Farm Credit System seeks to extend leadership role in biofuels finance

The Farm Credit System (FCS) was instrumental in providing the debt financing that allowed for the early development of the ethanol industry. According to the Farm Credit Council:

"Farm Credit was there fifteen years ago, taking the risk to finance the early ethanol plants when others would not. Now that Congress is looking to agriculture and the renewable fuels industry to make a major contribution to our nation’s energy independence, it is important that this experienced, customer-owned lender be able to continue to support the biofuels industry going forward."

Incredibly, FCS is constrained in its attempts to continue supporting the development of our renewable fuels industry and therefore contribute to the economic development that promises greatest benefit for the rural communities they serve. According to Ken Auer, President & CEO of The Farm Credit Council, "Limitations imposed decades ago on Farm Credit’s ability to serve farm-related businesses are preventing the Farm Credit System from directly financing many of the new agriculture-based projects that will be needed to meet U.S. renewable energy goals."

Commercial banks and lending institutions are lobbying against any changes in these limitations. Yet, their own study (released by the American Bankers Association and Independent Community Bankers of America) shows that during the past four years – the ethanol industry’s period of most rapid growth – commercial banks and other private institutions generated only about $2 billion of new debt per year for the industry.

The recent downturn in the economy has further limited the amount of available commercial financing for the biofuels industry. Yet, the availability of debt financing for biofuels projects is critically important if we are to meet the RFS objectives outlined in the Energy Bill. The arbitrary limitations that prevent further participation of FCS in the direct financing of biofuels projects is therefore counter-productive not only to its own mission, but to our pursuit of energy independence as well.

There is no constituency that better understands the benefits to be gained from investments in the biofuels industry than the farmer/investors served by FCS. It is for this reason that FCS was there in the early days to provide the support for the ethanol industry while the commercial banks and others stood on the sidelines. And it is why we now need Congress to remove the limitations that prevent FCS from continuing its leadership role in providing the financial support that is necessary to develop and produce alternative biofuels.

For more information on this topic and to learn how Congress can act to improve this circumstance, please visit the Farm Credit Council's (FCC) website here.

The very informative FCC press release is available here

posted by Jeff Pieterick, President, Wisconsin Biodiesel Association