Quarterly Report on 

FCS Condition 

April 16, 2020 

Dennis A. Shields

Hal Johnson

FCA Board Meeting 

April 2020

1

Tab 2
Topics for Open Session

▶ Economic Conditions Affecting the Farm Credit 

System

▪Economic upheaval with COVID-19

▪Commodity market volatility

▪Government response for agriculture sector

▶ 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. economic activity has plunged

▶ Effects of the pandemic became visible in the week ending March 21, with an unprecedented 

number of unemployment insurance claims, a sharp decline in consumer confidence, and a 

more modest decline in steel production.

▶ An offsetting surge in retail sales occurred as consumers flooded stores to stock up.

4

Source: “Monitoring Real Activity in Real Time: The Weekly Economic Index,” Federal Reserve Bank of New York Liberty Street 

Economics, March 30, 2020 (link).
Unemployment was low across the country 

before insurance claims skyrocketed

Source: FCA analysis of U.S. Bureau of Labor Statistics unemployment rate data; unemployment insurance claims from 

https://www.dol.gov/ui/data.pdf.

Unemployment rate by county as of January 2020

5

Unemployment insurance claims 

Week ending: 3/21 = 3.3 mil. 

3/28 = 6.9 mil.

4/04 = 6.6 mil.

0% 15% 30%

Jan. Feb. Mar.

March figures to be revised

Employed = 155.8 mil. 

Unemployed = 7.1 mil. 

Unemployment rate = 4.4%

U.S. = 3.6%
Goods-producing industries are important in 

local economies

6

Selected FCS 

geographic 

footprint

For each territory, 

goods-producing 

share of GDP (%)

Capital FC 47.0%

FCS of America 34.2%

Mid-America 31.8%

Amer. AgCredit 30.4%

Compeer 28.4%

Northwest FCS 25.0%

U.S. total 17.8%

Source: FCA analysis of data from Bureau of Economic Analysis, Gross Domestic Product: Private Goods-Producing Industries. 

Notes: Latest data available; “goods” equals agriculture, forestry, fishing, and hunting; mining (oil and gas); construction; and manufacturing.

Percent of 2018 GDP from goods-producing industries by county
Commodity prices are below year-earlier 

levels (except wheat) 

Prices in early April relative to a year ago

-40

-30

-20

-10

0

10

Corn Soybeans Wheat Cotton Fed cattle Hogs Broilers Milk Lumber

Percent change

Source: MGEX and USDA (cash prices) and CME (futures) as of April 3. 

Note: Cash bid/prices for commodities except futures for milk (May class III) and lumber (May).

7
$3.00

$3.25

$3.50

$3.75

$4.00

$4.25

$4.50

5/1/2019 9/1/2019 1/1/2020

Corn ($/bu.)

$3.70

$3.00

$3.50

$4.00

$4.50

$5.00

$5.50

$6.00

5/1/2019 9/1/2019 1/1/2020

Hard Red Winter Wheat ($/bu.)

$5.50

$7.00

$7.50

$8.00

$8.50

$9.00

5/1/2019 9/1/2019 1/1/2020

Soybeans ($/bu.)

$8.40 

Corn bids collapse with demise of ethanol 

prices; soybeans and wheat bids remain volatile 

Source: MGEX elevator daily cash bids. 8

Elevator daily cash bids (national index)

Farm Bill reference price that triggers Price Loss Coverage payments using season-avg. farm price

Lower fertilizer and fuel 

prices will partially offset 

lower market returns.
Livestock producers brace for declining demand

▶ Across all parts of the livestock marketing chain, declining prices reflect both loss 

of demand and developments in plant slowdowns or even closures related to 

COVID-19. 

▶ Declining beef and fed cattle prices are pressuring feedlot margins and resulting 

in dwindling calf receipts. 

▶ Hog prices increased in mid-March on a retail demand surge, generating positive 

producer margins, but then food service demand collapsed.

▶ Milk futures have plunged more than 30 percent since late 2019; a decline in 

cheese and butter prices will have a major negative impact on producer margins. 

▶ While poultry integrators were likely able to stay above breakeven during March, 

many operators are experiencing depleted foodservice demand that is pushing 

margins into the red.

▶ The food system is being tested by extreme conditions.

9
Forestry sector faces significant pressure

▶ Lumber futures have plummeted, and mills are dramatically dialing back production of twoby-fours, plywood and other building materials. 

▶ Sector weakness is only partially offset by the strong demand for pulp, which is used to make 

toilet paper, cardboard boxes and other products.

10

Source: CME Group.

Lumber futures, softwood 2x4s measured in $ per 1,000 board feet 
Government assistance for farmers

▶ Price Loss Coverage program provides some downside price 

protection – some program crops are better protected than others. 

▶ Loan deficiency payments started for cotton on 3/20/20.

▶ Crop insurance guarantees also provide some price protection: 

▪ corn = $ 3.88 per bushel, 

▪ soybeans = $9.17,

▪ hard red winter wheat = $4.35, and

▪ hard red spring wheat = $5.56. 

▶ CARES Act added $14 billion to the Commodity Credit Corporation 

funds and provided $9.5 billion for commodity support.

▶ Commodities that do not receive traditional farm program support 

include cattle, hogs, poultry, aquaculture, forage, fruits, vegetables 

and tree nuts.

11
Export demand will be critical for U.S. 

agricultural prices and income

U.S. agricultural exports – fiscal year 2020 forecast (February)

Source: USDA/ERS.

Note: Forecasts as of February 20, 2020.

12

U.S. ag. exports ($ bl.)

Canada $21.5

Mexico $19.8

China $14.0

Europe $12.9

Japan $12.0

World FY 2020 

(Feb. forecast) $139.5

World FY 2019 

(actual)

$135.5
Concluding comments 

▶ General economy could face a long recovery period with fewer 

fully-employed people, reducing off-farm income and demand. 

▶ Depth and time period of economic loss depends on disease 

containment in the U.S. (and elsewhere) and subsequent 

consumer behavior.

▶ Collapse in the energy market has significantly affected agriculture 

(through lower prices of corn) and many other parts of the rural 

economy via declining employment and related business activity.

▶ A protracted recession will be tempered to the extent that the 

current (or future) fiscal stimulus is effective.

13
Questions

THANK YOU

14
Farm Credit System 

Condition and Performance 

as of 

December 31, 2019

Hal Johnson

Sr. Financial Analyst

Office of Examination

15
Topics ▶ System growth ▶ Loan Portfolio ▶ Earnings ▶ Capital ▶ FIRS

16
The System reported modest growth in 2019

Source: FCS Information Statements 17

-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%

3.9%

Quarterly System Loan Growth

Total 

Assets

12/31/19

$365.4

billion

 +3.2% Qtr

 +4.7% FY

Gross

Loans

12/31/19

$287.0

billion

 +3.9% Qtr

 +5.0% FY

6.3 

4.4 4.8 4.7 

2.2 

2.9 3.3 

5.0 

8.3 

6.5 

9.2 

8.5 

5.5 

4.0 

5.2 5.0 

0

5

10

15

20

2016 2017 2018 2019

RE Mortgage

Prod. &

Intermediate

Agribusiness

Total Portfolio

Loan Growth by Loan Type

% change year-over-year
Portfolio credit risk indicators relatively stable 

in 2019; risk varies by region and ag sector

Source: FCS Information Statements 18

(1) calculated as a percentage of gross loans outstanding and 

other property owned (OPO)

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

2.19%

1.98%

1.53%

1.11%

0.86% 0.73% 0.82% 0.78% 0.83% 0.82%

% of Nonperforming Assets(1)

$2.347 Qtr Chg. - $202M or - 7.9%

billion 12 Month 

Chg. + $65M or + 2.8%

Q3 '19 0.30%

Q4 '18 0.33%

 Nonperforming 

Assets

(12/31/19)

 Delinquencies (1)

(12/31/19)

0.32%
Loans classified less than Acceptable 

continued to trend higher in 2019

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 

7.1 

Adverse/Doubtful

Special Mention

% of Loans classified less than Acceptable
System portfolio is diversified by commodity

System Loan Portfolio by 

Commodity Concentration

Source: FCS Information Statement

20

Cash Grains

15.8%

Tree Fruits, 

Nuts 

& Grapes

6.1% Field 

Crops

5.6%

Other 

Crops

5.3%

Cattle

9.0%

Dairy Farms

6.6% Poultry & 

Eggs

2.8%

Hogs

2.5%

Other 

Livestock

2.5%

Rural 

Infrastructure

10.3%

Food 

Products

7.1%

Rural 

Home

6.1%

Forestry

Farm Supply & 5.9%

Marketing

4.9%

Other

9.5%

Cash Grains 45,294 15.8%

Tree Fruits, Nuts & Grapes 17,381 6.1%

Field Crops 16,125 5.6%

Other Crop Production 15,162 5.3%

Total Crop Production 93,962 32.7%

Cattle 25,827 9.0%

Dairy Farms 18,818 6.6%

Poultry & Eggs 8,022 2.8%

Hogs 7,116 2.5%

Other Livestock 7,300 2.5%

Total Animal Production 67,083 23.4%

Rural Infrastructure 29,669 10.3%

Food Products 20,317 7.1%

Rural Home 17,379 6.1%

Forestry 17,065 5.9%

Farm Supply & Marketing 14,028 4.9%

Other 27,461 9.6%

 Total 286,964 100.0%

Dec-19

% of Total

 Portfolio

 System Loan Portfolio

($ in millions)
Portfolio volume is geographically distributed

Top 5 States % of 

Portfolio

California 11.4%

Texas 7.0

Iowa 5.4

Illinois 5.0

Minnesota 4.5

Source: FCS Information Statement 21

% of System Loan Volume by State as of yearend 2019

(only states with at least 1% are displayed)
The System is financially sound

Source: FCS Information Statements 22

3,495 

3,940 4,118 

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

5,189 5,332 5,446 

667 

430 313 

(31)

40 106 

266 197 194 169 

System Net Income

Provision for Loan Losses

System Earnings ($M)

4.06 

3.79 3.59 3.46 3.41 3.48 3.75 

4.21 4.40 

1.38 1.08 0.95 0.96 1.01 1.17 1.50

2.09 2.36

2.68 2.71 2.64 

2.50 

2.40 2.31 2.25 

2.12 2.04 

2.86 2.87 2.78 

2.64 2.55 2.49 2.48 2.46 2.42 

2011 2012 2013 2014 2015 2016 2017 2018 2019

Rate: Earning Assets Rate: Interest-Bearing Liabilities

Net Interest Margin

Net Interest Spread

Earning Ratios
Capital and Liquidity

( as of December 31, 2019 )

▶ Total Regulatory Capital levels:

Banks: 15.9% to 19.5%

Associations: 13.6% to 38.3%

▶ Days of available liquidity for 

the 4 funding banks ranged 

from 166 to 222 days

▶ Capital and the Allowance for 

Loan Losses as a % of loans for 

the combined districts ranged 

from 18.2% to 22.4%

Source: FCS Information Statements

(a) includes $1.3B in accumulated other comprehensive loss

(b) Restricted Capital represents capital associated with the Insurance Fund 23

The System is well-capitalized

Total System Capital: $61.7 B

as of yearend 2019

Capital Stock

3.3%

Preferred 

Stock

5.1%

Restricted 

Capital (b)

8.4%

Additional

paid-in-capital

6.1%

Allocated 

retained earnings

5.4%

Unallocated 

retained 

earnings (a)

71.7%
System FIRS ratings

FIRS Ratings 

( based on 12/31/19 financials )

▶ Composite FIRS ratings are a 

reflection of the System’s strong 

financial position 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

24

37 43 44 46 44 39 34 30

38 31 32 29 31

29 32 35

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 Dec-19

Number of Rated Institutions

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

▶ The coronavirus pandemic (COVID-19) had an immediate and 

unprecedented effect on communities, businesses, and 

markets around the world.

▶ The severity and duration of the ongoing health crisis and 

disruption in economic activity is unknown.

▶ The impact on the farm economy and the Farm Credit System 

is uncertain, but will be significant.

▶ The Farm Credit System is fundamentally safe and sound. 

System institutions are financially strong, well-capitalized, 

and have significant risk-bearing capacity.

25
Questions

THANK YOU

26