From Crisis to Credit: How Farmer Mac Became the Secondary Market for American Agriculture

Brad Nordholm is the Chief Executive Officer of Farmer Mac (NYSE: AGM). Chartered by the Federal government in 1988, it is the largest secondary market for American agricultural and rural infrastructure, buying and selling agricultural loans such as real estate mortgages and rural infrastructure loans. 

Nordholm has led a long and prominent career. He has served in executive and board positions at AgriBank, National Cooperative Bank, U.S Central, Generations Bank, Kansas City Life Insurance Co., and others. Nordholm holds a BA in economics from Carleton College and a PMD Certificate from Harvard Business School. Despite his extraordinary resumé, Mr. Nordholm displayed warmth, humility, and affability that are characteristic of his Minnesota roots and of the farming community to whom he has dedicated his professional life. 

Mr. Nordholm explained the origins of what is now the only publicly owned congressionally chartered company. The mid-1980s witnessed a severe agricultural credit and income crisis in the US, which failed many family farms. The era’s high interest rates factored in, but the main culprit was falling commodity prices going back to the embargos of the Carter administration. An extraordinary pressure was placed on family farms and the farm credit system. At the time, the question was how to attract and distribute more credit–particularly mortgage credit–to rural America, catalyzing the political push for a Farmer Mac. 

Farmer Mac is smaller than its cousins, Freddie Mac and Fannie Mae, but a more relevant distinction in their operations is in the underwriting process. As Mr. Nordholm explains, underwriting a single-family loan involves evaluating only a few variables. The advisability of an agricultural loan, on the other hand, depends on a more complicated set of considerations: type of crop, prevailing commodity prices, growing seasons, land conditions, variables related to geography, and many other factors, making it difficult to distill the underwriting process into just a few variables. 

Another relevant variable that Farmer Mac considers is climate change. Increasingly volatile weather patterns–droughts, fires, floods, and more–can be devastating for farms. Mr. Nordholm says they don’t significantly impact the health of their portfolio, and by extension, their ability to continue providing credit for farmers. This is for several reasons. First, extreme weather events are generally localized and don’t dramatically affect the nation’s agricultural output on average. Second, the Farm Bill (reauthorized every half-decade) provides federal crop insurance. Thirdly, even before the most dramatic effects of climate change began, Farmer Mac has and continues to comprehensively assess each borrower’s market plan, and how they’re utilizing risk-management strategies to gain more certainty against uncertainties–whether those be interest rates or tornadoes.

Agriculture always contains a degree of uncertainty, but Mr. Nordholm describes how new technology may assist in risk mitigation. Exciting advancements in ‘precision agriculture’ using data mapping and satellites can provide continual modeling and imaging down to an impressively granular level. A farmer can now determine that a single square foot of corn crop in one section of one field is a little behind its growth pattern because of a slight change in moisture or timing, and can then monitor changes in real time. This new horizon of big data has demonstrated potential in helping farmers make the best decisions now and in the future. Nordholm is also excited about the economic potential of renewable energy, and through its Rural Energy Initiative, Farmer Mac is helping communities take advantage of the transition towards a green energy economy. 

In his early twenties, right at the beginning of his long journey towards one of the most influential roles in the world of agricultural financing, Mr. Nordholm worked as a ranch hand in Montana. When asked how that experience may have informed his career path, he referenced his boss, John Schwartz. Schwartz, by Mr. Nordholm’s description, was no cautious, conservative farmer, but a man of insatiable curiosity and extraordinary initiative. He owned water rights and mineral rights, silver mines and gold mines, a trucking company, and feedlots. He had a seat on the Chicago Board of Trade and was chairman of the Montana Stockmen’s Association. In other words, he was a man in constant motion who saw every aspect of agricultural life. In Mr. Nordholm’s words, “I can’t tell you exactly how that impacted my life path, but I’m sure it did.”

Mr. Nordhom gave insight into an industry that is too often underappreciated and whose complexity is too often underestimated.