In the early 20th century, U.S. agriculture was characterized by cheap land, family labor and only a minimal need for additional capital. By the time of World War I, however, the demand for agricultural credit had increased.
The Farm Credit System was created by the Federal Farm Loan Act of July 17, 1916, which established a credit system specifically designed to meet the needs of people involved in agriculture. The Act provided for the establishment of Federal Land Banks and National Farm Loan Associations as a cooperative undertaking between farmers and the Federal Government. The Act was the first government-sponsored lending program of any kind.
The system was designed to provide long-term credit to farmers and ranchers, mainly for the purchase of farm real estate and rural homes. The agricultural depression of 1920-1921 demonstrated a demand for short-term credit, as well. In 1923, the Agricultural Credits Act was passed, which created Federal Intermediate Credit Banks. Short-term lending was improved through the Farm Credit Act of 1933, which provided for Production Credit Associations. Banks for Cooperatives were also a product of this Act.
When benefits of consolidation became apparent in 1988, the Federal Land Banks combined with Federal Intermediate Credit Banks to become Farm Credit Banks and the Banks for Cooperatives became Co-Bank. In many parts of the country, Federal Land Bank Associations and Production Credit Associations also merged, or began to operate under joint management, some becoming Agricultural Credit Associations. Most system entities now operate under the trade name Farm Credit Services.
More details of the Farm Credit System's history can be found on the national Farm Credit site or the Farm Credit Archive.