Quarterly Report on 

FCS Condition 

April 14, 2022 

Sarah Tulman

Hal Johnson

FCA Board Meeting 

April 2022

1
Topics for Open Session

▶ Economic Conditions Affecting the Farm Credit System

▪Macroeconomy

▪Impact of war in Ukraine

▪U.S. agricultural sector

▶ 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

Sarah Tulman, PhD

Senior Economist 

Office of Data Analytics and Economics

3
Inflation remains high for both consumers and 

producers

▶ Consumer Price Index (CPI) up 

7.9% in February from a year 

earlier.

▶ Increase led by energy (primarily 

motor fuel), used cars and trucks, 

shelter, and food.

▶ Producer Price Index (PPI) up 

10% in February from a year 

earlier.

▪ Tied with January for largest annual 

rate of increase.

▪ 40% of increase was from motor fuel.

4

Source: Bureau of Labor Statistics (CPI)

Contributions to the 7.9% 

annual increase in CPI

24% 22% 20% 13% 21%

0% 20% 40% 60% 80% 100%

Energy Used cars and trucks Shelter Food Other
Federal Reserve taking action to combat 

inflation

▶ Federal Reserve raised federal

funds rate 25 bps on March 16;

expects six additional hikes in

2022, possibly four in 2023.

▶ Federal Reserve expected to

begin reducing its balance

sheet soon.

▶ 2022 GDP growth forecast

lowered to 2.8% from 4.0%.

▶ Global events increase upward

pressure on inflation and

supply chain issues. Source: Wells Fargo, based on the Federal Reserve’s March 

Summary of Economic Projections. 

5

Federal Open Market Committee “Dot Plot” 

Expected midpoint of target range 4%

3%

2%

1%

0%

2022 2023 2024 Longer run

4%

3%

2%

1%

0%
Higher interest rates to increase U.S. farm 

production expenses 

▶ Since 1991, farm debt has

increased by more than

200%, which was faster than

inflation.

▶ Downward trend in interest

expense as a share of cash

production expense reflects

declining interest rates.

▶ Rising interest rates

combined with the increase

in farm debt to put pressure

on farm income in 2022 and

beyond.

Source: farmdoc daily, March 21, 2022

6

Interest expense as a share of cash production 

expenses, excluding operator dwellings 
Oil price rise was accelerated by the impact of 

the war in Ukraine 

▶ Oil prices were already

increasing when invasion of

Ukraine took place.

▶ Increase in oil prices have

outpaced the increase in

non-energy commodity

prices.

▶ U.S. has banned Russian oil

imports and involvement in

the sector.

7

Source: Short-Term Energy Outlook, U.S. Energy Information 

Agency, as compiled by Bloomberg L.P. 

Crude oil nearby futures 

contract prices

Energy vs. non-energy 

commodities and markets
Fertilizer cost and supply issues intensify

▶ Prices were increasing and supplies were constrained even before the

Ukraine invasion.

▶ Russia suspended fertilizer exports.

▶ Longer run: USDA announced $250 million in grants to support additional

fertilizer production.

Source: Green Markets, A Bloomberg Company. 8

Green Markets Weekly North American Fertilizer Price Index, 2021-2022
High degree of uncertainty in grain markets

▶ Grain price strength and volatility.

▶ Ukraine ag status and impacts on global trade.

▶ South American weather issues.

Source: AgWeb (wheat, corn) using CME Group data. 9

Corn December 2022 (futures price)

Wheat July 2022 

(futures price)

Corn December 2022 

(futures price)
Widespread drought impacting the Western 

half of the U.S. 

▶ Widespread western

drought continues.

▶ California state water

allocations cut to 5%,

widely expected to be cut

again to 0%.

▶ Hits both livestock forage

availability and hay

production.

▶ Winter wheat crop

threatened and concerns

in the Corn Belt.

Source: U.S. Drought Monitor. 10
Livestock producer margins are favorable but 

squeezed by higher feed costs

▶ Cow-calf margins depend on pasture conditions.

▪ In early 2022, calf prices have declined but remain above year-earlier levels. 

▪ 61% of cattle were in drought-impacted areas in February, twice the level of late summer 2021.

▶ Hog margins are supported by stronger prices. 

▪ Prices driven by decline in slaughter activity, with higher prices offsetting higher feed costs.

▪ Export forecasts lowered: lower U.S. supplies, higher pork prices, and inflationary pressures.

▶ Broiler margins remain positive on strong consumer demand.

▪ Revenue has offset increased feed costs in recent months.

▪ Cases of highly pathogenic avian influenza reported beginning in mid-January.

▶ Dairy margins expected to remain positive in 2022.

▪ Margins bolstered by production cuts and strong dairy demand.

11
Concluding comments

12

▶ Inflation and input costs continue to affect producer returns and

consumer demand.

▶ The Federal Reserve has begun raising interest rates and is expected to

begin reducing its balance sheet. Rising interest rates put pressure on

farm margins.

▶ War in Ukraine has introduced additional uncertainty into oil prices,

fertilizer prices and supply, and grain markets.

▶ Drought and water concerns stress some regions and producers.
Farm Credit System 

Condition and Performance 

as of 

December 31, 2021

Hal Johnson

Sr. Financial Analyst

Office of Examination

13
Topics ▶ System Growth ▶ Loan Portfolio ▶ Earnings ▶ Capital ▶ FIRS

14
System’s loan growth reflects a strong 

farm economy 

Source: FCS Information Statements

15

+6.2% Qtr +5.6% Qtr

+8.8% 12M +9.0% 12M

Total 

Assets

12/31/21

$436.0

billion

Gross

Loans

12/31/21

$343.9

billion

3.2%

0.3%

0.8%

0.0%

3.9%

2.0% 1.6% 1.5%

4.6%

2.0%

0.4% 0.8%

5.6%

Quarterly System Loan Growth

4.8 4.7 

11.7 11.5 

3.3 

5.0 

3.3 

8.0 

9.2 

8.5 

12.7 

7.5 

5.2 5.0 

9.9 

9.0 

0

5

10

15

2018 2019 2020 2021

Total Portfolio

Loan Growth by Loan Type

% change year-over-year
The System’s portfolio performed well in 2021

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

Source: FCS Information Statements 16

4.3

4.1

6.4

5.5

0.8

6.0

6.2

8.9

6.5

0.9

7.1

7.2

11.1

5.6

3.4

0.0 2.0 4.0 6.0 8.0 10.0 12.0

Total

Portfolio

Real Estate

Mortgage

Production &

Intermediate

Agribusiness

Rural

 Infrastructure

Dec-21 Dec-20 Dec-19

% of Loans Classified less than Acceptable

$1.578 Qtr chg. - $206M or -11.5%

billion 12 month

chg. - $319M or -16.8%

Q4 '20 0.28%

Q3 '21 0.22%

 Nonperforming 

Assets

(12/31/21)

 Delinquencies (1)

(12/31/21) 0.27%
Loan credit quality is very good; focus on 

strong risk management practices crucial

▶ Nonperforming assets were

0.46% of loans outstanding and

other property owned, the lowest

level since 4th quarter 2007.

▶ Nonaccrual loans totaled $1.176

billion on December 31, down

21.8% from a year ago.

▶ 63.7% of nonaccrual loans were

current as to principal and

interest.

▶ Higher agricultural production

costs and increasing market

volatility reinforces the need for

strong risk management

practices. Source: FCS Information Statements

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

17

$2,037 $2,022

$2,282 $2,347

$1,897

$1,578

0.82% 0.78%

0.83% 0.82%

0.60%

0.46%

Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21

Nonaccrual Loans

Accrued Restructed

Loans

Accruing 90 days+ Past

Due Loans

OPO

% Nonperforming

Assets

(amounts in millions)

% of Nonperforming Assets(1)
System’s portfolio is diversified by commodity

Loan Portfolio by 

Commodity Concentration

Source: FCS Information Statement

18

Cash Grains 54,230 15.8% 9.6%

Tree Fruits, Nuts & Grapes 21,524 6.3% 12.4%

Field Crops 18,668 5.4% 7.5%

Other Crop Production 18,180 5.3% 9.1%

Total Crop Production 112,602 32.7% 9.7%

Cattle 31,228 9.1% 13.3%

Dairy Farms 21,813 6.3% 9.0%

Poultry & Eggs 9,240 2.7% 6.2%

Hogs 7,937 2.3% 6.2%

Other Livestock 9,244 2.7% 15.9%

Total Animal Production 79,462 23.1% 10.8%

Rural Infrastructure 37,015 10.8% 7.4%

Food Products 26,484 7.7% 10.1%

Rural Home 20,707 6.0% 8.6%

Forestry 19,917 5.8% 7.3%

Farm Supply & Marketing 16,498 4.8% 4.7%

Other 31,244 9.1% 7.0%

 Total 343,929 100.0% 9.0%

Dec-21 % chg.

yr. over yr.

% of Total

 Portfolio

 System Loan Portfolio

($ in millions)

Cash Grains

15.8%

Rural 

Infrastructure

10.8%

Cattle

9.1%

Food 

Products

7.7%

Dairy Farms

6.3%

Tree Fruits, 

Nuts & Grapes

6.3%

Rural Home

6.0%

Forestry

5.8%

Field 

Crops

5.4%

Other 

Crops

5.3%

Farm Supply & 

Marketing

4.8%

Other 

Livestock

2.7%

Poultry & Eggs

2.7%

Hogs

2.3%

Other

9.1%
Portfolio volume is geographically distributed

Top 5 States % of 

Portfolio

California 11.8%

Texas 7.8

Iowa 5.4

Illinois 5.0

Minnesota 4.1

Source: FCS Information Statement 19

% of System Loan Volume by State at Dec. 31, 2021 

(only states with at least 1% are displayed)
System reports strong financial results for 2021

Source: FCS Information Statements 20

4,848 

5,189 5,332 5,446 

6,002 

6,796 

266 197 194 169 107 

(152)

2016 2017 2018 2019 2020 2021

Full Year System Net Income

Full Year Provisions for Loan Losses

System Earnings ($M)

9.0%

3.8% 4.4% 5.1%

7.8% 7.8%

2016 2017 2018 2019 2020 2021

% Increase in Average Earning Assets 

(from the same period a year ago)

3.75 

4.21 4.40 

3.56 

3.16 

1.50

2.09 2.36

1.30 0.83

2.25 

2.12 2.04 

2.26 2.33 

2.48 2.46 2.42 2.46 2.46 

2017 2018 2019 2020 2021

% Rate: Earning Assets

% Rate: Interest-Bearing Liab.

% Net Interest Spread

% Net Interest Margin

Net Interest Spread | Net Interest Margin
Capital and Liquidity

( as of December 31, 2021 )

▶ Total Regulatory Capital levels:

Banks: 15.2% to 18.9%

Associations: 12.8% to 34.7%

▶ Days of available liquidity for

the 4 funding banks ranged

from 158 to 235 days.

▶ Capital and the allowance for

loan losses as a % of loans at a

district level ranged from 16.8%

to 21.6%.

Source: FCS Information Statement

(a) includes $1.2B in accumulated other comprehensive loss

(b) Restricted Capital represents capital associated with the FCS Insurance Fund 21

Strong earnings drive continued capital growth

Capital Stock

3.0%

Preferred Stock

5.7%

Restricted Capital (b)

8.6%

Additional

paid-in-capital

5.4%

Allocated retained 

earnings

5.0%

Unallocated retained 

earnings (a)

72.3%

Total System Capital: $69.5 B

as of yearend 2021
System Composite FIRS ratings

FIRS Ratings

( based on 12/31/21 financials )

▶ Composite FIRS ratings reflect the

System’s sound condition and

strong financial performance.

▶ Over 94% of System Banks and

Associations have a Composite

FIRS rating of 1 or 2.

▶ Institutions rated 3 or lower

account for less than 1.0% of

System assets.

Composite FIRS Ratings

Farm Credit System Banks and Associations

Source: FCA’s FIRS ratings database 22

44 46 44 39 34 30 32 33

32 29 31

29

32 35 35 32

4 3 2

5 7 7 4 4

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 Dec-21

Number of Rated Institutions

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

▶ Producers squeezed by broad rise in agricultural production

costs.

▶ Drought and water availability in the Western half of the U.S. is

a continuing concern for agricultural producers.

▶ Portfolio loan quality is very good; continued emphasis on

sound risk management practices essential.

▶ The Farm Credit System is safe and financially strong.

▶ System institutions are strongly capitalized and well-positioned

to meet the credit needs of U.S. farmers and ranchers. 23