Quarterly Report on FCS Condition

April 13, 2023

Greg Lyons

Hal Johnson

FCA Board Meeting

April 2023
2

Topics for Open Session

Economic Conditions Affecting the Farm Credit System

 Farm income outlook

 Review of recent shocks to farm incomes

 Farmland markets

Farm Credit System Condition and Performance

 System growth and loan portfolio

 Earnings and capital

 Financial Institution Rating System (FIRS)
Economic Conditions Affecting 

the Farm Credit System

Greg Lyons

Senior Economist

Office of Data Analytics and Economics
4

Commercial banking update

20

40

60

80

100

120

140

160

180

Jan-2020 Jan-2021 Jan-2022 Jan-2023

DISCOUNT WINDOW PRIMARY CREDIT

($BILLIONS)

Discount Window Primary Credit

Source: Federal Reserve Bank of Chicago National Financial Conditions Index and Federal Reserve Board of Governors, Factors Affecting Reserve Balances – H.4.1

-1

-0.8

-0.6

-0.4

-0.2

0

0.2

0.4

0.6

0.8

2020 2022

ADJUSTED INDEX

Risk Credit Leverage Adjustments

Tighter financial conditions

Looser financial conditions 

Adjusted National Financial Conditions Index
5

Labor markets are very tight, with few signs of 

near-term improvement

5

10

15

20

25

30

35

2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023

MILLIONS

Unemployment level NILF - want a job now

Job openings: total nonfarm

Source: BLS Employment Situation Report; BLS Job Openings and Labor Turnover Survey and Federal Reserve Bank of Atlanta Wage Growth Tracker. 

NILF = not in the labor force; individuals who are not working, and who have not actively looked for work in the last 4 weeks.

Wage growth rate represents 12-month moving average.

Job openings and people available to work

0

1

2

3

4

5

6

7

8

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

GROWTH RATE (%)

1st 4th Overall

Percent wage growth by income quartile
6

Inflation shows some signs of moderating

4.23

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

EXPECTED INFLATION RATE (%)

Median one-year ahead expected inflation rate Actual CPI

Shaded area represents 25th to 75th

expectation range 

Source: Federal Reserve Survey of Consumer Expectations. Expected inflation 

rate represents one-year-ahead expectations. 

Actual vs. Consumer Expected Inflation Rate

Mixed evidence of easing costs

 Energy and food plateau

 Wage growth has not slowed

 Service / good producer costs diverge

Consumer demand strong at the moment

 Savings and credit show strain

 Goods purchases slow

Federal Reserve response
7

Farm income forecast trends towards baseline

Changes to Net Cash Farm Income, 2022 vs. 2023F

150.6

Source: USDA Economic Research Service Farm Income and Wealth Statistics

Dashed line represents 2000 – 2021 average NCFI

Income Expenses

Net farm income projected to fall, but 

remain well above recent historic 

averages

Income drivers are similar to 2022, 

though impacts are lessened

Higher expenses often outlast higher 

incomes through agricultural cycles 
8

Commodity prices remain elevated, but futures 

indicate potential weakening

60

80

100

120

140

160

180

Jan-2020 Jul-2020 Jan-2021 Jul-2021 Jan-2022 Jul-2022 Jan-2023

INDEX (2011 = 100)

Crops Livestock Fruit & Tree Nut

Aggregate Commodity Indexes

Source: USDA NASS Agricultural Prices. Indexes represent prices received by growers. 

Common themes

 High input costs

 Slowing exports

Crops

 Global stocks remain low through 2022/23

 Rebound in global harvested in 2023

Livestock

 Lower demand tightens profitability

 Endemic animal diseases add uncertainty

Specialty Commodities

 Weather-dependent outcomes

 Export concentration shapes outlook
9

High U.S. prices and foreign competition slow exports

U.S. annual export quantities

10

20

30

40

50

60

70

80

Corn Soybeans Wheat

EXPORTS, MMT

2017/2018 2018/2019 2019/2020 2020/2021 2021/2022 2022/2023 (F)

.0

.5

1.0

1.5

2.0

2.5

3.0

3.5

Dairy Beef Pork

EXPORTS, MMT

2018 2019 2020 2021 2022 2023 (F)

Crops Livestock

Source: USDA Foreign Agricultural Service Production, Supply and Distribution Database. Marketing year for crops; calendar year for livestock products. (F) denotes 

March 2023 forecast. 
10

End of La Niña helps moderate drought, but large 

pockets of strain persist

Source: NOAA National Weather Service Climate Prediction Center 
11

Supply chains improve, though agricultural 

transportation sees continued strain

0

50

100

150

200

250

300

350

400

450

-1

0

1

2

3

4

5

Jan-2020 Jan-2021 Jan-2022 Jan-2023

TRUCKING RATE INDEX (2000 = 100)

GLOBAL SUPPLY CHAIN PRESSURE INDEX

GSCPI Grain Transport Cost Indicator - Trucks

Select transportation indexes

Source: Federal Reserve Bank of New York Global Supply Chain Pressure Index 

and USDA AMS, Grain Transport Cost Indicators

General transport measures normalize

 Shipping volumes

 Vessel container costs 

 Trains and vessel absorption

Residual strain within agriculture

 Domestic transportation costs

 U.S. export costs

 Brazilian soybean transport cost advantage
12

Many input costs decline, but farm machinery 

continues to face tight supplies, high demand 

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

Jan-2021 Jan-2022 Jan-2023

PRICE PER TON

Anhydrous Ammonia Urea Liquid Nitrogen Red Potash

Sources: USDA Agricultural Marketing Service Iowa Production Cost Report and Iron Solutions 

Iowa average fertilizer costs

-10%

0%

10%

20%

30%

40%

50%

Jan-2020 Jan-2021 Jan-2022 Jan-2023

PERCENT INCREASE

Large Combines Large Tractors High Capacity Sprayers

Equipment price changes
13

Agricultural impacts from the war in Ukraine 

will continue after hostilities end 

Source: StoneX

Broad array of consequences

 Production loss

 Fertilizer

 Transport costs

 Energy

Long tail of impact

 Infrastructure repair

 Capital replacement

 Land rehabilitation
14

Land value growth cools in 2022, with some regional 

variation

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

MEAN TRANSACTED PRICE ($ / ACRE)

AgFirst AgriBank CoBank Texas National

Source: ODAE calculation using CoreLogic farmland transaction data

Average transacted farmland value by FCA district territory

Midwest: slower, but persistent growth

 Divergence in growth by land quality

Mixed evidence in West, Southern regions

 Waning non-farm pressures

 Less benefit from current commodity prices

Potential signs of softening

 Declines in total transactions

 Growth in auction values slows 
15

Questions

THANK YOU
Farm Credit System

Condition and Performance

Hal Johnson

Senior Financial Analyst

Office of Examination
Strong asset growth continued in 2022

Source: Federal Farm Credit Banks Funding Corporation Information Statements 17

+2.7% Qtr +3.2% Qtr 

+9.4% 12M +8.5% 12M 

Total 

Assets

12/31/22

$477.1

billion

Gross

Loans

12/31/22

$373.3

billion

5.0%

6.1%

11.3%

19.5%

0

0

0

0

0

RE Mortgage

(46%)

Production &

Intermediate

(18%)

Agribusiness

(18%)

Rural

Infrastructure

(12%)

Loan Growth by Loan Type

(% change year-over-year)

4.8%

8.0%

8.7%

5.5%

4.5%

5.2% 5.0%

9.9%

9.0% 8.5%

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Portfolio Loan Growth

(% change year-over-year)
3.2%

2.9%

4.5%

5.1%

1.0%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0%

Total

Portfolio

Real Estate

Mortgage

Production &

Intermediate

Agribusiness

Rural

 Infrastructure

Dec-22 Dec-21 Dec-20

Source: Federal Farm Credit Banks Funding Corporation Information Statements 19

$2,022

$2,282 $2,347

$1,897

$1,578

$1,755

0.78%

0.83% 0.82%

0.60%

0.46% 0.47%

Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22

Nonaccrual Loans

Accruing Restructured Loans

Accruing loans 90 days+ Past

Due

Other Property Owned (OPO)

% Nonperforming Assets (1)

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

Nonperforming Assets Loans Classified Less than Acceptable

(% of loans outstanding)

Credit quality remained strong
Portfolio is diversified by commodity

Loan Portfolio by Commodity Concentration

Source: Federal Farm Credit Banks Funding Corporation Information Statements 19

Cash Grains 55,669 14.9% 2.7%

Tree Fruits, Nuts & Grapes 23,289 6.2% 8.2%

Field Crops 19,440 5.2% 4.1%

Other Crop Production 19,342 5.2% 6.4%

Total Crop Production 117,740 31.5% 4.6%

Cattle 33,315 8.9% 6.7%

Dairy Farms 22,016 5.9% 0.9%

Poultry & Eggs 9,520 2.6% 3.0%

Hogs 8,413 2.3% 6.0%

Other Livestock 9,839 2.6% 6.4%

Total Animal Production 83,103 22.3% 4.6%

Rural Infrastructure 44,215 11.8% 19.5%

Food Products 32,379 8.7% 22.3%

Rural Home 22,326 6.0% 7.8%

Forestry 21,444 5.7% 7.7%

Farm Supply & Marketing 15,962 4.3% -3.2%

Other 36,097 9.7% 15.5%

 Total 373,266 100.0% 8.5%

 System Loan Portfolio

($ in millions) Dec-22 % of Total

 Portfolio

% chg.

yr. over yr.

Cash Grains

14.9%

Rural 

Infrastructure

11.8%

Cattle

8.9% Food 

Products

8.7%

Tree Fruits, 

Nuts & Grapes

6.2%

Rural Home

6.0%

Dairy Farms

5.9%

Forestry

5.7%

Field 

Crops

5.2%

Other 

Crops

5.2%

Farm Supply & 

Marketing

4.3%

Other 

Livestock

2.6%

Poultry & Eggs

2.6%

Hogs

2.3%

Other

9.7%
Loan volume is geographically dispersed

Top 5 States % of 

Portfolio

California 11.9%

Texas 8.0

Illinois 5.4

Iowa 4.9

Minnesota 4.1

Source: FCS Information Statement 20

Percentage of System Loan Volume by State

(at Dec. 31, 2022 - only states with at least 1% are displayed)
Strong loan growth drives increased earnings

Source: Federal Farm Credit Banks Funding Corporation Information Statements 21

$4,848

$5,189 $5,332 $5,446

$6,002

$6,796

$7,268

$266 $197 $194 $169 $107

-$152

$40

2016 2017 2018 2019 2020 2021 2022

System Net Income

Provisions for Loan Losses

System Earnings

(for the year ended Dec. 31)

9.0%

3.8% 4.4% 5.1%

7.8% 7.8%

11.2%

2016 2017 2018 2019 2020 2021 2022

3.75 4.21 4.40 

3.56 3.16 

3.79 

1.50

2.09 2.36

1.30 0.83

1.63

2.25 

2.12 

2.04 

2.26 2.33 

2.16 

2.48 2.46 2.42 2.46 2.46 

2.39 

2017 2018 2019 2020 2021 2022

% Rate: Earning Assets % Rate: Interest-Bearing Liab.

% Net Interest Spread % Net Interest Margin

Net Interest Spread | Net Interest Margin

Average Earning Assets 

(% change year-over-year)
Capital levels remain sound despite decline

System Capital

(at December 31, 2022)

▶ Total Regulatory capital levels:

- Banks: 13.5% to 16.9%

- Associations: 12.1% to 33.1%.

▶ Over 84% of System institutions 

were in the Capital benchmark 1 

range and all were in the 

benchmark 1 or 2 range.

▶ The System’s capital-to-assets 

ratio equaled 14.4% at year-end, 

down from 15.9%.

Source: Federal Farm Credit Banks Funding Corporation Information Statements

$30.0

33.3

35.9

38.6

42.6

45.7

48.8

52.3

55.4

58.4

61.7

65.5

69.5 $68.6

10.5% 11.0%

8.1% 7.4%

10.3%

7.3% 6.8% 7.1% 5.9% 5.5% 5.6% 6.2% 6.0%

-1.3%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

year-over-year 

capital growth

Total System Capital ($B)

(at December 31)

22
Strong asset growth and rising interest rates 

impact the System’s capital-to-asset ratio

17.1%

12.7%

16.3%

15.9%

14.4%

-2%

1%

4%

7%

10%

13%

16%

19%

22% % year-over-year asset growth

% year-over-year capital growth

capital-to-assets ratio

(1) Accumulated other comprehensive loss Source: Federal Farm Credit Banks Funding Corporation Information Statements

(1,210)

(5,492)

12.7%

15.9%

14.4%

17.1%

13.6%

16.2%

15.5%

AOCL ($M) capital-to-assets ratio capital-to-assets ratio excl. AOCL

Impact of AOCL(1)

on the capital-to-asset ratio System growth and the capital-to-asset ratio

23
24

Quality of capital and liquidity are strong

Source: Federal Farm Credit Banks Funding Corporation Information Statements and Farm Credit System Call Reports

25 31

67

29

77

42

35

65

112

56

74 82

7

30

7 21

221

159

183

197

0

50

100

150

200

250

AgFirst FCB AgriBank FCB CoBank ACB FCB of Texas

Supplemental

Level 3:

Level 2:

Level 1:

90 day 

regulatory 

minimum

Days of Liquidity | Farm Credit System Banks

(at December 31, 2022)

AOCL (b)

($5,492)

-8.0%

Restricted capital (a)

$6,673

9.7%

Retained earnings

$57,273

83.5%

Add'l paid-in 

capital

$4,597

6.7%

Capital stock

$2,134

3.1%

Preferred Stock

$3,416

5.0%

Capital Components

(at December 31, 2022)

(a) Restricted capital represents capital associated with the Insurance Fund

(b) Accumulated other comprehensive loss

System Capital

$68.6 billion
Composite FIRS ratings improve

FIRS Ratings

(based on 12/31/22 financial reporting)

▶ Composite FIRS ratings reflect the 

System’s sound financial condition.

▶ Over 95% of System banks and 

associations have a Composite FIRS 

rating of 1 or 2.

▶ Institutions rated 3 or lower represent 

just over 1% of System assets. 46 44

39

34 30 32 33 35

29 31

29

32

35 35 32 26

3 2

5 7 7 4 4

3

0

10

20

30

40

50

60

70

80

90

1/1/16 1/1/17 1/1/18 1/1/19 1/1/20 1/1/21 1/1/22 1/1/23

Number of Rated Institutions

1 Rated 2 Rated 3 Rated or lower

Composite FIRS Ratings

Farm Credit System Banks and Associations

25