constructive
Credit to Young, Beginning, and Small Farmers, Ranchers, and Producers
or Harvesters of Aquatic Products \8\ and annual call reporting
instructions. BL-040 Revised provides the definition for each category
of YBS Farmers. As stated in the bookletter, the three categories are
separate and distinct, and a loan to one borrower may meet the
definition for any or all of the categories, but a loan does not have
to meet all three to be considered a loan to a YBS Farmer.
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\5\ See section 1.1 of the Act (12 U.S.C. 2001).
\6\ See, section 4.19(a) of the Act (12 U.S.C. 2207(a)).
\7\ See. section 4.19(b) of the Act (12 U.S.C. 2207(b)).
\8\ BL-040 can be found at: FCA website--Bookletters.
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III. Potential Areas for Improvement
Reconciling YBS data can be challenging. The current reporting
practices count the number of transactions and volume of commitments
for System Institutions that involve YBS Farmers. This approach
identifies the overall System dollars committed to YBS Farmers based on
technology/data/standards primarily developed in the 1990s. The goal is
to improve upon this approach and provide more granularity for
reporting and tracking. For example, a farmer can meet the requirements
for both a young and beginning farmer. Under the current approach and
direction for reporting, this farmer's data would be separately counted
and reported in both the young and beginning categories. This situation
can be compounded because more than one Institution may be
participating in the financing of an individual YBS Farmer, which
allows each participation interest to be counted and leads to further
duplication when the Institutions' numbers are consolidated.
Due to the unique nature of this data, some banks' and
associations' collection and reporting processes require considerable
manual review and adjustment after retrieval from the core accounting
systems. This situation creates difficulty in aligning YBS Farmer data
with other data sources and reports generated from the Institutions'
core accounting systems. Finally, after recent analysis of the YBS
collection and reporting practices of several banks and associations,
more guidance is needed to ensure more uniform and efficient collection
and reporting of YBS Farmer data.
The definitions for the YBS categories have virtually remained the
same since 1998, and other agricultural data sources have similar, but
not equivalent, definitions. For example, since 1998, a farmer falls
within the ``small'' category if the farmer ``normally generates less
than $250,000 in annual gross sales of agricultural or aquatic
products''. Several agricultural and economic cycles have occurred
since 1998, and we are considering whether the $250,000 gross sales
amount continues to be appropriate or should be revised or indexed to
reflect the changes, including the economic conditions presently
affecting agricultural producers. In addition to these challenges,
several recent mergers of FCS associations have resulted in
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unexpected variability in the YBS data reported to FCA from the banks.
Based on the forgoing, FCA is considering whether changes to our
YBS regulations are appropriate or needed.
IV. Request for Comments
We request and encourage any interested person(s) to submit
comments on the following questions and ask that you support your
comments with relevant data or examples. We remind commenters that
comments, and data submitted in support of a comment, will be available
to the public through our website.
We have organized our questions into the following categories:
Reporting of YBS Farmer data and definitions of key terms associated
with YBS Farmer data.
A. Reporting of YBS Farmer Data
As described above, FCA requires each FCS bank to obtain reports on
the activities for YBS Farmer programs from the associations under its
supervision. These annual reports summarize the operations and
achievements of the YBS Farmer programs in each district. The banks
then provide loan information for YBS Farmers to FCA, and we include a
summary and analysis of the information in our annual report to
Congress.
The reporting period for gross new YBS lending is the calendar
year. Outstanding YBS loans include all loans designated as YBS
currently on the books as of December 31st in the reporting year.
Because the YBS mission is focused on each borrower group separately,
data are reported separately for each of the three YBS borrower
categories. Since some loans fit within more than one category, adding
the loans across categories cannot be done to accurately measure of the
System's YBS lending involvement. As such, we are seeking comment on
the following questions to determine if the current reporting structure
is sufficient to determine and report the FCS's activities that support
Section 4.19 of the Act:
1. Should loans continue to be reported in all the existing
categories in which they fit? Alternatively, should loans be reported
in seven mutually exclusive categories: Young; beginning; small; young
and small; young and beginning; beginning and small; and young,
beginning, and small?
2. When reporting YBS Farmer program performance, which would be
more useful, a focus on the dollar volume of loans, the number of
loans, the number of YBS Farmers that received credit and services, a
combination of these, or all?
3. Under FCA's regulations, the term ``services,'' as used in
section 4.19(a) of the Act, includes leases and related services made
by System banks and direct lender associations under titles I or II
authorities. As such, how appropriate is it for lease activity to be
reported for YBS purposes? Should leases and services be reported
together with or separately from loans?
The preamble to FCA's Final Rule on YBS Farmers (12 CFR 614.4165)
\9\ stated the objective for the rule is to ensure that the System
provides sound and constructive credit and services to YBS farmers and
ranchers through: Clear, meaningful, and results-oriented guidelines
for System YBS policies and programs; and enhanced reporting and
disclosure to the public on the System's performance and compliance
with its statutory YBS mission. To evaluate this objective further, we
are seeking comment to determine if there is additional information we
should collect to better measure the System's performance in fulfilling
its YBS mission.
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\9\ 69 FR 16470, March 30, 2004.
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4. What additional elements or measurements would be useful in
determining the FCS's compliance with and mission performance under
section 4.19 of the Act and FCA regulations at 12 CFR 614.4165?
5. What are ways Institutions could pool resources to ensure all
eligible YBS Farmers are being served?
6. In what ways could Institutions use investment authorities to
assist YBS Farmers, and should such investments be reported separately
from YBS Farmer loan data?
B. Definitions of Key Terms Associated With YBS Farmer Data
FCA defines Young, Beginning, and Small farmers in Bookletter 040--
Revised ``Providing Sound and Constructive Credit to Young, Beginning,
and Small Farmers, Ranchers, and Producers or Harvesters of Aquatic
Products''. These definitions have virtually remained the same since
1998. Additionally, the categories remain separate and distinct.
However, a loan to one borrower may meet the definition for any or all
categories, but a loan does not have to meet all three to be considered
a loan to a YBS Farmer.
The following are the current definitions used for YBS farmers:
Young farmer: A farmer, rancher, or producer or harvester of
aquatic products who is age 35 or younger as of the loan transaction
date.
Beginning farmer: A farmer, rancher, or producer or harvester of
aquatic products who has 10 years or less farming, ranching, or aquatic
experience as of the loan transaction date.
Small farmer: A farmer, rancher, or producer or harvester of
aquatic products who normally generates less than $250,000 in annual
gross sales of agricultural or aquatic products.
We are seeking comments on the following questions:
Young Farmer
7. Given the trends in the average age of farmers, ranchers, and
aquatic operators and the transfer of operations from one generation to
the next, does the current age limit remain appropriate? If not, what
would be a more meaningful age threshold for a ``young'' farmer and
why?
8. Should the young farmer designation change for a borrower's
outstanding loans once they age beyond the threshold?
9. What additional clarification is needed on who qualifies as a
young farmer? For example, should the following criteria apply to the
determination of whether a person is a young farmer and to what extent:
a. Ownership in the agricultural or aquatic operation.
b. Ownership of agriculture land only.
c. Financial control in the agricultural or aquatic operation.
d. Exposure to production risk in the agricultural or aquatic
operation.
Beginning Farmer
10. Is the 10-year threshold still appropriate, and if not, what
would be an appropriate threshold and why?
11. Should the beginning farmer designation change for a borrower's
outstanding loans once the years of experience exceed the threshold?
12. What additional clarification is needed on who qualifies as a
beginning farmer? For example, should the following criteria apply to
the determination of whether a person is a beginning farmer and to what
extent:
a. Ownership in the agricultural or aquatic operation.
b. Ownership of agriculture land only.
c. Financial control in the agricultural or aquatic operation.
d. Exposure to production risk in the agricultural or aquatic
operation.
Small Farmer
13. What criteria should FCA consider in determining whether to
maintain or change the $250,000 threshold? For example, should we
consider thresholds adopted by other government agencies for their
definition of ``small'' farmers?
14. Would it be appropriate to index or benchmark the economic
measure
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used at specified points in the future to ensure the threshold is
current and a reasonable measure? If so, what would be an appropriate
interval and benchmark?
15. Should the terminology ``normally generates'' be more clearly
defined for reporting purposes? Would a multi-year median or olympic
average \10\ be a more meaningful measure?
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\10\ Olympic average refers to an average of numbers after
removing the highest number and the lowest number.
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16. Should the measurement for farm or aquatic income reflect a
more stable metric compared to the current measure of annual gross
sales of agricultural or aquatic products?
17. Should a borrower be considered a small farmer if:
a. They have not yet generated agricultural or aquatic income?
b. They only own agricultural land and no agricultural income is
produced?
18. Should there be a time period established over which no
agricultural or aquatic income is generated that would disqualify the
classification of ``small farmer'' from continuing?
19. Should the small farmer designation change for a borrower's
outstanding loans if they grow beyond the threshold?
20. Should the small farmer measure account for such items as
amount of acreage farmed as well as the production value generated?
Other Reporting Definitions: Material Ownership and Closely Held
Entity--Determining whether an entity is a young or beginning farmer.
21. What family connections among individuals who own/operate an
entity should be considered to determine whether the entity meets the
age or years of experience thresholds?
22. With respect to farming, ranching, and aquatic operations
performed through legal entities:
a. What young or beginning farmer ownership thresholds should be
used to determine that an operation/entity is a young or beginning
farmer? \11\
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\11\ As a reference, section 506(m) of the Federal Crop
Insurance Act (7 U.S.C. 1508(m)) sets the minimum beneficial
interest level for crop insurance purposes at 5 percent.
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b. How should the percentage of ownership in the entity by
individuals that meet the requirements for a young or beginning farmer
affect the threshold?
c. If a single person's ownership share is not sufficient to meet
the threshold, should more than one person be allowed to jointly meet
the threshold?
d. What, if any, overall income threshold should be considered for
an entity to be classified as a young or beginning farmer?
23. In determining whether an entity is a young or beginning
farmer, over what minimum time period should the Agency provide for an
association to make the determination, or should the determination be
made at a specific point, for example, at the time the loan is applied
for or closed?
In addition to the questions listed above, we are interested in
receiving comments on other aspects of the collection and reporting of
YBS Farmer data. If providing such information, please designate
responses as ``Additional Comments''.
Dated: February 12, 2019.
Dale L. Aultman,
Secretary, Farm Credit Administration Board.
[FR Doc. 2019-02884 Filed 2-20-19; 8:45 am]
BILLING CODE 6705-01-P