What Is a Production Credit Association?
A Production Credit Association (PCA) is a federal entity created through the Farm Credit Act of 1933 to provide short- and intermediate-term credit to farmers, ranchers, and rural residents. The credit was extended so the recipients could purchase housing, perform marketing activities, purchase farm equipment and livestock, and operate farm-related businesses. At the time, credit was either not available or was available only at prohibitively high interest rates because of the Great Depression. Farmland and commodities weren't worth as much, and banks already had lots of agricultural loans on their books.
Production Credit Associations can make or guarantee loans whose terms do not exceed seven, 10, or 15 years, depending on the funding bank's policies.
Understanding Production Credit Associations
Product Credit Associations are a part of a larger body known as the Farm Credit System. The Farm Credit System, a government-sponsored enterprise established in 1916, provides financing and financial services related to agriculture and includes a number of credit organizations. In addition to Production Credit Associations, the Farm Credit System includes agricultural credit associations, agricultural credit banks, banks for cooperatives, farm credit banks, federal intermediate credit banks, federal land bank associations, and federal land credit associations. Production Credit Associations get their funding from farm credit banks and own their loan assets. The Farm Credit System raises money by selling debt securities to investors in the U.S. and abroad.