[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

[[Page 5391]]

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