Farm Credit System: What It Is and How It Works

The Farm Credit System is a nationwide network of lending institutions for agriculture and rural America that are owned by the people who borrow from them. The Farm Credit Administration (FCA), its federal regulator, describes it as "a nationwide network of lending institutions that are owned by their borrowers" and says it is the largest agricultural lender in the United States. Yes, it is a cooperative: FCA states that "all of the banks and direct-lending associations of the Farm Credit System are cooperatives."

This page explains how the System is built, who can borrow, what borrower stock is, how patronage works, and what the regulator and the System's insurance corporation do. For the wider picture of farmer-owned businesses, see agricultural cooperatives.

The Farm Credit System at a glance

Question	Answer from the primary sources
What is it?	A network of cooperative lending institutions owned by the farmers, ranchers and other borrowers it serves (FCA, FCSIC)
When was it created?	By Congress in 1916 (FCA, FCSIC)
Who regulates it?	The Farm Credit Administration, an independent federal agency
What law governs it?	The Farm Credit Act of 1971, as amended (12 U.S.C. chapter 23)
Who funds the lending?	The System's banks sell securities in the national and international money markets (FCA)
Who owns each institution?	The borrowers who use it (FCA)

The Farm Credit System Insurance Corporation (FCSIC), a separate federal entity, describes the System as "a network of federally chartered, cooperative lending institutions owned by the agricultural and rural customers it serves, including farmers, ranchers, producers and harvesters of aquatic products, agricultural cooperatives, and farm-related businesses." It also calls the System "America's oldest financial government sponsored enterprise." That is a legal category, not a government guarantee, and the section on FCSIC below explains the difference.

Why it counts as a cooperative

Congress wrote the cooperative idea into the Farm Credit Act itself. Section 1.1 of the Act, codified at 12 U.S.C. 2001, declares that "the farmer-owned cooperative Farm Credit System" should be designed to improve the income and well-being of American farmers and ranchers by furnishing sound, adequate and constructive credit and closely related services to them, their cooperatives and selected farm-related businesses. The same section sets the objective of encouraging "farmer- and rancher-borrowers participation in the management, control, and ownership" of the System.

FCA's page on "the cooperative way" explains what that means in practice. Each institution is owned and controlled by the farmers who borrow from it, and they control it by setting policies and helping make decisions. FCA says a 2005 study found that System institutions generally adhere to three core cooperative principles: user-ownership, user-control and user-benefits. FCA also lists the seven cooperative principles that cooperatives around the world follow, including democratic member control and members' economic participation. These match the ideas behind every co-op, covered in cooperative principles. Under the Act, each production credit association elects its board of directors from its voting members, except that at least one member is elected by the other directors and may not be an officer, employee, stockholder or agent of a System institution (12 U.S.C. 2072).

How the System is organized

The System has two main layers, plus a few shared institutions.

Layer	What it does	Who owns it
Banks	Raise money by selling securities and lend to associations	Associations hold the voting stock in banks other than banks for cooperatives (12 U.S.C. 2154a)
Direct-lender associations	Make loans to farmers, ranchers and other eligible borrowers	The borrowers who hold voting stock
Funding Corporation	Issues and markets the banks' joint bonds and notes	The System banks

The banks

FCA lists four banks:

CoBank, ACB
AgriBank, FCB
AgFirst Farm Credit Bank
Farm Credit Bank of Texas

Three are organized as farm credit banks (FCBs). CoBank is an agricultural credit bank (ACB), which gives it the same authorities as the farm credit banks plus some more. FCA says that as an ACB, CoBank can make loans to agricultural, aquatic and public utility cooperatives, and can also finance U.S. agricultural exports and provide international banking services for farmer-owned cooperatives. FCA's directory adds that CoBank serves cooperatives nationwide.

The banks raise money by selling securities in the national and international money markets. They use it to lend to the associations, which in turn lend to U.S. farmers, ranchers and other eligible borrowers (FCA).

The associations

Each association has its own chartered territory and is affiliated with one of the four banks, according to FCSIC. FCA's directory counts 59 banks and associations as of March 1, 2026: the four banks plus 55 associations. The directory lists how many associations each bank funds: CoBank funds 16, Farm Credit Bank of Texas funds 12, AgriBank funds 11, and AgFirst funds 16.

On the legal form, the Act says the Farm Credit Banks "shall be Federally chartered instrumentalities of the United States" (12 U.S.C. 2011) and that each production credit association "shall continue as a Federally chartered instrumentality of the United States" (12 U.S.C. 2071). Section 2071 also says a production credit association may be organized by 10 or more farmers, ranchers or producers or harvesters of aquatic products who want to borrow, and that the Farm Credit Administration must approve the articles before a charter is issued.

To find the institution that serves a given area, FCA offers a Farm Credit System lender locator and a directory with a district map.

The funding arm

The Federal Farm Credit Banks Funding Corporation is an institution of the System. By statute it issues, markets and handles the obligations of the System banks (12 U.S.C. 2160). FCSIC states that the Funding Corporation "is not part of the U.S. government" and is a System institution chartered, regulated and examined by FCA. FCA adds that it is owned by the System banks and sells the System's securities, chiefly bonds and discount notes, through a nationwide group of securities dealers.

Shared service corporations

The Act allows System banks and associations to form service corporations. FCA lists six, which provide support such as technology services, equipment leasing, human resource services and facilities.

Who can borrow

Eligibility is set by law and by each institution's own policies. The Farm Credit Act's provisions for the Farm Credit Banks and their associations say the credit and financial services may be made available to persons who are or become stockholders or members and who are (12 U.S.C. 2017):

bona fide farmers, ranchers, or producers or harvesters of aquatic products;
persons furnishing to farmers and ranchers farm-related services directly related to their on-farm operating needs; or
owners of rural homes.

FCA's description of the System's lending authority covers a broader list of purposes. It includes agricultural real estate loans, production and intermediate-term loans such as equipment, loans to producers and harvesters of aquatic products, loans to certain farmer-owned processing facilities and farm-related businesses, loans to farmer-owned agricultural cooperatives, rural home mortgages, loans that finance agricultural exports and imports, and loans to rural utilities. FCA also notes that under its "similar-entity authority" the System may participate with other lenders to make loans to those who are not eligible to borrow directly but whose activities are functionally similar to those of eligible borrowers.

Farm Credit is a lender, not a grant maker. FCA's own FAQ says the agency does not offer loans, grants or scholarships, and points readers to the Farm Credit System lender locator for credit. The same FAQ notes that the USDA Farm Service Agency also offers loans.

Borrower stock: what you buy when you borrow

Because each institution is owned by its borrowers, a borrower normally becomes an owner by buying stock. The statute that sets this up is 12 U.S.C. 2154a. It requires every bank and association to adopt bylaws, approved by a majority of its stockholders who vote, that cover how the institution is capitalized. Key points from the statute:

Minimum purchase. The bylaws must require a borrower who is entitled to hold voting stock or participation certificates to acquire it when the loan is made, "in an amount not less than $1,000 or 2 percent of the amount of the loan, whichever is less." The amount an institution actually requires is set in its bylaws.
Who can hold voting stock. Voting stock may be held only by borrowers who are farmers, ranchers or producers or harvesters of aquatic products, cooperatives eligible to borrow, and certain other eligible persons. For banks other than banks for cooperatives, voting stock is held by the System associations.
After you repay. Within 2 years after a borrower's loan is repaid in full, any voting stock the borrower holds must be converted to nonvoting stock.
Non-borrowers. The bylaws may allow people who are not borrowers to hold nonvoting stock.
Transfer and retirement. The bylaws must permit stock to be transferable, and must permit retirement of stock at the institution's discretion if it meets the capital standards set by FCA.
Loans sold into the secondary market. For loans designated for sale into a secondary market, the bylaws may provide that no voting stock or participation certificate purchase requirement applies (section 2154a(f)).

FCA's list of borrower rights includes the right "to be informed that you are required to purchase at-risk stock in your FCS institution." Separately, one of FCSIC's statutory authorities is to ensure the retirement of "eligible borrower stock" issued before 1988 at par value.

If you are considering a loan, ask the institution in writing for its stock requirement, whether it applies to your loan, and its policy for retiring stock when the loan is repaid.

Patronage: how borrower-owners can share in earnings

Like any co-op, a Farm Credit institution can return part of its earnings to the borrowers who generated them. The law leaves the decision to each institution. For production credit associations, the Act says that when the bylaws so provide, available net earnings at the end of the fiscal year "may be distributed on a patronage basis in stock, participation certificates, or in cash" (12 U.S.C. 2074). More generally, section 2154a requires each institution's bylaws to provide for "the payment of dividends and patronage refunds, as determined appropriate by the Board of Directors."

There is a limit built into the same section. A board may not reduce the institution's permanent capital through patronage refunds or dividends, or through stock retirement, if after that action the institution would fail to meet the minimum capital standards set under 12 U.S.C. 2154(a). In other words, patronage and stock retirement come after the institution's capital rules, as with every patronage refund and every use of cooperative capital.

What that means for a borrower:

Whether an institution pays patronage, in what form (cash, stock or participation certificates) and how much is set by its bylaws and board each year.
No amount is promised. The statute says patronage may be distributed "when the bylaws of an association so provide."
Ask the institution for its patronage policy and its history of payments before you borrow, and ask a tax professional how patronage affects your return.

The regulator: Farm Credit Administration

FCA is an independent federal agency that regulates and examines the banks, associations and related entities of the System, including the Federal Agricultural Mortgage Corporation (Farmer Mac). Its mission, in its own words, is to ensure that System institutions and Farmer Mac are safe, sound and dependable sources of credit and related services for all creditworthy and eligible persons in agriculture and rural America.

Facts FCA publishes about itself:

It was created by a 1933 executive order of President Franklin D. Roosevelt and today draws its authority from the Farm Credit Act of 1971, as amended.
It regulates by writing rules for System institutions and examines them for compliance with the Act, FCA regulations and safe and sound banking practices. It can enforce corrective action, protects borrower rights, reports to Congress on the System and approves the issue of System debt.
It is run by a full-time, three-person board appointed by the President with the advice and consent of the Senate.
Although FCA is a federal agency, "we are not supported by federal money; instead, we are funded by assessments paid by FCS institutions."
It is not part of the U.S. Department of Agriculture. It was part of USDA from 1939 to 1953, and the Farm Credit Act of 1953 restored its independence.

Borrower rights and complaints

FCA publishes a list of rights for System borrowers. They include the right to know the effective interest rate by the date the loan closes, to receive copies of the documents you signed by closing, to be told promptly whether the application was accepted, reduced or denied, to be told of the right to request restructuring if the loan becomes distressed, and to have a credit committee review a denial. FCA notes that these rights do not extend to agricultural cooperatives that borrow, and that not all of them apply to consumer credit.

A borrower who believes a right has been denied should first inform the institution and try to resolve it. FCA then accepts complaints through an online form, by phone, email or mail, and says the process is informal. FCA says it does not mediate disputes or intervene in legal proceedings between borrowers and institutions.

The insurance corporation: what FCSIC does and does not insure

The Farm Credit System Insurance Corporation (FCSIC) is an independent U.S. government-controlled corporation that insures the timely payment of principal and interest on debt securities jointly issued by the System banks, often called "Systemwide bonds." Congress created it in the 1987 Agricultural Credit Act and modeled it on the Federal Deposit Insurance Corporation.

FCSIC's own FAQ is direct about the limits:

It insures the banks' jointly issued bonds. "FCSIC does not insure anything else."
It is not deposit insurance. FCSIC says that unlike deposit insurance, it does not guarantee repayment to any specific bondholder.
It does not insure Farmer Mac obligations.
Its insurance "is NOT a 'full faith and credit guarantee' of the U.S. government."
Asked whether the United States guarantees repayment of System debt, FCSIC answers: "No, the U.S. does not guarantee repayment of Farm Credit System (or other GSE) debts."

FCSIC says the direct beneficiaries of its insurance are investors in System debt obligations.

Questions to ask before you borrow

These are questions, not advice. Every institution answers for itself.

What stock must I buy, and when is it retired? Get the amount, class and retirement policy in writing.
Does the institution pay patronage? Ask for its policy and the form it takes.
What are the fees and the effective interest rate? FCA lists the right to know the effective interest rate by closing.
Which association serves my county? Use FCA's lender locator and directory.
How do I vote and run for the board? The statute says voting stock may be held only by eligible borrowers, so ask how voting works at that institution.

Frequently Asked Questions

What is the Farm Credit System?

It is a nationwide network of cooperative lending institutions, created by Congress in 1916, that lends to farmers, ranchers, producers and harvesters of aquatic products, agricultural cooperatives and farm-related businesses. Its institutions are owned by the borrowers they serve, and FCA regulates and examines them.

Is the Farm Credit System a cooperative?

Yes. FCA says all of the banks and direct-lending associations of the System are cooperatives, each owned and controlled by its borrowers. The Farm Credit Act itself refers to "the farmer-owned cooperative Farm Credit System."

Is CoBank part of the Farm Credit System?

Yes. FCA lists CoBank, ACB as one of the four System banks. It is organized as an agricultural credit bank, which FCA says lets it lend to agricultural, aquatic and public utility cooperatives and finance U.S. agricultural exports.

Who can borrow from Farm Credit?

The Act makes services available to stockholders or members who are bona fide farmers, ranchers or producers or harvesters of aquatic products, persons who furnish farm-related services directly related to on-farm operating needs, and owners of rural homes. Each institution applies its own credit standards.

Do Farm Credit borrowers have to buy stock?

The statute requires the bylaws of each bank and association to require a borrower entitled to hold voting stock or participation certificates to acquire it when a loan is made, in an amount not less than $1,000 or 2 percent of the loan, whichever is less. The institution's bylaws set the actual amount. FCA lists being told about the at-risk stock requirement as a borrower right.

Does the Farm Credit System pay patronage?

It can. The Act lets production credit associations distribute net earnings on a patronage basis in stock, participation certificates or cash when their bylaws so provide, and it requires bylaws to provide for patronage refunds as the board determines. Each institution decides, and none is promised.

Does the government guarantee Farm Credit loans or debt?

No. FCSIC states that the U.S. does not guarantee repayment of Farm Credit System debt. FCSIC insures only the timely payment of principal and interest on bonds jointly issued by the System banks, and it says it does not insure anything else.

Is Farm Credit part of USDA?

No. The Farm Credit Administration is an independent agency. FCA says it was part of USDA from 1939 to 1953 and has been independent since the Farm Credit Act of 1953.

Where do I file a complaint about a Farm Credit lender?

FCA says to inform the institution first and try to resolve the problem. If that does not work, FCA accepts complaints through its borrower complaint form, or by phone, email or mail.