Quarterly Report on 

FCS Condition 

December 9, 2021 

Dennis A. Shields

Hal Johnson

FCA Board Meeting 

December 2021

1
Topics for Open Session

▶ Economic Conditions Affecting the Farm Credit System

▪Macro, inputs, and supply chain

▪Commodity margins

▪Farm sector income and real estate values

▶ Farm Credit System 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. economy powers forward, but inflation 

could alter trajectory

▶ U.S. GDP growth slowed in the third quarter, constrained by supply

chain issues and labor shortages.

▶ Employment numbers remain below pre-pandemic levels on falling

workforce participation.

▶ CPI inflation hits a 30-year high, and consumer sentiment falls to

10-year low.

▶ Fed policy holds rates steady despite growing concerns that

inflation is not “transitory.”

▶ Relatively strong economic growth is expected for major importers

of U.S. agricultural products.

4
More costly inputs and supply chain woes 

challenge producers and marketers

▶ Ag producers face major cost increases

for energy, transportation, and labor.

▶ Chemical inputs have soared:

▪ Fertilizer prices are up sharply on rising natural

gas and transportation costs, plus strong

global demand.

▪ Generic glyphosate prices have doubled.

▶ Global farm equipment industry

continues to struggle with product and

parts delivery.

▶ Supply chains may not fully recover

until 2023.

5

Source: New York Mercantile Exchange as reported 

by Trading Economics.

Note: Btu = British thermal unit. 

Natural gas futures, $ per mil. Btu
Shipping costs show signs of easing 

▶ Transportation bottlenecks have 

kept U.S. ports logjammed with 

ships from Asia.

▶ Backhaul opportunities to Asia 

evaporated.

▶ Shipping rates set records, but 

have recently declined as 

shipping demand eases 

seasonally.

▶ Situation is expected to improve 

over winter.

Sources: Bloomberg for container rates and Trading Economics

for London-based Baltic Exchange Dry Index.

Notes: Container rate for Shanghai-to-Los Angeles trade route; 

FEU = 40-foot equivalent unit.

6

Container 

shipping rates Freightos 

(marketplace)

Drewry 

(consultants)

Bulk shipping 

cost index 
U.S. ag exports to remain strong in 2022

▶ Value of U.S. agricultural

exports projected at record.

▶ Trade supported by global

economic recovery.

▶ Relatively strong demand for

a range of ag commodities.

▶ China to remain largest

market, driven by import

needs and policy.

U.S. agricultural exports 

7

Source: Outlook for U.S. Agricultural Trade, USDA.

Notes: October-September fiscal years; F = forecast as of 11/23/21.

0

25

50

75

100

125

150

175

200

2017 2018 2019 2020 2021 2022F

$ billion

Other

Japan

EU-27 + U.K.

China

Mexico

Canada
Grain farm income to fall in 2022 with higher 

input costs

▶ Net income in 2022 for

Illinois grain farms are

projected lower,

approaching 2013-2019

average.

▶ Higher fertilizer costs are

major driver.

▶ Sharply lower crop prices

would trigger negative net

incomes and major cost

adjustments for these

farms.

Net income for an Illinois grain farm

Average farm net income

2022 projection scenario:

Corn price = $5 / bu. $146,160 per farm

Corn price = $4 / bu. -$53,200 per farm

2021 projection $300,000+ per farm (record)

2013-2019 avg. $85,000 per farm

Source: farmdocdaily, Univ. of Illinois, 11/16/21.

Notes: Example serves as proxy for Midwest grain farms. Projections for a 

corn/soybean farm in central IL with 1,400 acres. For 2022, assumes higher 

fertilizer costs than in 2021 and per-bushel soybean prices of $12 and $10.

8
Livestock producer margins in 2021 have been 

favorable, except for dairy

▶ Cow-calf margins are positive outside of drought areas.

▪ Poor pastures and expensive hay stress some producers.

▪ Cyclical downturn in cattle inventory means higher calf prices next year.

▶ Hog margins have been robust despite high feed costs.

▪ Reduced slaughter and strong exports supported hog prices in 2021.

▪ Record high retail prices will slow purchases in 2022.

▶ Broiler margins find rare air, remain high through most of 2021.

▪ Industry cautiously expanded production in 2021.

▪ Chicken wings compete with burgers and pizza – a major structural shift in demand.

▶ Dairy margins remain well below 5-year average.

▪ Milk prices increased only 1% compared with double-digit gains for cattle, hogs, and broilers.

▪ Poor margins have not been offset by ad hoc payments and federal purchases (as in 2020).

9 Source: Margins and Markets, 11/22/21, Livestock Marketing Information Center.
Farm income to remain above average in 2021

U.S. net cash farm income (adjusted for inflation)

Source: USDA/ERS.

Note: Forecast for 2021 as of December 1. 10

95

2000-2020 average 

net cash farm income = $113.8 billion

0

50

100

150

2000 02 04 06 08 2010 12 14 16 18 2020

$ billion 

(2021 dollars)

Direct government payments

Income without govt. payments
Midwest farmland markets soar

11

Source: District Federal Reserve Bank surveys.

Note: Non-irrigated cropland.

▶ Banker surveys report double-digit 

gains for cropland prices.

▶ Farm auctions trigger strong farmer 

and investor interest.

▶ Sales volume is up across much of 

Corn Belt this fall.

▶ Pasture/ranchland prices are also up 

sharply outside of drought areas.

▶ Drivers: high profits for crops, low 

borrowing rates, negative returns on 

alternative investments, inflation 

concerns, and demand for rural land. 

Chicago Federal Reserve District 18%

Illinois 13%

Indiana 15%

Iowa 28%

Kansas City Fed. Reserve District 14%

Kansas 10%

Nebraska 16%

Oklahoma 9%

Minneapolis Fed. Reserve District 22%

North Dakota 4%

Minnesota 26%

South Dakota 23%

Cropland values, % change 

Q3 2020 to Q3 2021
Farmland markets are stable-to-higher in 

Pacific Northwest and California

▶ In the Pacific Northwest, most

areas report strong demand for

good quality ag land, rural

residential properties, and ranches.

▶ Prices have risen for California

farmland with good water rights.

▶ With water availability a major

determinate of land usage,

valuations can be half when water

rights are less secure.

12

Cropland value, % change

State 2018 2019 2020 2021

Washington -1% 0% -1% 3%

Oregon 3% 3% 1% 6%

Idaho 5% 5% 4% 9%

California 5% 5% 1% 7%

Source: Calculated from Land Values, 2021 Summary; USDA.

Note: Based on data collected from producers during first half 

of June.
Patterns in movements of farmland value 

can have implications for collateral risk

13

Lower 

value

Higher farmland 

value

2000 2005 2010 2015 2020

Lower 

value

Higher farmland 

value

2000 2005 2010 2015 2020

▶ State farmland values follow a

distinct pattern in:

OH, IN, IL, IA, NE, MN 

MO, KS, OK 

▶ A different pattern emerges in:

RI, DE, MD, VA 

FL, GA, NV

▶ Real estate values might have similar

patterns in unexpected places.

Source: FCA’s Office of Data Analytics and Economics.

Notes: States are arithmetically grouped by similarity of changes in state average farm real estate values (USDA/NASS, 1996-2021). 

Charts show pattern of change, not specific values.
Concluding comments

14

▶ Expanding economic activity in the U.S. and abroad supports demand

for U.S. farm goods.

▶ Inflation and input costs continue to affect producer returns and

consumer demand.

▶ Pandemic-related challenges present risks while driving change in

operations for businesses and customers.

▶ Drought and water concerns stress some regions and producers.

▶ Stable-to-strong land market strengthens farm balance sheets.

▶ Farm income to hit multi-year high in 2021, but shrinking government

payments make future profits uncertain.
Farm Credit System 

Condition and Performance 

as of 

September 30, 2021

Hal Johnson

Sr. Financial Analyst

Office of Examination

15
Topics

▶ System growth

▶ Portfolio credit quality

▶ Earnings

▶ Capital | Liquidity

▶ FIRS

16
Soaring cropland markets drive strong demand 

for real estate mortgage loans

Source: FCS Information Statements 17

+0.7% Qtr +0.8% Qtr

+2.5% YTD +3.3% YTD

+6.7% 12M +8.0% 12M

Total 

Assets

9/30/21

$410.6

billion

Gross

Loans

9/30/21

$325.8

billion

1.2%

3.2%

0.3% 0.8%

0.0%

3.9%

2.0% 1.6% 1.5%

4.6%

2.0%

0.4% 0.8%

Quarterly Loan Growth

1.0%

2.3%

1.2%

-1.4%

5.1%

7.5%

1.7%

0.2%

3.3%

7.8%

0.6%

-5.3%

-8%

-4%

0%

4%

8%

12%

16%

Total Loan

Portfolio

RE Mortgage

(49%)

Prod. & Intermediate

(18%)

Agribusiness

(16%)

Loan Growth by Loan Type

% change year-to-date through September
Portfolio loan quality is very good; challenges 

persist for certain sectors and regions

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

Source: FCS Information Statements 18

1.11%

0.86%

0.73% 0.82% 0.78% 0.83% 0.82%

0.60%

0.55%

 -

 500

 1,000

 1,500

 2,000

 2,500

 3,000

 3,500

 4,000

 4,500

 5,000 Nonperforming Assets ($M)

Nonperforming Assets as a % of Gross Loans + OPO

% of Nonperforming Assets

4.8

4.6

7.5

5.8

1.2

6.6

6.6

10.3

6.0

1.8

7.4

7.4

11.9

5.8

3.2

0.0 2.0 4.0 6.0 8.0 10.0 12.0

Total

Portfolio

Real Estate

Mortgage

Production &

Intermediate

Agribusiness

Rural

 Infrastructure

Sep-21 Sep-20 Sep-19

% of Loans Classified less than Acceptable $1.784 Qtr chg. -$77M or -4.1%

billion 12 month chg. -$537M or -23.1%

Q2 '21 0.24%

Q3 '20 0.28%

 Nonperforming 

Assets

(9/30/21)

 Delinquencies (1)

(9/30/21) 0.22%
The System reported strong 3rd quarter results

Source: FCS Information Statements 19

(**) year-to-date annualized

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

4,012 4,055 

4,446 

5,201 

7 

87 

218 188 146 95 165 

(142)

Year-to-date System Net Income

Year-to-date Provisions for Loan Losses

System Earnings ($M)

7.0% 6.4%

9.8%

4.1% 4.2% 5.2%

7.2% 8.0%

3Q-14 3Q-15 3Q-16 3Q-17 3Q-18 3Q-19 3Q-20 3Q-21

3.41 3.48 3.75 4.21 4.40 

3.56 3.17 

1.01 1.17 1.50 2.09 2.36

1.30 0.84

2.55 2.49 2.48 2.46 2.42 2.46 2.46 

2.40 2.31 2.25 2.12 2.04 

2.26 2.33 

2015 2016 2017 2018 2019 2020 Q3 '21 **

Rate: Earning Assets Rate: Interest-Bearing Liab.

% Net Interest Margin % Net Interest Spread

% Change in Average Earning Assets

(compared to the same period a year ago)

Net Interest Spread | Net Interest Margin
Capital and Liquidity

( as of September 30, 2021 )

▶ Total Regulatory Capital:

Banks| 15.4% to 18.9%

Associations| 12.0% to 34.7%

▶ Days of liquidity for the four 

funding banks ranged from 150 

to 227 days

▶ Capital and the allowance for 

loan losses as a % of loans 

outstanding ranged from 17.8% 

to 23.0% at a combined district 

level

Source: FCS Information Statements Note: Restricted capital represents capital associated with the Insurance Fund. 20

Strong earnings support continued capital growth

45.8 48.9 

52.4 

55.5 

58.2 

62.4 

66.0 

69.5 

16.9% 16.8% 16.7%

17.3% 17.4% 17.6%

17.1% 16.9%

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

System Capital

Total Capital less Restricted

Capital-to-Assets Ratio

Total System Capital ($B)
System FIRS ratings

FIRS Ratings

( based on 9/30/21 financial reporting )

▶ Composite FIRS ratings were largely

unchanged from the 2nd 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 21

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 Sep-21

Number of Rated Institutions

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

▶ Supply chain issues, labor constraints, and inflationary 

pressures are affecting agricultural producers.

▶ Strong crop sector returns help drive farmland values higher, 

particularly in the Midwest.

▶ System portfolio quality is very good, but challenges persist for 

certain sectors and geographic regions. 

▶ The Farm Credit System remains safe and financially sound. 

▶ System institutions are well-positioned to meet the credit 

needs of agricultural producers and rural America.

22
Questions

THANK YOU

23