Quarterly Report on 

FCS Condition 

December 10, 2020 

Steven Koenig

Hal Johnson

FCA Board Meeting 

December 2020

1
Topics for Open Session

 Economic Conditions Affecting the Farm Credit 

System

▪Economic conditions

▪Commodities and trade

▪Agriculture sector finance

 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

Steven Koenig

Senior Agricultural Economist 

Office of Data Analytics and Economics

3
Economic trends going into 2021

 World & U.S. economies expected to rebound in 2021 but under continuing 

pandemic influences and uncertainties

 World trade growth 

 China

 Dollar value 

 U.S. economy rebounds with support

 U.S. labor markets healing 

 Consumer spending is a strength

 Business investment rebounds 

4
Improved prospects for major cash crops

5

Corn and soybean supplies tighten

* Excluding China. 

Data source: USDA/WAOB, November 10, 2020. 
China returns to the market

China has returned to purchasing 

soybeans in the U.S. market in part 

to meet the needs of recovering 

hog production in the aftermath of 

the African Swine Fever.

U.S. soybean export commitments 

to China this year are expected rise 

to 26.8 million tons compared to 7.1 

million the previous year. 

Total soybean commitments to the 

world, including unknown 

destinations, more than doubled to 

48.5 million tons compared to 20.9 

million last year.

6

Source: USDA/FAS. 
China returns to the market

 China’s combined grain 

imports are forecast at a 

record level in 2020/21 driven 

by demand for feedstuffs. 

 Greater imports by China are 

primarily driven by corn 

purchases.

 China wheat imports of 8.0 

million tons in 2020/21 are 

forecast at their highest level 

in 25 years. The demand is 

being driven for feed-quality 

wheat in the face of high price 

of domestic corn. Source: USDA/FAS. 7
Profits for corn and soybeans but not wheat

8

Sources: USDA/WAOB data and FCA/ODAE.
Looking ahead: future prices offer pricing 

opportunities 

9

Data source: DTN, as of 12/1/2020. 

To be Updated 
Cotton depends on trade

 U.S. stock-to-use ratio is the 

highest since 2007/08

 Ample world production and 

supplies restrain prices

 Softer demand in the pandemic

 Favorable U.S. yields and 

government payments help 

producers

10

Data source: USDA/WAOB, November 10, 2020. 

Note: Upland cotton prices.
Outlook for 2021: Drought watch 

11

Source: https://droughtmonitor.unl.edu/. 
Mixed picture for protein 

 Tight margins for cow/calf and feeders 

 Profits for dairy and hogs

 Broilers continue to see red

 Looking ahead:

 Retail vs. food service marketing disruptions

 Processing changes & disruptions

 Rising feed costs

 Export growth 

12
Dairy production and profits rise

13

Shaded areas is a forecast.

Source: IHS Markit.
Hog profits return...China backs off

14

Shaded area is a forecast. 

Source: IHS Markit.

Data Source: USDA/FAS.
Broiler returns coming out of the red?

15

Shaded area is a forecast. 

Source: IHS Markit.

National Whole Broiler/Fryer Composite Price

Cents per pound

Source: USDA/AMS.
Forestry, nursery, rural housing benefit

 Home purchases and prices move 

higher on historically low interest 

rates and shift in COVID-induced 

demand

 Forestry products (timber and 

wood manufacturing) and 

nursery products see direct 

benefit from construction and 

remodeling boom

 Paper products see increased 

packaging demand from ecommerce

16 Data: www.macrotrends.net.
Farm finance measures signal caution 

17

Data source: USDA, Economic Research Service, 12/2/2020.

30-year average, 18%

30-year average, 29%
The stalwart farmland market

18

Data sources : USDA and St. Louis Federal Reserve Bank. 

Historically low rates, limited land supply, rising land returns 
Concluding comments

Challenges in U.S. economic recovery

Mixed outlook for major farm commodities

Global demand uncertainties

Future policies impacting Ag

19
Questions

THANK YOU

20
Farm Credit System 

Condition and Performance 

as of 

September 30, 2020

Hal Johnson

Sr. Financial Analyst

Office of Examination

21
Topics

▶ System growth

▶ Portfolio credit quality

▶ Earnings

▶ Capital | Liquidity

▶ FIRS

22
Strong real estate mortgage lending 

continued to drive portfolio loan growth

Source: FCS Information Statements 23

Total 

Assets

9/30/20

$384.9

billion

 0.1% Qtr

+5.4% YTD

Gross

Loans

9/30/20

$301.6

billion

 +1.5% Qtr

 +5.1% YTD

0.3%

3.0%

1.5%

-0.2%

1.2%

3.2%

0.3%

0.8%

0.0%

3.9%

2.0% 1.6% 1.5% 2.0%

3.4%

-0.1%

0.6%

1.0%

2.3%

1.2%

-1.4%

5.1%

7.5%

1.7%

0.2%

-2%

2%

6%

10%

14%

Total Loan

Portfolio

RE Mortgage

(47%)

Prod. &

Intermediate

(19%)

Agribusiness

(17%)

2018

2019

2020

Loan Growth by Loan Type

% change year-to-date through September

Quarterly Portfolio Loan Growth
Portfolio loan quality remained stable

24

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

Source: FCS Information Statements

6.6

6.6

10.3

6.0

1.8

7.1

7.2

11.1

5.6

3.4

7.4

7.4

11.9

5.8

3.2

0.0 5.0 10.0

Total

Portfolio

Real Estate

Mortgage

Production &

Intermediate

Agribusiness

Rural

 Infrastructure

Sep-20 Dec-19 Sep-19

$2.321 YTD chg. - $26M or -1.1%

billion 12 month 

chg. - $228M or -8.9%

Q4 '19 0.32%

Q3 '19 0.30%

 Nonperforming 

Assets

(9/30/20)

 Delinquencies (1)

(9/30/20) 0.28%

% of Loans Classified less than Acceptable
Percentage of nonperforming assets edge 

lower as nonaccrual loans decline

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

property owned (OPO)

Source: FCS Information Statements 25

65.3%

60.6% 59.7%

55.8%

60.1%

55.2%

52.6%

57.8%

Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20

1.53%

1.11%

0.86%

0.73%

0.82% 0.78% 0.83% 0.82%

0.77%

% of Nonperforming Assets(1)

Nonaccrual Loans that are current as to 

Principal and Interest
The System reports strong earnings; interest 

spread widens year-over-year

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

4,012 4,055 

4,446 

7 

87 

218 188 146 95 

165 

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

System Net Income

Provision for Loan Losses

Source: FCS Information Statements 26

6.3% 7.0% 6.4%

9.8%

4.1% 4.2% 5.2%

7.2%

Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20

System Earnings ($M)

Year-to-date through September

% increase in Average Earning Assets 

(compared to the same period a year ago)

Net Interest Spread

(YTD annualized)

Net Interest Margin

(YTD annualized)

Sept. '18 Sept. '19 Sept '20

2.13%

2.45%

2.02%

2.41%

2.22%

2.45%
Capital and Liquidity

( as of September 30, 2020 )

▶ Total Regulatory Capital:

Banks| 15.8% to 18.5%

Associations| 12.0% to 37.4%

▶ Days of liquidity for the four 

funding banks ranged from 

168 to 218 days

▶ Capital and the allowance for 

loan losses as a % of loans 

outstanding ranged from 

18.7% to 23.7% at a combined 

district level

Source: FCS Information Statements Note: Restricted capital represents capital associated with the Insurance Fund. 27

The System is strongly capitalized

42.6 

45.7 

48.8 

52.3 

55.4 

58.4 

61.7 

66.0 

16.3% 16.2% 16.1% 16.4% 16.8% 16.7% 16.9% 17.1%

Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Sep-20

System Capital

Total Capital less Restricted

Capital-to-Assets Ratio

Total System Capital ($B)
System FIRS ratings

FIRS Ratings

( based on 9/30/20 financial reporting )

▶ Composite FIRS ratings remained 

steady in the 3rd quarter

▶ Almost 95% of System Banks and 

Associations have a Composite 

FIRS rating of 1 or 2

▶ Institutions rated 3 or lower 

account for about 1.0% of 

System assets

Composite FIRS Ratings

Farm Credit System Banks and Associations

Source: FCA’s FIRS ratings database 28

43 44 46 44 39 34 30 30

31 32 29 31

29 32 35 38

8 4 3 2

5 7 7 4

0

10

20

30

40

50

60

70

80

90

100

Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Sep-20

Number of Rated Institutions

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

▶ U.S. economic activity rebounded sharply in the 3rd quarter.

▶ Prospects have improved for the major cash crops, but 

challenges remain for the livestock sector.

▶ System portfolio loan quality has been stable, but the risk 

environment for agriculture remains elevated.

▶ The Farm Credit System remains fundamentally safe and 

financially sound.

▶ System institutions are strongly capitalized and are wellpositioned to support agricultural producers and rural America.

29
Questions

THANK YOU

30