Testimony of the Honorable Glen R. Smith

Chairman and Chief Executive Officer

Farm Credit Administration

Before the Subcommittee on Agriculture, 

Rural Development, Food and Drug Administration, 

and Related Agencies 

U.S. House of Representatives Committee on Appropriations

March 24, 2021

Chairman Bishop, Ranking Member Fortenberry, and Members of the Subcommittee, I am 

Glen R. Smith, board chairman and CEO of the Farm Credit Administration (FCA or agency). 

On behalf of my board colleague, Jeffery S. Hall of Kentucky, and all the dedicated men and 

women of the agency, I am pleased to provide this testimony. Mr. Hall also serves as 

chairman of the board of directors of the Farm Credit System Insurance Corporation.

In my testimony today, I will discuss the agency’s responsibilities, the current state of the 

farm and rural economy, and the condition of the Farm Credit System (FCS or System) and 

the Federal Agricultural Mortgage Corporation (Farmer Mac).1 I will discuss the effects that 

the COVID-19 pandemic has had on the rural and farm economy. I will also discuss the 

response by FCA, the System, and Farmer Mac to the challenges of the pandemic.

FCA’s responsibilities

FCA is the independent agency responsible for examining and regulating the banks, 

associations, and related entities of the Farm Credit System, a government-sponsored 

enterprise created by Congress in 1916 to provide American agriculture with a dependable 

source of credit. The System’s banks and associations form a nationwide network of 

cooperatively organized lending institutions that are owned and controlled by their 

borrowers, serving all 50 states and Puerto Rico. The System is currently made up of 4 

banks, 67 associations, 5 service corporations, and the Federal Farm Credit Banks Funding 

Corporation. FCA is also responsible for the oversight of Farmer Mac, which was established 

in 1988 under Title VIII of the Farm Credit Act.

As directed by Congress, FCA’s mission is to ensure that System institutions and Farmer 

Mac are safe, sound, and dependable sources of credit and related services for all 

creditworthy and eligible persons in agriculture and rural America. We accomplish this 

mission in two ways.

First, we protect safety and soundness by examining and supervising all FCS institutions

and Farmer Mac, and we ensure that they comply with applicable laws and regulations. If an

institution violates a law or regulation or operates in an unsafe or unsound manner, we use 

1 Although Farmer Mac is an FCS institution under the Farm Credit Act, we discuss Farmer Mac separately from the 

other institutions of the FCS. Therefore, in this testimony, unless Farmer Mac is explicitly mentioned, the Farm 

Credit System refers only to the banks and associations of the System.
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our supervisory and enforcement authorities to take appropriate corrective action. Second, 

we develop policies and regulations that govern how System institutions and Farmer Mac 

conduct their business and interact with customers. We also approve the corporate charter 

changes of System institutions, the issuance of System debt, and other financial and 

operational matters.

Condition of the farm economy

Over the past year, U.S. farmers and ranchers have once again demonstrated their 

resourcefulness. Agricultural producers repeatedly braced themselves and their operations 

as the coronavirus disrupted many aspects of the farm and rural economy. Price volatility, 

sudden shifts in demand, processing disruptions, and general uncertainty have contributed 

to one of the most challenging times for U.S. agriculture. Moreover, before the pandemic, 

farm prices for many commodities had been relatively low for five years, and financial stress 

was building for producers.

The hallmarks of U.S. agriculture — creativity, perseverance, and hard work — have served 

the nation well during the pandemic. Farmers and ranchers quickly adjusted to fastchanging conditions. Processors and manufacturers worked through spot shortages and 

continue to look for ways to make the food supply chain more resilient.

Fortunately, the farm economy is in better shape today than it was a year ago, thanks to 

robust U.S. exports and strong crop prices since last fall, particularly for major commodities 

such as corn and soybeans. Meat trade is also strong. For example, 2020 was the thirdhighest year on record for U.S. beef exports despite the COVID-19–related disruptions, 

which drove down exports by 30% in May and June. For fiscal year 2021, USDA expects 

total U.S. exports to hit a record high, with shipments to China leading the way.

USDA estimates gross farm income will remain unchanged in 2021 because an increase in 

total farm cash receipts is expected to offset a decline in government payments. With rising 

farm expenses, net cash farm income in 2021 will decline modestly, but it remains well 

above levels recorded from 2015 to 2019.

A record level of government support in 2020 has helped stabilize the farm sector. 

Payments arrived through traditional farm programs, USDA’s Coronavirus Food Assistance 

Program, and the Market Facilitation Program. Some producers also received proceeds 

under the Paycheck Protection Program. Importantly, a broad swath of agriculture and rural 

America has benefited from the Coronavirus Food Assistance Program, especially those who 

encountered serious market disruptions. A concern for the future is that, if agriculture faces 

another major disruption, current law does not provide for assistance of the magnitude 

supplied in recent years.

Farm debt continues to grow, with an expected increase of nearly 50% between year-end 

2012 and year-end 2021. USDA estimates that by the end of this year inflation-adjusted 

farm debt will be just $2 billion shy of the record set in 1980 and 1981. Despite the 

continued rise in debt, net cash farm income is expected to keep pace this year. A positive 
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indicator for loan repayment is strong farm income relative to debt, coupled with interest 

rates that are expected to remain low for the immediate future.

Farmers are now gearing up for spring planting season with a degree of optimism they 

haven’t felt for years, according to the Purdue/CME Group Ag Economy Barometer, which 

measures farmer sentiment. Expectations for the future beyond spring 2021 also remain 

high but have drifted lower in recent months, reflecting longer-run concerns about policies 

that could affect U.S. agriculture.

While producers certainly need a well-deserved dose of optimism, as a grain producer, I 

know how markets can reverse course. Higher prices will motivate more plantings here and 

abroad, which may add to supplies and cause prices to moderate. As always, weather 

during the growing season will shape the size of crops. In the meantime, producers have 

excellent opportunities to manage their risks through federal crop insurance and their own 

marketing plans. For livestock producers, margins have tightened or turned negative 

because of the rise in feed costs. Agricultural disaster funds continue to provide financial 

support to farmers and ranchers as they strive to overcome the weather-related calamities 

of the past year, including the severe winter weather that caused hardship for many 

operations last month.

Speaking of extreme weather events, a growing concern is the effect that climate change 

may have on agriculture and the rural economy. Fortunately, farmers have a history of 

adopting conservation practices in their operations that improve water, air, soil, and wildlife 

habitat and will no doubt continue to be receptive to further innovations. And I’m happy to 

report that the Farm Credit System and Farmer Mac are already supporting many renewable 

energy projects, including wind and solar.

Farmland values

Farmland and ranchland make up more than 80% of the farm sector’s total assets, and 

agricultural land value serves as a key indicator of farm financial health. Farmland values 

generally increased last fall after an extended period of relative weakness. In the 

agriculturally rich Chicago Seventh Federal Reserve District, a survey of agricultural bankers 

showed that agricultural land values rose 6% in 2020 — the largest gain since 2012. 

Moreover, values for “good” farmland in the district were up 4% in the fourth quarter of 

2020 from the third quarter. 

Higher cropland values in the Midwest are being driven by a robust upturn in income from 

higher grain and oilseed prices, large government payments to producers, and historically 

low rates on loans. Farmer and investor interest in purchasing farmland has risen, while the 

limited supply of land for sale has declined. Land that is attractive for recreation or housing

also increased in value during the year. Farmland prices will likely continue to be strong in 

2022 if the current factors driving supply and demand do not change significantly.

The rural economy

While the COVID-19 pandemic touched every corner of our country, many rural areas were 

hit particularly hard. COVID-19 outbreaks in the meat processing industry garnered 
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considerable media attention, especially in the early days of the pandemic. By fall, COVID19 had infiltrated most rural communities. Farm and rural businesses in these communities 

had to cope with the huge impact on their employees and communities, as well as changes 

in the markets they serve. 

Unlike some suburban and urban areas, rural communities often face inadequate medical 

infrastructure. Many found themselves less capable to cope with the crisis. Some rural 

hospitals were already struggling financially before the pandemic. While the national 

number of cases has receded from its January peak, access to medical care and to vaccines 

remains a vital concern for many rural communities. Through its investments in rural 

economic development and infrastructure, including health care facilities, the System is 

helping those communities make the necessary investments for their future. Today, rural 

economies are recovering from disruptions caused by the pandemic — with gains in rural 

manufacturing, a rebound in agriculture and forestry, and rising demand for recreational 

resources. Yet I remain concerned that some parts of the rural economy may face a rougher 

road to recovery, especially in areas with high unemployment.

One tool that can benefit all rural communities is high-quality broadband services. 

Unfortunately, broadband access is limited or unavailable in many rural communities. Even 

before the pandemic, broadband was critical to the future health and growth of rural 

communities. Now, with millions of people needing to work, learn, and receive medical care 

from their homes, broadband has become essential to the survival of these communities. 

Increasing broadband access will allow communities to retain current residents and attract 

new ones. This will in turn create opportunities for new businesses in these communities.

I’m pleased to report that the System is an important source of credit for communication 

providers serving rural America. At the end of 2020, the System’s portfolio for 

communication loans grew to $9.7 billion, up nearly $2 billion from the end of 2019.

Farm finances

Although farm income had deteriorated in recent years and was further weakened by the 

pandemic, farm finances and credit conditions improved as 2020 progressed. USDA 

estimates that net cash farm income increased 25% in 2020 to $136 billion. This income 

boost greatly improved the ability of farmers to make timely payments or reduce balances 

on credit lines. However, although working capital increased during the year to $84 billion, 

it is far below the 2012 peak of $165 billion, so this remains a concern.

Another factor that helped improve credit quality in 2020 was the sharp decline in interest 

rates during the year. Many farmers took advantage of the lower rates to restructure their 

balance sheets and lock in low interest rates. The average interest rate on outstanding 

System farm real estate loans fell from 5.03% in 2019 to 4.51% in 2020.

FCA encourages System lenders to work with borrowers to help them navigate difficult 

financial conditions without jeopardizing the long-term viability of the borrower or the 

System institution. Lenders have been proactive with borrowers encountering difficulty this 

past year, encouraging them to adjust their operations before it is too late. Also, most 
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System institutions implemented payment modification and loan deferral programs that are 

specific to the COVID-19 pandemic. 

Some farmers will continue to restructure their balance sheets (to the extent they are able) 

in 2021 and make changes in their operations. In 2020, use of Chapter 12 farm bankruptcy

filings declined to 552 in 2020 from 595 in 2019. Annual filings over the past 10 years have 

been in a relatively tight range — between 400 and 700.

Condition of the FCS

The FCS continues to be safe and financially sound. Despite the shock of the pandemic to 

the U.S. economy and agriculture, the System reported favorable financial results for the 

year, including strong earnings, increased capital, and acceptable portfolio loan quality. 

System institutions remain strongly capitalized, with significant risk-bearing capacity to 

support the credit needs of U.S. agriculture.

The System experienced strong loan growth in 2020 as borrowers took advantage of 

declining interest rates. Gross loans at year-end 2020 totaled $315.5 billion, up $28.5 billion 

or 9.9% year over year. Real estate mortgage lending, up $15.4 billion or 11.7%, 

accounted for most of the loan growth. Overall, real estate mortgage loans represented just 

under 47% of the System’s loan portfolio. 

Credit quality remains sound, and the System’s portfolio continues to perform well despite 

the unprecedented challenges in 2020. Nonperforming assets totaled $1.9 billion, or 0.60% 

of loans and other property owned as of December 31, 2020. This is down from $2.3 billion 

or 0.82% at year-end 2019. Loan delinquencies (accruing loans that are 30 days or more 

past due) declined to 0.28% of total accruing loans from 0.32% at year-end 2019. 

For 2021, although prospects have improved for the major cash crops, stress is likely to 

remain elevated for certain agricultural sectors and geographical regions. Uncertain demand 

prospects and rising feed costs are pressuring margins for livestock producers. High-cost 

producers and those with significant debt will be the most vulnerable to financial stress. 

The System remained well capitalized and continued to build capital in 2020. As of 

December 31, total System capital was $65.5 billion, up from $61.7 billion a year before.

Almost 80% of total capital is in the form of retained earnings. The System’s overall capitalto-assets ratio was 16.4%, down from 16.9% a year ago. 

The System’s strong capital position enhances its capacity to support agricultural producers 

and rural America. The allowance for loan losses at December 31, 2020, was $1.8 billion or 

95% of the System’s nonperforming assets. Capital, combined with the allowance for loan 

losses, represented 21% of total System loans outstanding as of year-end 2020.

Growth in System capital is due in large part to the System’s strong earnings. For 2020, the 

System reported net income of $6.0 billion, up from $5.4 billion for the same period a year 

ago. The net interest margin increased to 2.46% for 2020 from 2.42% for 2019 because of 

strong loan growth and the ability of System funding banks to take advantage of the decline 
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in the yield curve. Debt called during 2020 totaled $115 billion, compared with $54 billion 

during 2019. 

The System continues to maintain reliable access to the debt capital markets. Investor 

demand remains positive, allowing the System to continue to issue debt at competitive 

rates. Risk spreads and pricing on System debt securities remain favorable relative to 

corresponding U.S. Treasuries.

With a balance of $5.5 billion as of year-end 2020, the Farm Credit Insurance Fund further 

enhances the financial integrity of the System. Administered by the Farm Credit System 

Insurance Corporation, this fund protects investors in Systemwide consolidated debt 

obligations. System banks also maintain liquidity reserves to ensure they can withstand 

market disruptions. As of December 31, 2020, the System’s liquidity position equaled 171 

days, significantly above the 90-day regulatory minimum required for each FCS bank.

Response of FCA to the pandemic

When the national emergency was declared almost a year ago, our first concern was how to 

keep our employees safe while continuing to fulfill our public mission. Thanks in large part 

to our IT staff and the technologies they have put in place for our use, we were able to do 

just that. We also relied heavily on real-time data to make decisions about closing offices, 

opening them on a limited basis, and establishing protocols to keep employees safe when 

they are in the office.

One of our first actions in response to the pandemic was to send a message to the 

institutions we regulate, urging them to work with borrowers affected by the pandemic and 

notifying them that we can provide some temporary regulatory relief to help them manage 

the challenges of the pandemic. Since then, we have issued numerous guidance documents 

related to the pandemic, including detailed guidance on providing Paycheck Protection 

Program loans to System borrowers. 

Young, beginning, and small farmers and ranchers

Congress requires each System association to have a program to provide credit and related 

services to young, beginning, and small (YBS) farmers and ranchers. In the late 1990s, FCA 

established a system to monitor the associations’ YBS programs and activities and to 

receive reports regarding the associations’ YBS lending. We include data from these reports 

in our annual reports to Congress.

On February 21, 2019, we published an advance notice of proposed rulemaking to seek 

public comment on ways to improve the YBS data collection process. Using the input we 

received, we are modernizing the System’s reporting of YBS data for lending and nonlending 

activities. Over the past year, we have made significant strides in improving the collection of 

YBS data. To accomplish this, we are engaged in a transparent long-term process to use 

existing data assets to reduce regulatory burden, improve efficiency, and promote 

consistency in YBS data reporting. We are also working to enhance public reporting of YBS 

activities; these public reports are available on our website. 
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In addition, we are working with USDA’s Farm Service Agency to find ways for agricultural 

lenders to better use USDA resources for YBS producers. In October, we helped USDA 

facilitate a meeting of stakeholders to determine how to improve service to beginning 

farmers and ranchers.

Condition of Farmer Mac

Congress established Farmer Mac in 1988 to create a secondary market for agricultural real 

estate and single-family rural housing mortgage loans. Farmer Mac has authority to 

purchase agricultural real estate mortgages and rural home loans, USDA-guaranteed farm 

and rural development loans, and rural utility cooperative loans. It is also authorized to 

create and guarantee securities and other secondary market products that are backed by 

such loans.

By providing a ready source of liquidity for primary lenders, Farmer Mac increases the 

availability of reasonably priced credit to agriculture and rural America. It provides 

wholesale portfolio funding, credit guarantees, and other products for its network of lenders, 

including agricultural banks, insurance companies, Farm Credit System institutions, 

nonbank lenders, and rural utility cooperative lenders. Since its inception, Farmer Mac has 

helped fund farmers, ranchers, rural electric cooperatives, and agribusinesses in all 50 

states and has provided more than $58 billion of investment in rural America. 

Even with its workforce working remotely for the past 12 months, Farmer Mac has 

continued to fulfill its mission, and its condition is safe and sound. As of December 31, 

2020, Farmer Mac’s outstanding program volume reached $21.9 billion. Net income 

available to common stockholders for the 12 months ended December 31, was $89.2

million, up 0.9% from the same period in 2019. Farmer Mac’s core capital totaled $1.0 

billion as of December 31, which exceeded its statutory minimum requirement of $674.5

million by $352.5 million.

Despite recent stress in the agriculture sector, Farmer Mac’s credit quality remains sound. 

No delinquencies exist in Farmer Mac’s Institutional Credit, USDA Guarantees, and Rural 

Utilities lines of business, which represent 61% of its program volume. In fact, rural utilities 

have seen reasonably stable demand throughout the pandemic — despite some brief 

demand disruption. 

The Farm & Ranch portfolio represents the remaining 39% of outstanding volume. As of 

December 31, 2020, substandard loans were 3.4% of the total Farm & Ranch portfolio, 

down 0.6 percentage points from a year earlier, and loans more than 90 days delinquent 

decreased to 0.54% of the total Farm & Ranch portfolio from 0.78% as of December 31, 

2019. Farmer Mac worked with loan servicers to facilitate COVID-19–related payment 

deferment requests from borrowers. It executed 472 payment deferments on $432 million 

of outstanding principal on Farm & Ranch loans and loans underlying USDA securities.

Cybersecurity

Cybersecurity is a key focus for us at FCA. We protect our systems and data in a variety of 

ways: filtering out known malicious websites and emails, monitoring our network for 
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unexpected activity, encrypting our data and sensitive communications, and communicating 

with other agencies and our regulated entities to ensure we’re using best practices. We’re 

also looking for ways to constantly strengthen cybersecurity. This past year we emphasized 

staff awareness by increasing cybersecurity training. As the recent SolarWinds hack 

demonstrated, cybersecurity is an area that no organization can afford to ignore. 

Fortunately, our agency was not affected by the incident because we were not using the 

version of the software with the vulnerability that enabled the hack. We often wait to install 

the latest version of software programs to ensure that any technical issues are worked out.

Cybersecurity is also one of the many aspects we consider when examining the institutions 

we regulate. Although, at the time of the incident, three institutions were using the version 

of SolarWinds with the vulnerability, none appeared to have been attacked, and all have 

since switched to a safe version of the software.

Conclusion

We at FCA remain vigilant in our efforts to ensure that the Farm Credit System and Farmer 

Mac remain financially sound and focused on serving agriculture and rural America. We will 

continue our commitment to excellence, effectiveness, and cost efficiency and will remain 

focused on our mission of ensuring that System institutions and Farmer Mac are safe, 

sound, and dependable sources of credit for agriculture and rural America.

This concludes my statement. On behalf of my colleagues and the staff at the agency, I 

thank you for the opportunity to share this information.