Quarterly Report on 

FCS Condition 

June 10, 2021 

Steve Koenig

Hal Johnson

FCA Board Meeting 

June 2021

1
Topics for Open Session

 Economic Conditions Affecting the Farm Credit 

System

▪Macro economy 

▪Commodity markets 

▪Farm economy 

 FCS Condition and Performance

▪System growth and loan portfolio

▪Earnings and capital

▪Financial Institution Rating System (FIRS)

2
Economic Conditions Affecting 

the Farm Credit System

Steve Koenig

Senior Agricultural Economist 

Office of Data Analytics and Economics

3
Rapid economic growth

 U.S. Q1 growth at historically high pace - 6.4%

 U.S. imports set monthly record of $275B in March

 April retail sales up 18% over February 2020

 Equity markets roll on to records with cryptocurrencies

 Demand drivers: 

 Consumers unleashed

 $5 trillion in stimulus and related policies 

 Improving labor market and consumer confidence

 Historically low interest rates

4
Supply chains and labor markets tighten

 Worldwide supply chains stretched thin

 Production bottlenecks and low inventory hangovers from 2020

 Key component shortages from micro chips to plastic resins

 Distribution and shipping constraints:

 Baltic Dry Index (cost of moving by sea) reached 10-year high in April 

 U.S. domestic freight expenditures index rose 6.5% in March

 U.S. labor markets tighten

 More job openings but smaller workforce than before pandemic

 Workforce participation restrained by government policies and other factors

 Labor shortages emerge – manufacturing, construction, trucking, and food services 

 Wages and compensation rising – April wages up 5.8% from February 2020

5
Raw material prices rise

 Widespread commodity price increases – some to records

 Supply and demand imbalances and future expectations 

 China is leading commodity importer – 45% of maritime dry-bulk market 

6

Source: International Monetary Fund database.
Inflation rekindled? 

 April CPI rose at 4.2% annual rate -- a 13 year high (6.2% for first 4 

months)

 Too much money chasing too few goods

 The median sales price of existing-homes rose 19.1% year-over-year in April to 

$341,600, both record highs (National Association of Relators)

 Rising building materials costs and low inventory caused new home sales prices 

to jump 20% year-over-year in April (National Association of Home Builders)

 Year-over-year April used car and truck prices up 21% in BLS data while 

Manheim Used Vehicle Value Index increased 52.2%

 As economy fully opens, more consumer spending will shift to services 

which should moderate goods price increases

7
Will this latest inflation be “transitory”?

 Younger generations (borrowers) have never experienced sustained rates above 4%

 Once rooted, curtailing inflation can require substantial monetary policy adjustments 

 Monetary policy includes soaking up some $120 billion per month of federal stimulus

8

Source: St. Louis Federal Reserve Bank. Shaded areas are economic recessions.
Higher inflation leads to higher interest rates

 Yield curve has become steeper

 Changes in interest rates quickly 

impact borrowing costs on 

majority of System loans

 Share of loans repricing in:

 Less than 1 year: 55.4%

 1 to 5 years: 24.9%

 Over 5 years: 19.6%

Source: First Quarter 2021 Information Statement of the FCS. Source: FCA.

9

Impact on System borrowers

55.4%

75 basis

points
Grain and oilseed prices soar on shortages

Profitable pricing 

opportunities for the next two 

crops 

China feed grain and oilseed 

needs push exports to the 

country to records

South American production 

(safrinha corn) shortfalls

U.S. and global stocks forecast 

to remain tight for 2021/22

Looking ahead on renewal fuel 

standards 10

Source: UDSA-NASS and USDA-WOAB. 

Prices Received by Farmers, Indexes by Month, 2011=100
Farmland prices jump with crop prices

Data source: USDA. 11

A 10% rise 

 How much have values risen?

▪Chicago Fed - 7% in 12 month

▪Iowa survey - 8% in 6 months

▪Prime land prices – 10% - 15% spikes

 Pricing factors

▪Higher grain prices

▪Government payments/stimulus

▪Limited supply on market

▪Greater investor interest

▪Low interest rates 

 Outlook

▪Monetary and tax policy changes

▪2022 rental costs expected to rise 
Higher crop input costs this spring

Ag chemicals with large supply 

chain exposures to China saw 

reduced availability, higher 

shipping costs, freight delays

Major fertilizer prices moved 

higher throughout this spring

Anhydrous ammonia retail price 

hits $700 per ton in April for first 

time Since 2015

Diesel fuel costs 25% higher in 

April 2021 vs. April 2020 

Modest seed price increases 12
Higher machinery sales and prices 

Large farm tractor and combine sales rise on stronger farm incomes and government payments 

Small tractor sales rise on strong rural lifestyle demand aided by stimulus payments 

Low financing rates aids sales across all segments

Resale prices (used) on farm equipment rose last fall into this spring

13
All eyes on weather Stressed pastures and reduced 

hay production in cattle country

With tight supplies, crop 

conditions here and abroad are 

being closely scrutinized

Corn and bean crops off to a 

very good start

Kansas wheat tour reports a 

record yield is coming (58 bu.)

Western / California drought is 

a growing concern 

14
California drought rerun? 

15

Source: http://cdec.water.ca.gov/
Rising costs cloud protein outlook 

 Producers and processors face higher costs:

 Higher feed bills

 Rising labor costs/shortages and Covid mitigation expenses

 Processing capacities 

 Transportation costs/bottlenecks/cyberattack disruptions

 Rising cost of capital goods

 Demand turns up – but for how long?

 Export market growth

 Reopening of restaurants reshapes distribution once again

 Return of social and family gatherings and grill season

 Stimulus payments find their way into food budgets

 Domestic food purchases and return of school lunches 16
Hog and broilers prices soar with low supplies 

 Exports draw down stocks

 Low cold storage stocks of pork 

and chicken

 Chicken sandwich wars

 Supply/production constraints 

17

Source: USDA/AMS.
How long will protein margins hold?

18

Shaded areas are forecasts. Source: IHS Markit May 2021.
Cattle prices languish

Cattle producers are not 

enjoying as much of a price 

increase relative to 

wholesale or retail levels

Packer margins moved to 

historically high levels in 

April

Feeder prices and feed costs 

present challenges under 





current pricing outlook

19

Source: USDA/ERS
Dairy demand is soaking up higher production

 Cheese and powder milk 

production is up

 Strong dairy exports

 Food service and domestic 

demand is ramping up

 Margins expected to 

improve 

 Headwinds for fluid milk 

20

Shaded areas are a forecast.

Source: IHS Markit.
Concluding comments

U.S. economic rebound continues with stressed supply chains, 

tightening labor markets and upward pressure on prices.

U.S. food system continues to adjust to demand shifts and supply 

disruptions in the post-pandemic environment.

 Higher prices for many ag commodities

 Higher costs for ag inputs

 Not all outcomes are positive

Price volatility and policy adjustments going forward.

As always, weather here and abroad is critical. 

19
Questions

22

Thank You!
Farm Credit System 

Condition and Performance 

as of 

March 31, 2021

Hal Johnson

Sr. Financial Analyst

Office of Examination

23
Topics

▶ System growth

▶ Portfolio credit quality

▶ Earnings

▶ Capital | Liquidity

▶ FIRS

24
Real estate mortgage and agribusiness 

lending drive 1st quarter loan growth

Source: FCS Information Statements 25

1.5%

-0.2%

1.2%

3.2%

0.3% 0.8%

0.0%

3.9%

2.0% 1.6% 1.5%

4.6%

2.0%

Quarterly Loan Growth

Total 

Assets

3/31/21

$404.4

billion

+0.9% Qtr

+4.4% 12M

Gross

Loans

3/31/21

$321.8

billion

+2.0% Qtr

+10.0% 12M

0.3%

-0.2%

-4.4%

8.0%

2.0% 1.3%

-4.2%

8.7%

2.0% 2.2%

-6.1%

10.1%

-8%

-4%

0%

4%

8%

12%

16%

20%

Total Loan

Portfolio

RE Mortgage

(47%)

Prod. &

Intermediate

(18%)

Agribusiness

(18%)

Loan Growth by Loan Type

% change from prior quarter
Portfolio loan quality is strong; little change in 

1st quarter credit measures

26

(1) accruing loans 30 days or more past due as a % of accruing loans

Source: FCS Information Statements

5.6

5.5

8.5

6.6

1.2

6.7

7.0

10.7

5.3

2.9

6.5

7.1

10.6

4.3

2.2

0.0 2.0 4.0 6.0 8.0 10.0 12.0

Total

Portfolio

Real Estate

Mortgage

Production &

Intermediate

Agribusiness

Rural

 Infrastructure

Mar-21 Mar-20 Mar-19

% of Loans Classified less than Acceptable

$1.905 Qtr chg. +$8M or +0.4%

billion 12 month 

chg. -$546M or -22.3%

Q4 '20 0.28%

Q1 '20 0.46%

 Nonperforming 

Assets

(3/31/21)

 Delinquencies (1)

(3/31/21) 0.31%
The percentage of nonperforming assets 

decreases to the lowest level in 15 years

Source: FCS Information Statements 27

1.53%

1.11%

0.86%

0.73%

0.82% 0.78% 0.83% 0.82%

0.60%

0.59%

Nonperforming Assets ($)

Nonperforming Assets as a % of Gross Loans + OPO

% of Nonperforming Assets

OPO - Other Property Owned

1.16%

1.09% 1.14%

0.92% 0.89% 0.92%

0.89%

0.93%

0.78% 0.76%

0.42%

0.88%

0.65%

0.23% 0.21%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

Dec-17 Dec-18 Dec-19 Dec-20 Mar-21

Production

& Intermediate

RE Mortgage Agribusiness

% of Nonperforming Assets by Loan Type
1,320 1,288 

1,380 1,387 1,391 1,432 1,441 

1,573 1,556 

1,693 

48 65 

1 29 

74 57 

101 

7 

(58)

28 

System Net Income

Provisions for Loan Losses

Strong 1st quarter financial results

Source: FCS Information Statements 28

Quarterly System Earnings ($M)

6.4% 6.5%

8.6%

6.3%

3.6%

5.2% 4.8%

10.3%

1Q-14 1Q-15 1Q-16 1Q-17 1Q-18 1Q-19 1Q-20 1Q-21

% increase in Average Earning Assets 

(compared to the same period a year ago)

Mar. '19 Mar. '20 Mar '21

Net Interest Spread

(YTD annualized)

Net Interest Margin

(YTD annualized)

2.00% 2.16% 2.32%

2.40% 2.47% 2.45%
Capital and Liquidity

( as of March 31, 2021 )

▶ Total Regulatory Capital:

Banks| 14.1% to 17.5%

Associations| 10.9% to 36.3%

▶ Days of liquidity for the four 

funding banks ranged from 

169 to 211 days

▶ Capital and the allowance for 

loan losses as a % of loans 

outstanding ranged from 

17.3% to 22.9% at a combined 

district level

Source: FCS Information Statements Note: Restricted capital represents capital associated with the Insurance Fund. 29

Continued capital growth; strong liquidity

43.7 

46.8 

50.0 

53.4 

56.2 

59.7 

63.4 66.5 

16.6% 16.8% 16.4% 16.7% 16.9% 17.1%

16.4% 16.4%

Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21

System Capital

Total Capital less Restricted

Capital-to-Assets Ratio

Total System Capital ($B)
System FIRS ratings

FIRS Ratings

( based on 3/31/21 financial reporting )

▶ Composite FIRS ratings were largely 

unchanged in the 1st quarter 

▶ Over 95% of System banks and 

associations have a Composite FIRS 

rating of 1 or 2

▶ Institutions rated 3 or lower hold 

less than 1.0% of System assets

Composite FIRS Ratings

Farm Credit System Banks and Associations

Source: FCA’s FIRS ratings database 30

44 46 44 39 34 30 32 31

32 29 31

29 32 35 35 37

4 3 2

5 7 7 4 3

0

10

20

30

40

50

60

70

80

90

100

Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Mar-21

Number of Rated Institutions

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

▶ U.S. economic activity rebounds strongly, but supply chain 

issues and inflationary pressures bear watching.

▶ Grain and oilseed prices soar but rising feed costs have hurt 

livestock producers.

▶ Continuing drought in the West is a major concern.

▶ System loan quality is very good, but certain sectors and 

geographic regions face significant challenges.

▶ The Farm Credit System is safe and financially sound. System 

institutions are well-positioned to support the credit needs of 

agricultural producers and rural America.

31
Questions

THANK YOU

32