Quarterly Report on 

FCS Condition 

April 9, 2019

Dennis A. Shields

Hal Johnson

FCA Board Meeting 

April 2019

1

Tab 2
Topics for Open Session

▶ Economic Conditions Affecting the Farm Credit System

▪Macroeconomic factors

▪Commodity indicators and farm income prospects

▪Diversification of farm sector and risks ahead

▶ FCS Condition and Performance

▪System growth 

▪Loan portfolio

▪Earnings and capital

▪Financial Institution Rating System (FIRS)

2
Economic Conditions Affecting 

the Farm Credit System

Dennis A. Shields

Chief Economist 

Office of Regulatory Policy

3
Economic factors remain favorable

Economic factor 2017 2018 2019F

U.S. real gross dom. product (change) +2.2% +2.9% +2.4%

Unemployment rate 4.4% 3.9% 3.7%

10-year Treasury yield (end of year) 2.8% 2.7% 3.1%

U.S. dollar (change) 1.7% stronger 1.1% weaker 0.1% stronger

Crude oil price $51/barrel $65/barrel $56/barrel

Diesel fuel $2.65 per gal. $3.18 per gal. $3.01 per gal.

Sources: Consensus Economics, USDA/Economic Research Service, U.S. Energy Information Administration.

4
U.S. agricultural exports increased in 2018, 

but final quarter was weak

U.S. agricultural exports

5

144.4 150.0

133.1 134.7 138.2 139.6

45.3 43.0

36.3 41.3 39.3 35.6

0

50

100

150

Calendar 2013 2014 2015 2016 2017 2018

$ billion Jan.-Dec. Oct.-Dec.

Source: USDA/FAS Global Agricultural Trade System.
Trade impact: the market is telling farmers to 

plant fewer soybeans (but weather matters)

Prospective plantings: 

2019 change from 2018

Source: Prospective Plantings, 3/29/19, USDA/NASS.

Soil is saturated in major producing areas

Source: NOAA/National Weather Service. 6

-4.6

3.7

-0.6

-0.3

-2.0

-4.4

-6 -4 -2 0 2 4 6

Soybeans

Corn

Sorghum

Cotton

Wheat

All crops

Million acres

Calculated soil moisture historical ranking in percentile
Soybean stocks to remain high for 2019 crop 

year even if planted area declines 

U.S. soybean prices and ending stocks

Source: USDA. 7

0

200

400

600

800

1,000

0

3

6

9

12

15

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

$ per bushel Mil. bushels

Ending stocks

Farm price
Weak or negative crop margins put pressure 

on farm returns

Crop margin including government payments

Sources: FCA-ORP using data from Iowa State Univ. (soybeans and corn), Kansas State Univ. (wheat) and USDA. 8

-5

-4

-3

-2

-1

0

1

2

3

4

Soybeans Corn Wheat $ per bu.

2009 2019F 2009 2019F

2009 2019F

2014

2014

2014
Farm prices depend on location

Soybean prices in February ($/bu.) 

Source: USDA/NASS (monthly farm price). 

9

U.S. farm price $8.52

North Dakota $7.82

Iowa $8.38

Illinois $8.71

Ohio $8.86

Soybean basis (cash minus futures)

Source: https://www.dtnpf.com/agriculture/web/ag 

markets/local-grain-bids on April 1, 2019.
Milk production growth slows; farm prices 

begin to recover

U.S. milk production growth

Source: USDA.

10

0.0

0.5

1.0

1.5

2.0

2.5

2010 11 12 13 14 15 16 17 18 19F

% change 

14

15

16

17

18

19

20

Jan Mar May Jul Sep Nov

$ per cwt 2017 2018 2019

U.S. farm milk price
% change in production

2017 2018 2019F

+3.8 +2.6 +1.5

+2.4 +2.2 +1.1

+2.6 +2.9 +4.2

0

20

40

60

80

100

2000 04 08 12 16

Billion lbs.

Beef

Broiler

Pork

Production growth in 2019 to slow for beef 

and broiler meat

U.S. production

Sources: USDA and Livestock Marketing Information Center. 11

19F
Net cash farm income in 2019 looks like the 

four-year period before the boom

U.S. net cash farm income

Source: USDA/ERS. 12

1999-2018 average 

= $106 bil.

0

25

50

75

100

125

150

175

1999 01 03 05 07 09 11 13 15 17 19F

$ billion

(2018 $)
Farmland values are mixed in early 2019

13

% change in $ value of “good” farmland

Top: Oct. 2018 to Jan. 2019

Bottom: Jan. 2018 to Jan. 2019

Source: Federal Reserve Bank of Chicago.

▶ Some markets show 

continued strength; modest 

declines in others

▶ Land for sale continues to be 

relatively modest and 

balanced with demand

▶ Surveys of lenders and real 

estate professionals indicate 

stable to somewhat lower 

cropland prices in 2019
Trade and farm policy update

▶ U.S.-Mexico-Canada Agreement contains small 

improvements over NAFTA for agriculture

▶ A potential agreement with China

▶ Farm programs for crops, dairy program upgrade, and 

assistance for disasters (e.g., Midwest flooding)

14
Commodity diversification in agricultural 

production varies by state

The farm sector is more diversified in California than in other states

Source: FCA-ORP using USDA/ERS cash receipts data for 2016. 15

0

20

40

60

80

100

0 10 20 30 40 50 60 70

Percent of state 

total cash receipts

Number of commodities

Illinois North Dakota California

CA cash receipts

1. Milk (13%)

2. Misc. crops (12%)

3. Grapes (12%)

4. Almonds (11%)

(48% of total)

IL cash receipts

1. Corn (46%)

2. Soybeans (35%)

3. Hogs (8%)

4. Cattle (4%)

(93% of total)

ND cash receipts

1. Soybeans (29%)

2. Wheat (19%)

3. Corn (15%)

4. Cattle (11%)

(74% of total)
Concluding comments

▶ U.S. farmers adjust to tariffs and weak/uncertain returns 

▪Plantings to shift away from soybeans, but stocks remain high

▪Expansion slowdown for meat, poultry, and milk supports prices

▪Continued (and potentially severe) farm financial stress results in 

voluntary exits; others adapt to economic conditions; enhancing 

marketing and risk management skills are key

▪Farm safety net might not help much if tariff issues are not resolved

Risks ahead

▶ Permanence of lifting tariffs on U.S. farm exports

▶ A decline in commodity prices from current levels could impact land values 

16
Questions

THANK YOU

17
Farm Credit System 

Condition and Performance 

as of 

December 31, 2018

Hal Johnson

Sr. Financial Analyst

Office of Examination

18
Topics ▶ System Growth ▶ Loan Portfolio ▶ Earnings ▶ Capital ▶ FIRS Ratings

19
The System continues to grow at a measured 

pace; growth concentrated in the 4th quarter

Source: FCS Information Statement

Loan type as a % of portfolio: RE Mortgage 46%; 

Prod. & Intermediate 20%; Agribusiness 17%.

20

214 215

230 230 247 261

283

304

320

330 349

161 165 175 175 192 201

217

236

249

259 272

13.0%

2.1%

6.4%

-0.4%

9.9%

4.8%

8.0% 8.7%5.5% 4.0% 5.1%

$ billions

 Total System Assets

 Total Gross Loans

% year-over-year change in Gross Loans

5.9 

6.9 

6.2 

4.5 4.4 4.5 

6.3 

2.2 2.9 3.3 

21.8 

11.1 

8.3 

6.5 

9.2 8.0

8.7

5.5

4.0 5.1

0

5

10

15

20

25

2014 2015 2016 2017 2018

RE Mortgage

Prod. & Intermediate

Agribusiness

Total Portfolio

Loan Growth by Loan Type

(% change year-over-year)

System Growth
Portfolio credit risk edged higher in 2018

Source: FCS Information Statement

% of Loans Classified less than Acceptable

21

6.6

7.1

10.6

4.3

6.1

6.5

10.0

4.7

4.0

3.8

5.4

4.3

0.0 5.0 10.0

Total

Portfolio

Real Estate

Mortgage

Production &

Intermediate

Agribusiness

Dec-18 Dec-17 Dec-15

1.19

0.60 0.62

2.42

3.54

3.00

2.04

1.63

1.97 2.20

1.28%

0.56% 0.43%

1.50%

2.14%

1.72%

1.01%

0.69% 0.76% 0.81%

Nonperforming Loans ($B)

Nonperforming Loans as a % of Gross Loans

Nonperforming loans
System portfolio is diversified by commodity

System Loan Portfolio by 

Commodity Concentration

Source: FCS Information Statement

System Loan Portfolio

($ in millions) Dec-18 % chg.

yr. over yr.

Cash Grains 43,673 1.2%

Tree Fruits, Nuts & Grapes 15,655 9.6%

Field Crops 14,936 2.9%

Other Crop Production 15,290 5.8%

Cattle 24,738 4.0%

Dairy Farms 18,139 5.5%

Poultry & Eggs 7,377 4.2%

Hogs 6,586 9.6%

Other Livestock 7,107 2.3%

Rural Infrastructure 29,160 4.3%

Food Products 18,857 4.9%

Rural Home 16,563 3.0%

Forestry 15,768 1.9%

Farm Supply & Marketing 13,773 12.4%

Other 24,322 12.4%

Total Loans Outstanding 271,944 5.1% 22

Cash Grains

16.1%

Tree Fruits, Nuts 

& Grapes

5.8%

Field 

Crops

5.5%

Other 

Crops

5.6% Cattle

9.1%

Dairy Farms

6.7% Poultry & 

Eggs

2.7%

Hogs

2.4%

Other 

Livestock

2.6%

Rural 

Infrastructure

10.7%

Food 

Products

6.9%

Rural 

Home

6.1%

Forestry

5.8% Farm Supply & 

Marketing

5.1%

Other

8.9%
Portfolio volume is also geographically 

distributed

Top 5 States % of 

Portfolio

California 11.0%

Texas 6.9

Iowa 5.4

Illinois 5.0

Minnesota 4.5

Source: FCS Information Statement 23

System Loan Portfolio by State as of yearend 2018

(only states with percentages greater than 1% are displayed)
The System is financially sound; earnings 

remained strong in 2018

Source: FCS Information Statement 24

3,495 

3,940 4,118 

4,640 4,724 4,688 4,848 

5,189 5,332 

667 430 313 

(31)

40 106 266 197 194 

2010 2011 2012 2013 2014 2015 2016 2017 2018

Net Income

Provision for Loan Losses

System Earnings ($M)

4.24 4.06 3.79 3.59 3.46 3.41 3.48 3.75 

4.21 

1.63 1.38 1.08 0.95 0.96 1.01 1.17

1.50

2.09

2.61 2.68 2.71 2.64 

2.50 2.40 2.31 2.25 

2.12 

2.82 2.86 2.87 2.78 

2.64 2.55 2.49 2.48 2.46

2010 2011 2012 2013 2014 2015 2016 2017 2018

Rate: Earning Assets Rate: Interest-Bearing Liabilities

Net Interest Spread

Net Interest Margin

Earnings Ratios
System is well-capitalized

Capital and Liquidity

as of December 31, 2018

▶ Retained earnings as a 

percentage of total capital 

equaled 79.5% of total 

capital

▶ The System’s liquidity 

position equaled 182 days of 

coverage

▶ Days of available liquidity 

for the 4 funding banks 

ranged from 160 to 241 

days

Source: FCS Information Statement Restricted capital represents capital associated with the Insurance Fund. 25

30.0 

33.3 

35.9 

38.6 

42.6 

45.7 

48.8 

52.3 

55.4 

58.4 

13.9%

14.5%

15.6% 15.7%

16.3% 16.2% 16.1% 16.4%

16.8% 16.7%

Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18

System Capital

Total Capital less Restricted

Capital-to Asset-Ratio

Total System Capital ($B)
System FIRS ratings

FIRS Ratings

• Composite FIRS ratings reflect 

the System’s solid financial 

performance and acceptable 

portfolio credit quality 

• Over 90% of System Banks and 

Associations have a Composite 

FIRS rating of 1 or 2

• 3 rated or lower institutions 

account for less than 2.5% of 

total System assets

Composite FIRS Ratings 

Farm Credit System Banks and Associations

Source: FCA's FIRS ratings database 26

37 43 44 46 44 39 34

38 31 32 29 31

29 32

11 8 4 3 2

5 7

0

10

20

30

40

50

60

70

80

90

100

Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18

Number of Rated Institutions

1 Rated 2 Rated 3 Rated or lower
Summary and final points

▶ Challenges facing agriculture:

▪ U.S. economic factors are generally favorable, but tariffs, trade 

uncertainties and labor costs bear watching

▪ Farm sector concerns include crop prices and ending stock levels, 

export demand, rising input costs, and deteriorating liquidity levels

▶ The System is financially sound and strongly capitalized

▶ While portfolio loan quality is acceptable, stress remains 

elevated for agriculture

▶ System institutions have significant risk-bearing capacity and 

are well-positioned to support agricultural producers

27
Questions

THANK YOU

28