Quarterly Report on 

FCS Condition 

September 10, 2020 

Dennis A. Shields

Hal Johnson

FCA Board Meeting 

September 2020

1

From YG 9/3/2020_4:31 p.m.
Topics for Open Session

▶ Economic Conditions Affecting the Farm Credit 

System

▪Economic indicators during COVID-19

▪Commodities and trade

▪Agriculture sector income

▶ 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

Dennis A. Shields

Chief Economist 

Office of Data Analytics and Economics

3
U.S. economy continues recovery after steep 

contraction in spring

Weekly Economic Index 

Source: Federal Reserve Bank of New York, https://www.newyorkfed.org/research/policy/weekly-economic-index.

Note: The Weekly Economic Index is scaled to an annual GDP growth rate and is an index of ten daily and weekly 

indicators covering consumer behavior, the labor market, and production. 4

8/22/20 

-4.3

8/29/20

-5.0

4/25/20

-11.5
Trend in COVID-19 cases varies by U.S. region

Northeast

West

Source: Data from Johns Hopkins University Center for System Science and Engineering (as of 9/2/20).

South

Midwest

5
Unemployment remains elevated in many 

areas of the United States

6

Unemployment rate by county in July 2020

Source: FCA using data from U.S. Bureau of Labor Statistics, https://www.bls.gov/news.release/empsit.a.htm.

0% 10% 30%

July 2019 July 2020 

Employed 157.3 mil. 143.5 mil. 

Unemployed 6.0 mil. 16.3 mil.

Unemployment rate 3.7% 10.2% 

20%
Consumer spending has recovered some

Change in average consumer credit and debit card spending since January

Source: www.tracktherecovery.org. 7
Expectations for large corn and soybean crops are 

tempered by poor weather in parts of the Midwest

▶ Farm prices for 2020 crops are 

forecast lower, but drought and 

exports have lifted markets recently.

▶ Price Loss Coverage payments 

supplement market returns when 

corn price < $3.70 per bu. and 

soybean price < $8.40 per bu. 

▶ Wheat prices remain weak as large 

global stocks continue to overhang 

the market.

8

U.S. season-average farm price ($/bu.)

$4.55

$8.24

$3.24

$4.58

$8.55

$3.60

$5.16

$8.48

$3.61

Wheat

Soybeans

Corn

2018/19

2019/20 forecast

2020/21 forecast

Source: FAPRI using August data. 
Crop returns could fall sharply in 2021 without 

ad hoc federal assistance

Central Illinois operator and land returns (bars) and cash rents (line) 

(assumes ad hoc payments for 2020 crop but not for 2021)

Source: farmdocdaily.illinois.edu/2020/08/cash-rents-in-2020-and-2021.html.

Note: High-productivity farmland. 9

non-farm bill payments
Livestock sector faces weather and price 

challenges following COVID-related disruptions

▶ For cow-calf producers, drought is 

pushing cows off marginal pastures; 

4th quarter calf prices are expected 

below a year ago.

▶ Hog producers are expected to be 

unprofitable for rest of 2020 as the 

industry works through backlog of 

hogs. 

▶ Dairy margins have been positive this 

summer with strong cheese demand 

lifting milk prices.

10

Annual prices ($/cwt.)

Source: FAPRI using August data. 

$16.75

$41.97

$150.94

$17.69

$38.90

$144.46

$18.63

$47.95

$153.65

$16.28

$45.93

$159.20

Milk

Hogs

Feeder steers

2018 2019

2020 forecast 2021 forecast
U.S. ag exports to rise in 2021 as shipments to 

China advance

Fiscal year U.S. agricultural exports 

($ bil.)

Source: USDA/ERS.

Note: Forecasts as of August 26, 2020. 11

2019

2020 

forecast

2021 

forecast

Canada $21.0 $20.8 $21.0 

Mexico $19.0 $19.0 $19.3 

China $10.1 $14.0 $18.5 

Europe $13.2 $11.7 $11.9 

Japan $12.1 $11.6 $11.8 

World $135.5 $135.0 $140.5 

20.8
Government payments continue to strengthen 

farm income

▶ Cash receipts in 2020 are forecast 

to decline 3.3% to $358.3 billion. 

▶ Cash expenses are down 1.3%, 

driven by lower interest expense.

▶ Net cash farm income is forecast to 

increase 4.5% to $115.2 billion, 

which is above the historical 

inflation-adjusted average.

▶ Government payments account for 

a growing share of farm income.

Net cash farm income

Source: USDA/ERS, September 2, 2020. 12

125 122

96 83 90 89 88 78

11 10

11

13 12 14 22 37

0

20

40

60

80

100

120

140

2013 2014 2015 2016 2017 2018 2019 2020F

$ bil. Direct government payments

Income excluding gov. payments
Government support has been broadened to 

include many “non-program” commodities

▶ Farm program commodities: corn, soybeans, wheat, rice, cotton, peanuts, 

lentils, chickpeas, etc.; separate programs for milk and sugar. 

▶ Recent ad hoc programs have expanded assistance to more commodities:

▪ 2018 Market Facilitation Program (MFP)

✓ 4 non-program commodities 

▪ 2019 MFP

✓ 13 non-program commodities 

▪ 2020 Coronavirus Food Assistance Program (CFAP)

✓ More than 125 non-program commodities 

▶ With ad hoc payments, risk is reduced but only after-the-fact.

▶ Next farm bill will likely consider breadth and depth of farm support.

13
Concluding comments

▶ U.S. economic recovery is uneven as consumers and businesses adapt to 

challenges of COVID-19 impacts and attempt to find normalcy. 

▶ Off-farm income prospects could be most affected in areas with largest 

changes in employment.

▶ Commodity prices and returns continue to pressure producers. 

▪ Major crop supplies remain plentiful; weather issues this summer have created both 

production losses (in some areas) but also marketing opportunities with price rallies. 

▪ Protein sector supplies are also plentiful; drivers include export demand and a rebound in 

foodservice demand. 

▪ For specialty crops, availability of farm workers remains a major concern.

▶ Substantial ad hoc government payments are helping many producers in 

2020; there is no guarantee of a repeat next year. 

14
Questions

THANK YOU

15
Farm Credit System 

Condition and Performance 

as of 

June 30, 2020

Hal Johnson

Sr. Financial Analyst

Office of Examination

16
Topics

▶ System growth

▶ Portfolio credit quality

▶ Earnings

▶ Capital | Liquidity

▶ FIRS

17
Real estate mortgage lending drives portfolio 

growth in the 1st half of the year

Source: FCS Information Statements 18

Total 

Assets

6/30/20

$384.7

billion

 -0.7% Qtr

+5.3% YTD

Gross

Loans

6/30/20

$297.2

billion

 +1.6% Qtr

 +3.6% YTD

0.8%

1.7%

-4.9%

4.7%

1.0% 0.9%

-2.0%

6.6%

3.6% 4.4%

0.2%

1.3%

-10%

-5%

0%

5%

10%

15%

Total Loan

Portfolio

RE Mortgage

(46%)

Prod. &

Intermediate

(19%)

Agribusiness

(17%)

2018

2019

2020

Loan Growth by Loan Type

% change year-to-date through June

0.1% 0.3%

3.0%

1.5%

-0.2%

1.2%

3.2%

0.3% 0.8%

0.0%

3.9%

2.0% 1.6%

Quarterly System Asset Growth
Credit risk indicators mixed; market 

uncertainty remains high for producers

19

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

Source: FCS Information Statements

6.8

6.8

10.4

6.1

3.3

7.1

7.2

11.1

5.6

3.4

7.2

7.5

12.0

5.0

2.9

0.0 5.0 10.0

Total

Portfolio

Real Estate

Mortgage

Production &

Intermediate

Agribusiness

Rural

 Infrastructure

Jun-20 Dec-19 Jun-19

% of Loans Classified less than Acceptable

$2.487 YTD chg. + $140M or +6.0%

billion 12 month chg. - $43M or -1.7%

Q4 '19 0.32%

Q2 '19 0.36%

 Nonperforming 

Assets

(6/30/20)

 Delinquencies (1)

(6/30/20) 0.37%
Nonperforming assets edge higher; indications 

of increasing portfolio stress

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

property owned (OPO)

Source: FCS Information Statements 20

1.53%

1.11%

0.86%

0.73%

0.82% 0.78% 0.83% 0.82% 0.84%

% of Nonperforming Assets(1)

82% 80% 81% 78% 77%

11% 11% 13% 12% 12%

5% 5%

3%

7% 8%

3% 3% 3% 3% 3%

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

Nonaccrual Accruing Restructured

Accruing 90 Days or More Past Due Other Property Owned

65.3%

60.6% 59.7% 55.8%

60.1%

55.2%

52.6%

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

Nonaccrual Loans that are Current 

as to Principal and Interest

Nonperforming Assets by Performance Category
Strong earnings growth year-over-year; 

loan provisions rise

2,341 2,273 2,337 2,466 

2,649 2,668 

2,873 

(35)

50 

160 117 87 66 

158 

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

System Net Income

Provision for Loan Losses

Source: FCS Information Statements

3.41 3.48 3.75 4.21 4.40 

3.81 

1.01 1.17 1.50

2.09 2.36

1.60

2.40 2.31 2.25 2.12 2.04 2.21 

2.55 2.49 2.48 2.46 2.42 2.44 

2015 2016 2017 2018 2019 Jun '20

Rate: Earning Assets Rate: Interest-Bearing Liabilities

% Net Interest Spread % Net interest Margin

21

Net Interest Spread | Net Interest Margin System Earnings ($M)

Year-to-date through June

Rate | Volume Impact on Net Interest Income

YTD through June Volume Rate Total

 Interest Income 467 (1,167) (700)

 Interest Expense 263 (1,303) (1,040)

Net Interest Income 204 136 340 

Increase (decrease) due to:
Capital and Liquidity

( as of June 30, 2020 )

▶ Total Regulatory Capital:

Banks| 15.0% to 18.0%

Associations| 12.4% to 37.5%

▶ Days of available liquidity for 

the 4 funding banks ranged 

from 180 to 223 days

▶ Capital and the allowance for 

loan losses as a % of loans 

outstanding ranged from 

18.4% to 23.3% at a district 

level

Source: FCS Information Statements Note: Restricted capital represents capital associated with the Insurance Fund. 22

System is financially sound and well-capitalized

Total System Capital ($B)

42.6 

45.7 

48.8 

52.3 

55.4 58.4 

61.7 64.8 

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

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

System Capital

Total Capital less Restricted

Capital-to-Assets Ratio
System FIRS ratings

FIRS Ratings

( based on 6/30/20 financial reporting )

▶ Composite FIRS ratings remained 

steady in the 2nd 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 23

43 44 46 44 39 34 30 29

31 32 29 31

29 32 35 39

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 Jun-20

Number of Rated Institutions

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

▶ The U.S. economy is recovering as local economies reopen, but 

significant uncertainty persists. 

▶ For agricultural producers, market volatility and price concerns 

remain high for key crop and livestock sectors.

▶ The Farm Credit System remains fundamentally safe and sound.

▶ Although portfolio credit quality is expected to deteriorate, 

System institutions are strongly capitalized with significant riskbearing capacity.

▶ System institutions are well-positioned to support agricultural 

producers and rural America. 24
Questions

THANK YOU

25