Alabama Ag Credit Celebrates 100 Years

Alabama Ag Credit supports agriculture and rural communities in South Alabama by providing reliable, consistent credit and financial services. And as a part of the Farm Credit System, we’ve been doing that for 100 years and we plan to do it for 100 more.

July 17, 2016 Farm Credit will celebrate its 100th birthday. In doing so, Alabama Ag Credit reflects on its history while looking to the future.

In the early 1900s, commercial lenders considered agriculture to be a large risk. Interest rates were high, and long-term financing for farmers and ranchers was scarce. President Theodore Roosevelt appointed a Country Life Commission in 1908 to address the problems facing a predominantly rural population.

After congressional and presidential studies, Congress passed the Federal Farm Loan Act in 1916, establishing the nationwide Farm Credit System — a network of credit cooperatives — to be a reliable source of funding for farmers, ranchers and aquatic producers. The legislation set up 12 district banks, known as Land Banks, across the country to provide funds to local mortgage lending cooperatives, which would be owned by farmers and ranchers.

Following World War I, which was a prosperous time for farmers, prices collapsed, resulting in a shortage of short-term credit for farmers and ranchers. Congress responded with the Agricultural Credit Act of 1923 which added 13 Federal Intermediate Credit Banks (FICBs) to the Farm Credit System.

The stock market crash of 1929 touched off the Great Depression, throwing thousands of farmers into bankruptcy and strangling the Farm Credit System's ability to finance agriculture. In 1933, Congress passed two laws affecting the future of Farm Credit. One piece of legislation re-capitalized the Land Banks with $189 million. The other revamped the FICBs and established a short-term credit delivery system through locally owned Production Credit Associations. In addition, President Franklin Roosevelt consolidated the supervision of all federal agricultural credit agencies under a new regulator, the Farm Credit Administration.

President Woodrow Wilson signed legislation creating the Federal Land Bank System

President Woodrow Wilson signs legislation creating the Federal Land Bank System. The first loan is made less than a
year later.

As producers discovered the benefits of doing business with a financing cooperative they owned — and that truly cared about their success — Farm Credit became the trusted financial partner of generations of rural Americans. By 1968, all of the Farm Credit System lending entities had repaid their federal capital debt and were completely owned by their borrowers.

The Farm Credit Act of 1971, along with amendments added in 1980, expanded the range of services Farm Credit institutions could offer to include rural home mortgages, leasing services and rural utility financing.

During the early- to mid-1980s, American agriculture plummeted into recession. Again, Congress responded with legislation that revised the structure and operations of the Farm Credit System.

One result was the establishment of the Federal Farm Credit Banks Funding Corporation, which manages the sale of Systemwide debt securities. Another was the establishment of the Farm Credit System Insurance Corporation as a new federal agency to regulate and administer the Farm Credit System Insurance Fund. It is funded by premiums paid by the System lenders to insure the timely repayment of debt obligations.

It was also during this era that Congress also enacted provisions allowing Federal Land Bank Associations to merge with Production Credit Associations to become full-service Agricultural Credit Associations. In 1990-91, Congress asked Farm Credit to play a greater role in financing agricultural marketing and processing, as well as financing water and sewer development in rural communities.

The cooperative credit system envisioned by Congress has stood the test of time. Since 1916, the Farm Credit System has pursued a mission to maintain the quality of life in rural America by ensuring the availability of sound, dependable funding for creditworthy agricultural producers, agribusiness, rural homeowners and other rural landowners.

Today, Alabama Ag Credit and other lending cooperatives remain an important part of the fabric of rural America and a partner to the nation's agricultural sector. Together, we are a leader in rural financing, offering competitive loan products, financial services and specialized expertise in agricultural financing.

About Alabama Ag Credit

Alabama Ag Credit provides financing for farms, timber and forestry operations, agribusinesses, recreational land and other rural property in 40 counties in southern Alabama. The financing co-op operates offices in Demopolis, Dothan, Enterprise, Montgomery, Monroeville, Opelika, Selma, Spanish Fort and Tuscaloosa.