Made a comment on recent diary regarding the costs of insurance from climate change and its impact on inflation (here — www.dailykos.com/...) that I wanted to expand into a story.
I was noting the existence of the Federal Farm Credit Banks Funding Corporation (FFCBFC). Ok, a show of hands — how many of you even knew this existed? Ok, how many of you know what it does?
My comments started from the simple explanation — think Fannie Mae for the ag industry. It’s a pretty good size — just about ½ TRILLION dollars in debt issued. That is insured by the US Federal Government. Not Fannie Mae levels — those are around $4 TRILLION but not rounding error either.
The FFCBFC is overseen by the Senate and House Ag Committees by way of three entities — the Farm Credit Administration (a regulatory agency), the Farm Credit System Insurance Corporation (think FDIC for farm debt holders), and the Farm Credit Council (the trade association of banks allowed to make loans under the FFCBFC system. The FFCBFC then underwrites loans from the Federal Farm Credit System banks. There are four — CoBank, AgFirstFCB, AgriBank, FCB, and FCB of Texas. That’s it — if you want a farm loan under this system, you have to come to these banks. But they don’t loan directly, they lean through a network.
The network is a under two system — Ag Coops and “Eligible Borrowers” and “Associations”. This breaks down further in that only CoBank responsible for lending to Cooperatives any where in the nation while all four lend to “associations” within their region. Only the associations approved by each bank within their region can access these funds. And this is limited; CoBank has 16 associations it lends to, AgriFirst has 16, AgriBank has 11, and FCB of Texas has 13. If you aren’t in the group or the association doesn’t bring your loan to the Bank, you don’t get access to these very favorable loans. The map of the coverage of these entities can be found here — www.fca.gov/...
BTW, there have been any number of stories here that detail the inability of black farmers to access farms loans. This is the system they are talking about. This systems is a holdover of the pre-civil rights era and a place where progressives should consider changes from the top down in a Democratic Congress rather than trying to change the system association by association.
One estimate from the FFCBFC is that the 63% of all farm debt for US farms is through this program.
Enough background, this was about climate change. The one bank I have had the most contact with is CoBank (been over a number of years from several different professional avenues but never as a borrower). The CEO is a gentleman named Tom Halverson. I would suggest that anyone interested in this system and its impacts go follow him on LinkedIn, he posts a lot of their public whitepapers and opinions there.
In 2019, he asked the bank staff to look at climate change impacts on the communities they lend to. The result was a document entitled “Rural Industries and Climate Change” — www.cobank.com/…
As I noted in my comment on another story, the summary sets the tone:
My key takeaways from this exercise have been twofold:
First, concerns about climate change are now a permanent part of the operating environment for rural America; they are here to stay regardless of which political party happens to be in power at state or federal levels. That’s because so many critical stakeholders outside the realm of government – consumers, investors, employees, etc. – are also increasingly committed to environmental sustainability.
He notes that almost 50% of US rural GDP comes from four sectors — Manufacturing, 24%; Agriculture, 9%; Utilities, 9%; and Mining and Energy Extraction, 9% — and that all “have meaningful exposure to environmental regulation”. But this document goes in a different direction than you might think.
WE NATURALLY TEND TO THINK of environmental regulation as emanating from government. But nothing is a more powerful influence on a company than the preferences of its customers. As the chart above from Nielsen shows, a majority of U.S. consumers of all ages say it is important to them that companies have programs to improve the environment. Three quarters of millennials say they will change their purchasing and consumption habits to reduce their personal impact on the environment. In the rural economy, this trend has big implications for branded food and beverage companies, utilities and other businesses with consumer franchises.
Much of the remainder of the document is a pitch piece showing gains to date and how rural America has been progressing towards better stewardship. It speaks to collaboration rather than confrontation on climate change discussions. It is an interesting statement from one of the major lenders to red America that no one talks about.
