Unmatured debentures outstanding- Matured debentures-principal and interest.. Notes payable-Federal intermediate credit banks. Notes payable-other--- Dividends payable on class B capital stock and guaranty fund Due U. S. Government-redemption of class A capital stock__ Capital: Privately owned capital: Capital stock: Class B 178, 820, 000 78, 853 2,500,000 11, 125, 000 415, 135 1, 317, 482 5, 641, 300 2, 402, 270 $15, 339, 393 Mr. WHITTEN. The committee will come to order. 460, 310, 922 We are glad to have with us today Mr. Robert B. Tootell, Governor of the Farm Credit Administration, and his associates, Mr. Miles and Mr. Bagwell. We will insert in the record at this point pages 1 through 19 of the justifications; pages 21 through 25 of the justifications; pages 27 through 32 of the justifications, and pages 34 and 35 of the justifica tions. (The pages referred to are as follows:) FARM CREDIT ADMINISTRATION PURPOSE STATEMENT with The administration provides supervision, examination, facilities and services to a coordinated system of farm credit banks and associations which make loans to farmers and their cooperatives. A fundamental principle of supervision is the encouragement and development of agricultural cooperative agencies, complete farmer ownership the ultimate objective of the agencies supervised. Services and facilities furnished by the Administration facilitate the operations of the several agencies and their progress toward farmer ownership. Typical services are: custody of collateral for bonds and debentures, assistance in financing and investments, credit analysis, development of land appraisal standards and policies, preparation of reports and budgets, and preparation and distribution of information on farm credit. All the expense of this activity is paid by assessments collected from the banks and associations comprising the farm credit system. Since December 3, 1953, the Administration has been an independent agency under the direction of a Federal Farm Credit Board (12 U. S. C. 636). The Administration was originally created by Executive Order No. 6084 on May 27, 1933, and was transferred to the Department of Agriculture on July 1, 1939, by Reorganization Plan No. 1. On December 31, 1957, the Administration had 219 full-time employees of whom 124 are in Washington. The 95 field employees are farm loan registrars, land bank appraisers, and farm credit examiners. Administrative expenses: Budget estimate, 1959. (a) Administrative expenses $2, 200, 000 2, 125, 000 [Authorization for the obligation of assessments collected from farm credit banks and associations] Limitation, 1958, and base for 1959__ Budget estimate, 1959. $2, 200, 000 2, 125, 000 Proposed changes in the administrative expense language are as follows (new language italicized; deleted matter enclosed in brackets): "Not to exceed [$2,200,000] $2,125,000 (from assessments collected from farm credit agencies) shall be obligatea during the current fiscal year for administrative expenses." STATUS OF PROGRAM SUPERVISION AND EXAMINATION OF, AND FACILITIES AND SERVICES TO, FARM CREDIT BANKS AND ASSOCIATIONS Farm Credit Administration is a supervisory agency established to provide the banks and associations comprising the farm credit system with centralized and coordinated supervision and examination, and to furnish facilities and services which are essential to the operation of the system and to its progress toward becoming wholly farmer owned. The Farm Credit Act of 1953 established the Farm Credit Administration as an independent agency and created a Federal Farm Credit Board which has responsibility for the direction, supervision, and control of the Administration and its operations (12 U. S. C. 636). The Board consists of 13 members: 12 appointed by the President with the advice and consent of the Senate; the 13th designated by the Secretary of Agriculture. In making appointments to the Board, the President considers nominations made by the national farm loan associations, the production credit associations, and borrowing farmer cooperatives in each of the 12 farm credit districts. The act reaffirms the concept of progressively greater borrower participation in the management, control, and ultimate ownership of the credit agencies supervised by Farm Credit Administration. Progress toward this objective since December 4, 1953, the effective date of the act, and other developments are outlined in the section headed "The Farm Credit System." Significance of the program.-Effective Farm Credit Administration supervision and examination have promoted the development of the farm credit system. The 21494-58-pt. 4-2 system has developed sound administrative management, and the facilities and services made available by the Administration have enabled it to serve farmers well. The steady increase in the number of farmers participating in cooperative credit indicates their confidence in the farm credit system, and demonstrates that with effective leadership such a credit system is desirable and feasible. Objectives of the farm credit system which can be attained best through coordinated effort under central supervision are to assure farmers a permanent source of credit by strengthening the farm credit banks and associations; to assure dependable sources of loan funds, which are of first importance to any credit system, by maintaining the confidence of investors in farm credit securities through adherence to sound credit principles and maintenance of strong financial structures; to accomplish the retirement of Government capital without impairing the effectiveness of the system. TRENDS IN AGRICULTURAL CREDIT The lending operations of the farm credit banks and associations are closely related to agricultural conditions and to general economic conditions, particularly as they affect the money market and cost of lending funds. Changes in crop and livestock production, prices received for farm commodities, costs of operation, and farm income have important effects upon the kinds and amounts of credit needed by farmers and their cooperatives and upon their ability to repay loans. The cost and availability of funds in the money markets are important factors in financing the lending operations by the farm credit banks. Agricultural situation Following a period of declining farm income since 1951, farmers' net income turned upward slightly in 1956 and has changed little, if any, in 1957. The volume of farm marketings in 1957 was up slightly compared with a year earlier, which was about offset by higher average prices paid for commodities, and services bought. Prices received by farmers during 1957 showed some strength throughout the year. The general index of prices received was 238 at the beginning of the year. By August it had advanced to 248 and, following the usual seasonal decline in the fall it was 242 in December. The average for the year was 242, compared with 235 for the full year 1956. Farm costs also continued to advance, especially those items which are not farm produced, such as machinery, fertilizer, and farm supplies. Wage rates and taxes also advanced. The index of prices paid, including taxes and wages, averaged 296 for 1957, compared with 285 for 1956. Even though prices received for farm commodities averaged higher in 1957 than a year earlier, increasing costs have prevented much, if any, improvement in net farm income. The ratio between prices received and prices paid showed no change, standing at 82 for both 1957 and 1956. With the help of somewhat larger soil-bank payments, net farm income in 1957 is preliminarily estimated to have been about the same as the $12.1 billion reported in 1956. The net amount of credit extended by the farm credit system increased from $2,676 million in 1956 to $2,802 million in 1957. Not all of the banks and associations, however, showed the same trends. The production credit associations' loans increased from $1,426 million in 1956 to $1,574 million last year, an increase of 10 percent, and loans made by the banks for cooperatives increased from $567 million to $584 million, an increase of only 3 percent during the same period. These increases can be attributed partly to higher operating costs and, in the case of production credit association loans, farmers may be borrowing on a short-term basis for long-term purposes in anticipation of lower interest rates in the future. Loans made by the Federal land banks, on the other hand, declined to $475 million in 1957 from $514 million in 1956.' This decline resuited from (1) a low level of farm transfers; (2) less pressure to refinance short-term debt because of improved moisture conditions and higher livestock prices; and (3) reluctance of farmers to make long-term commitments at high interest rates, especially in view of the fact that the wave of heavy capital investments in farms may have passed its peak. Loans made to agriculture by farm credit banks and associations During 1957 there was a further increase in the total amount of debt outstanding to farmers, all types of lenders. It is estimated that total farm-mortgage debt outstanding on January 1, 1958, amounted to about $10.6 billion, compared with about $9.9 billion on January 1, 1957, an increase of about 7 percent. This compares with a 10-percent increase during 1956. Non-real-estate debts owed by farmers, exclusive of loans held and guaranteed by the Commodity Credit Corporation, are estimated at $8.1 billion on January 1, 1958, which is up only slightly from the $8.0 billion outstanding on January 1, 1957. While total farm debt is at a new high for recent years, it did not increase materially during the year in relation to total assets of farmers. The total value of farm real estate on January 1, 1958, estimated at $118.0 billion, was about 11 times the amount of the real-estate debt, the same as a year ago. The value of all other farm assets, estimated at $70.3 billion, was about 8.7 times the amount of non-real-estate debt, including loans held or guaranteed by the Commodity Credit Corporation, compared with 7.1 times a year ago. These facts indicate that although farmers' debts have been rising, agriculture as a whole is still in a relatively sound condition based on the current valuation of farmers' assets. However, since the farm debt is not shared evenly by all farmers many individual operators are carrying a relatively heavy debt load. This is particularly true of farmers who have gone into debt in recent years either to start farming or to materially expand their operations. The farm credit banks hold a larger portion of loans to individual farmers than a year ago. The Federal land banks held 17.4 percent of the total farm mortgage debt on January 1, 1957, compared with 16.3 percent a year earlier. The production credit associations' share of the total nonreal estate debt increased from 8.1 percent to 8.8 percent during the same period. The share of all loans to farmers furnished by the farm credit system rose from 12.9 percent to 13.9 percent. Data from a survey conducted by the Farmer Cooperative Service, USDA, indicate that the banks for cooperatives are holding between 50 and 60 percent of the total credit used by farmers' cooperative marketing. purchasing, and service associations. Amount of loans to farmers and percent of total held, by types of lenders—United States, Jan. 1, 1957, and 1956 1 Excludes oans held or guaranteed by Commodity Credit Corporation. 2 Loans to and discounts for private financing institutions only. |