Quarterly Report on 

FCS Condition 

December 12, 2019

Dennis A. Shields

Hal Johnson

FCA Board Meeting 

December 2019

1

Exhibit xx
Topics for Open Session

▶ Economic Conditions Affecting the Farm Credit 

System

▪Trade and farm income

▪Crop insurance indemnities

▪Farm prices and risks in 2020

▶ 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

Dennis A. Shields

Chief Economist 

Office of Data Analytics and Economics

3
U.S. soybean exports to China try to regain 

traction; pork exports advance in 2019

U.S. soybean exports to China

Source: USDA/FAS.

U.S. pork exports to China

4

0

50

100

150

Jan. Mar. May July Sept. Nov.

$ mil. 2017 2018 2019

0

1,000

2,000

3,000

Jan. Mar. May July Sept. Nov.

$ mil. 2017 2018 2019
0

20

40

60

80

100

120

140

0

50

100

150

2007 2009 2011 2013 2015 2017 2019F

1998-2018 average 

= $106.6 bil.

Farm income is lifted by Market Facilitation 

Program payments

Source: USDA/ERS, November 27, 2019.

U.S. net cash farm income 

(includes government payments)

5

$ billion in 

2019 dollars

Market Facilitation 

Program payments

2019 forecast of net 

cash farm income is 

$119.0 billion. 

Based on USDA’s 

historical forecast 

accuracy, farm income 

could be as low as 

$115.1 billion or as high 

as $136.2 billion.
Crop insurance indemnities provide support 

to areas experiencing poor weather in 2019 

Source: FCA analysis of USDA/RMA data. 

Notes: Includes corn, soybeans, wheat, sorghum, cotton, and rice. Total liability is amount equal to a 

complete crop loss (after deductible is incurred). 

2019 indemnities for 6 major program crops

as a share of their total liability

6

Selected FCS 

geographic footprint

Indemnities 

($ mil.)

Compeer $535

Mid-America $644

FCS of America $1,265

Northwest FCS $80

Amer. AgCredit $147

U.S. total $5,725

6-crop indemnities as of 12/2/19
Farmers in the Corn Belt purchase relatively 

higher levels of crop insurance coverage

Average crop insurance coverage level in 2019 for 

combined corn, soybeans, wheat, sorghum, cotton, and rice

7

Selected FCS 

geographic footprint

Average 

coverage level

Compeer 81.2%

Mid-America 80.0%

FCS of America 78.4%

Northwest FCS 78.7%

American AgCredit 71.1%

U.S. total 77.1%

Source: FCA analysis of USDA/RMA data. 

Note: Average coverage level in 2019 for 6 major program crops, weighted by crop value of insured acres. 

The insured absorbs the deductible (1 minus coverage %) before indemnity is paid.

2019 crop year
2012

2013

2017

2019 2020 2018

8

9

10

11

12

13

14

15

0 5 10 15 20 25

$/bu.

Ending stocks-to-use ratio in percent

For the 2020 crop year, another high soybean 

stocks-to-use ratio could keep a lid on prices

U.S. soybean price and stocks-to-use ratio

Source: FCA using USDA data (November 2019 WASDE for 2019 forecast; Baseline Projections for 2020 crop; ERS Oil 

Crops Yearbook for historical data). 8
$10

$11

$12

$13

$14

$15

2018 19 20 21 22

Rice ($/cwt.)

$14 

$2.75

$3.25

$3.75

$4.25

2018 19 20 21 22

Sorghum ($/bu.)

$3.95 

$3.20

$3.40

$3.60

$3.80

$4.00

2018 19 20 21 22

Corn ($/bu.)

$3.70

$0.25

$0.30

$0.35

$0.40

2018 19 20 21 22

Seed cotton ($/lb.)

$0.367

$4.50

$5.00

$5.50

$6.00

2018 19 20 21 22

Wheat ($/bu.)

$5.50/bu.

$8.25

$8.50

$8.75

$9.00

$9.25

2018 19 20 21 22

Soybeans ($/bu.)

$8.40/bu.

Crop prices for the next 3 years are projected 

below reference prices (except soybeans) 

Source: USDA Baseline Projections, November 2019. 9

Farm price

Farm Bill reference price that triggers Price Loss Coverage payments
Projected price weakness (relative to 

reference price) varies across growing regions

Source: FCA analysis of USDA’s November 2019 baseline prices for 2020-2022 and 2017-19 planted area by county. 

Note: For each county, the 3-year average ratio (projected price/reference price) for each crop is weighted by the 

crop’s planted area.

2020-2022 projected farm price as percentage of Farm Bill reference price

(combined corn, soybeans, wheat, sorghum, cotton, and rice)

10

Selected FCS 

geographic footprint

Projected price 

as % of ref. price

Compeer 96.5%

Mid-America 97.5%

FCS of America 96.1% 

Northwest FCS 89.4% 

American AgCredit 90.2%

U.S. total 94.1%
Hog producer returns are expected above 

break-even in early 2020, but risks remain 

▶ U.S. supply ramps up and 

demand prospects brighten 

▶ Risk posed by African swine 

fever approaches U.S. 

agriculture from different 

angles

Source: 2018 FCS Information Statement.

Hog margins

Source: IHS Markit Agribusiness. 

11

Hog share of 

total FCS loan 

portfolio = 2.4%

-50

-25

0

25

50

75

Jan.

2016

Jan.

2017

Jan.

2018

Jan.

2019

Jan.

2020

$/head

Forecasts
Government assistance for farmers in 2020

▶ Permanent disaster programs for livestock losses

▶ Crop insurance addresses within-season revenue or yield risk; 

coverage varies by System territory 

▶ Farm program payments provide downside protection for some 

commodities (but they weren’t enough in 2018 and 2019)

▶ Tranche 3 payments from 2019 Market Facilitation Program? 

▶ Additional assistance from the Administration or Congress? 

12

15% 14% 16% 13% 8% 8% 8% 7% 10% 14% 11% 13% 19%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F

Government payments as a share of net cash farm income

(USDA)
Concluding comments

▶ As 2020 approaches, global crop supplies remain ample, limiting 

attractive pricing opportunities for U.S. farmers 

▶ Farm financial conditions become more challenging next year in 

the absence of stronger markets or another injection of payments

▶ Expected livestock/dairy returns in early 2020 are positive, but 

trade and disease risk remains elevated; a recession would dim 

prospects

▶ Without broader foreign trade access, U.S. agriculture could 

become a “residual” supplier with farm prices remaining under 

pressure

13
Questions

THANK YOU

14
Farm Credit System 

Condition and Performance 

as of 

September 30, 2019

Hal Johnson

Sr. Financial Analyst

Office of Examination

15
Topics

▶ System growth

▶ Portfolio credit quality

▶ Earnings

▶ Capital

▶ FIRS

16
System reports little growth through the first 

nine months of 2019

Source: FCS Information Statements 17

1.0%

2.8%

0.1%

-3.4%

2.0%

3.4%

-0.1%

0.6% 1.0%

2.3%

1.2%

-1.4%

-4%

-2%

0%

2%

4%

6%

8%

Total Loan

Portfolio

RE Mortgage

(47%)

Prod. &

Intermediate

(19%)

Agribusiness

(17%)

Sep-17

Sep-18

Sep-19

Loan Growth by Loan Type

% change year-to-date through September Total 

 Assets

9/30/19

$354.0

billion

 +0.4% Qtr

 +1.4% YTD

 Gross 

 Loans

9/30/19

$276.1

billion

 -0.04% Qtr

 +1.0% YTD

-0.7%

2.7%

0.6%

0.1% 0.3%

3.0%

1.5%

-0.2%

1.2%

3.2%

0.3% 0.8%

0.0%

Quarterly System Loan Growth
Credit stress edges higher; risk varies by 

region and sector

Source: FCS Information Statements 18

2.46%

2.20%

1.71%

1.29%

0.91% 0.80% 0.85% 0.84% 0.92% 0.92%

% of Nonperforming Assets(1)

(1) calculated as a percentage of gross loans outstanding and other property owned (OPO)

$2.549 Qtr Chg. + $19M or 0.8%

billion

YTD Chg. + $267M or 11.7%

Q2 '19 0.36%

Q3 '18 0.29%

 Nonperforming 

Assets

(9/30/19)

 Delinquencies (1)

(9/30/19) 0.30%

(1) accruing loans 30 days or more past due as a % of accruing loans
Loans classified less than Acceptable are 

up in 2019 for all major loan types

Source: FCS Information Statements 19

4.1 3.7 2.4 5.3 9.6 9.4 7.4 5.5 4.2 3.6 4.0 5.5 6.1 6.6 7.4 

3.3 

4.0 

8.0 

7.9 

3.6 3.8 

6.5 

7.4 

4.9 

7.1 

13.1 

9.4 

4.4 

5.5 

10.0 

11.9 

6.9 

9.4 

16.6 

4.3 

4.7 

5.8 

 -

 3.0

 6.0

 9.0

 12.0

 15.0

 18.0

 -

 3.0

 6.0

 9.0

 12.0

 15.0

 18.0

Total

Portfolio

Real Estate

Mortgage

Production &

Intermediate

AgriBusiness

% for Total Portfolio

% of Loans classified less than Acceptable by Loan Type
System’s financial condition is sound; 

year-to-date earnings stable

2,633 

2,994 3,158 

3,499 3,569 3,481 3,589 3,716 

4,012 4,055 

474 352 

188 

9 7 87 

218 188 146 95 

System Net Income

Provision for Loan Losses

System Earnings

year-to-date through September

Source: FCS Information Statements 20

7.1%

1.9%

6.3% 7.0% 6.4%

9.8%

4.1% 4.2% 5.2%

Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19

% increase in YTD Average Earning Assets

(compared to the same period a year ago)

Q3 '19 Q2 '19 Q3 '18

2.02% 2.00% 2.13%

Q3 '19 Q2 '19 Q3 '18

2.41% 2.40% 2.45%

Net Interest Spread

(YTD annualized)

Net Interest Margin

(YTD annualized)
Capital and Liquidity

- as of September 30, 2019 -

▶ Total Regulatory Capital levels:

Banks: 16.1% to 19.1%

Associations: 13.5% to 39.5%

▶ The System’s liquidity position 

equaled 177 days of coverage

▶ Days of available liquidity for 

the 4 funding banks ranged 

from 149 to 232 days

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

21

The System is strongly capitalized

38.6 

42.6 

45.7 

48.8 

52.3 55.4 

58.4 

62.4 

15.7%

16.3% 16.2% 16.1% 16.4% 16.8% 16.7%

17.6%

Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Sep-19

System Capital

Total Capital less Restricted

Capital-to-Assets 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

▶ Institutions rated 3 or lower 

account for less than 2.5% of 

System assets

Composite FIRS Ratings

Farm Credit System Banks and Associations

Source: FCA’s FIRS ratings database 22

37 43 44 46 44 39 34 31

38 31 32 29 31

29 32 34

11 8 4 3 2

5 7 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 Sep-19

Number of Rated Institutions

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

▶ Agricultural producers are facing tough times

▪Trade policy uncertainties, low margins, weak crop prices, 

large global stocks, changing markets

▶ Rising credit stress in the loan portfolio reflects the financial 

challenges confronting System borrowers

▶ System institutions are financially sound, well-capitalized, 

and have the risk-bearing capacity to respond to the credit 

needs of U.S. agriculture

23
Questions

THANK YOU

24