Quarterly Report on FCS Condition

April 11, 2024

Rebecca Kaiser – Economist 

Brianna Tomlinson – Supervisory Examiner
2

Topicsfor Open Session

Economic Conditions Affecting the Farm Credit System

▶ Macroeconomic conditions

▶ Farm sector income and margin squeeze

▶ Issues shaping risk in livestock industry

Farm Credit System Condition and Performance

▶ System growth and loan portfolio

▶ Earnings and capital

▶ Financial Institution Rating System (FIRS)
3

Interest ratessteady amid inflation risk

▶ High inflation in 2022 and 2023 led to

sharp increase in interest rates aimed

at bringing it down to 2%.

▶ The Fed has signaled possible rate cuts 

in 2024.

▶ Concerns about recession loom, but 

some economic indicators remain 

strong.

Sources: Bureau of Labor Statistics; Board of Governors of the Federal Reserve System; Freddie Mac

Core CPI

8%

6%

4%

2%

0%

8%

6%

4%

2%

0%

2019

Average 30 year Mortgage Rate

2020 2021 2022

Fed Funds Rate

2023 2024
4

Farm income expected to drop substantially

-30%

-20%

-10%

0%

10%

20%

30%

40%

2018 2019 2020 2021 2022 2023F

Source: USDA ERS Farm Income and Wealth Statistics

2024F

$0

$50

$100

$150

$200

$250

$300

$350

2018 2019 2020 2021 2022 2023F 2024F

Millions

Year-over-Year Change in Production Cash Receipts and Net Cash Farm Income 

Expenses Animals and products Crops Net cash income

Interest Pesticides Fertilizer Fuel
5

Cash grain prices decline following highs in 2023

Source: USDA World Agricultural Supply and Demand Estimates 

Values for 2023 are estimates and 2024 are projections.

$0

$1

$2

$3

$4

$5

$6

$7

$8

0

500

1,000

1,500

2,000

2,500

2009 2011 2013 2015 2017 2019 2021 2023E

$ / Bushel

Millions of Bushels

U.S. Corn Prices and Ending Stocks

Ending Stocks Farm Price
6

Long-lasting drought eases across the country

0%

2019 2020 2021 2022 2023 2024

Source:National Drought Mitigation Center, University of Nebraska-Lincoln

Percent of Cropland in Extreme and 

Exceptional Drought

Corn Soybeans Winter Wheat

40%

35%

30%

25%

20%

15%

10%

5%
7

Sources: USDA NASS January 1 Cattle Inventory; Sterling Beef Profit Tracker

Cow-calf margins rise as inventory shrinks

75

80

85

90

95

100

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

2018 2019 2020 2021 2022 2023 2024

Head of Cattle (millions)

$ / Head

Cattle Inventory and Profit Margins

Inventory Cow-calf Margins
8

Eventsshaping risk to livestock industry

▶ Texas wildfires:

▪Texas panhandle has largest concentration 

of cattle in the United States.

▪Impact of fires are felt in local areas with 

negligible effect on national beef supplies.

▶ Highly Pathogenic Avian Influenza (HPAI):

▪HPAI detected in dairy cattle in multiple 

states and has been transmitted from cattle 

to humans.

▪Questions about how virus moves through 

and across herds.

▪Egg operation in Texas tested positive.

Sources: USDA NASS Census of Agriculture, 2022;

Incident Information System, inciweb.wildfiles.gov

Texas Cattle Inventory and Wildfire Zone

Dark color represents 

higher number of 

cattle.
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CA Prop 12 arrives with hog margins under pressure

▶ California’s Proposition 12: Pork 

provisions prohibit the confinement of 

breeding pigs. The law went into full 

effect January 1, 2024.

▶ Drawn-out process may have allowed 

the market to adjust, but some analyses 

are showing Californians are already 

paying higher pork prices.

▶ Farrow-to-finish returns are already slim 

and negative.

Source: Iowa State University, 2024

-$40

-$60

-$20

$0

$20

$40

$60

$80

2019 2020 2021 2022 2023 2024

Farrow-to-Finish Hog Returns

($ / Head)
10

Producer sentiment holding up better than corn prices

$0

$1

$2

$3

$4

$5

$6

$7

$8

0

20

40

60

80

100

120

140

2022 2023

Sources: Purdue Center for Commercial Agriculture, Producer Survey, February 2024; USDA NASS

2024

$ / Bushel

Oct 2015 

– Mar 2016

= 100

Producer Sentiment vs Corn Prices

Purdue Ag Barometer Corn Price
11

Questions
Farm Credit System 

Condition and Performance 

as of December 31, 2023

Brianna Tomlinson 

Supervisory FCA Examiner 

Office of Examination
11.5%

8.0% 7.5% 7.4%

5.0%

6.1%

11.3%

19.5%

2.8%

10.5%

5.1%

23.2%

RE Mortgage

(45%)

Production & 

Intermediate 

(18%)

Agribusiness

(18%)

Rural Infrastructure

(14%)

Portfolio growth slowed in 2023, but certain 

loan categories posted strong gains

Source: Federal Farm Credit Banks Funding Corporation Information Statements

2

+3.1% Qtr +3.4% Qtr

+6.5% 12M +6.7% 12M

Total

Assets

12/31/23

$507.8

billion

Gross

Loans

12/31/23

$398.2

billion

Loan Growth by Loan Type

(% change year-over-year)

$16.0

19.7

13.0

10.1

13.5 13.6

28.5 28.4 29.3

$24.9

9.1%

4.0%

5.0%

9.9%

8.5%

6.7%

Loan volume increase % loan growth

Portfolio Loan Growth

(% change year-over-year)

(amounts in billions)

Percentage 

of Portfolio
$2,022

$2,282 $2,347

$1,897

$1,578 $1,755 $1,798

0.78%

0.83% 0.82%

0.60%

0.46% 0.47% 0.45%

Nonaccrual Loans

Other Nonperforming

OPO

% Nonperforming assets

3

Portfolio credit risk remained low, but nonaccruals 

and less than Acceptable loans increased in 2023

(amounts in millions) (1) Includes lease receivables

(1) Prior to the adoption of CECL on 1/1/23, nonperforming assets included accruing restructured loans 

Source: Federal Farm Credit Banks Funding Corporation Information Statements

4.1%

3.7%

5.4%

5.6%

2.9%

3.2%

2.9%

4.5%

5.1%

1.0%

4.3%

4.1%

6.4%

5.5%

0.8%

Total 

Portfolio

Real Estate 

Mortgage

Production & 

Intermediate (1)

Agribusiness

Rural 

Infrastructure

Loans Classified Less than Acceptable

(as a percentage of loans outstanding)

Dec-23 Dec-22 Dec-21

Nonperforming Assets(1)

(as a percentage of loans outstanding and other property owned)
System portfolio is diversified by commodity

Loan Portfolio by Major Commodity Concentration

Source: Federal Farm Credit Banks Funding Corporation Information Statements 4

Cash Grains 

14.3%

Rural 

Infrastructure 

13.7%

Food 

Products 

9.3%

Cattle 

9.1%

Forestry 

6.1%

Tree Fruits, 

Nuts & Grapes 

6.0%

Rural Home 

5.9%

Dairy

Farms

Field 5.9%

Crops

5.1% Other

Crops

5.1%

Farm Supply & 

Marketing

3.7%

Other 

Livestock 

2.6%

Poultry & Eggs 

2.5%

Hogs 

2.2%

Agricultural 

Export Finance 

2.1%

Other 

6.4%

Cash Grains 57,104 14.3% 2.6%

Tree Fruits, Nuts & Grapes 23,976 6.0% 2.9%

Field Crops 20,351 5.1% 4.7%

Other Crop Production 20,474 5.1% 5.9%

Total Crop Production 121,905 30.6% 3.5%

Cattle 36,364 9.1% 9.2%

Dairy Farms 23,410 5.9% 6.3%

Poultry & Eggs 9,884 2.5% 3.8%

Hogs 8,645 2.2% 2.8%

Other Livestock 10,180 2.6% 3.5%

Total Animal Production 88,483 22.2% 6.5%

Rural Infrastructure

Food Products

54,457

37,104

13.7%

9.3%

23.2%

14.6%

Rural Home Loans 23,541 5.9% 5.4%

Forestry 24,111 6.1% 12.4%

Farm Supply & Marketing 14,627 3.7% (8.4%)

Agricultural export finance 8,418 2.1% (16.4%)

Other 25,530 6.4% (1.9%)

Total 398,176 100.0% 6.7%

System Loan Portfolio

(amounts in millions) Dec-23 % of Total % chg. 

Portfolio yr. over yr.
Portfolio volume is geographically dispersed

Source: Federal Farm Credit Banks Funding Corporation Information Statements

5

Percentage of System Loan Volume by State

as of Dec. 31, 2023

(only states with at least 1% are displayed)
System reported increased earnings, but

provisionsfor credit losses were higher

Source: Federal Farm Credit Banks Funding Corporation Information Statements 6

$4,848 5,189 5,332 5,446

6,002

6,796

7,268 $7,445

266 197 194 169 107 40

614

2018 2019 2020

(152)

2021 2022 2023

System Net Income

Provisions for Credit Losses

2016 2017

(amounts in millions)

System Net Income

(for the year ended Dec. 31)

177

35

(366)

191

(574)

891

Net Income

Other

Noninterest Expense

Noninterest Income

Provisions for Credit Losses

Net Interest Income

Changes in key components of net income

(2023 vs. 2022)

(amounts in millions)
System capital and liquidity levels are strong

▶ For 2023, System capital increased $4.7 

billion or 6.9% year-over-year.

▶ The System’s capital-to-assets ratio at 

year-end was 14.4%, unchanged from a 

year ago.

▶ Total regulatory capital ratios were sound

- Banks: 13.4% to 16.0%

- Associations: 12.5% to 33.4%.

▶ Days of liquidity for the 4 funding banks 

ranged from 161 to 219 days.

▶ As of December 31, accumulated other 

comprehensive loss (AOCL) equaled $4.5 

billion, down from $5.5 billion a year ago.

Source: Federal Farm Credit Banks Funding Corporation Information Statements (1) Restricted Capital represents capital associated with the FCS Insurance Fund

7

$45.7

48.8

52.3

55.4

58.4

61.7

65.5

69.5 68.6

$73.3

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

16.4% 15.9%

14.4% 14.4%

Restricted Capital (1)

Total Capital less Restricted

capital-to-assets ratio

System Capital

(as of December 31)

(amounts in billions)
Composite FIRS ratings are strong

Composite FIRS Ratings

(based on 12/31/23 financial reporting)

▶ Composite FIRS ratings reflect the 

System’s sound financial condition.

▶ Over 96% of System banks and 

associations have a Composite FIRS 

rating of 1 or 2.

▶ Institutions rated 3 or lower hold less 

than 1% of System assets.

8

Source: FCA’s FIRS ratings database

Composite FIRS Ratings

Farm Credit System Banks and Associations

44 39

34 30 32 33 35 35

31

29

32

35 35 32 26 23

2

5 7 7 4 4

3

2

0

10

20

30

40

50

60

70

80

90

1/1/17 1/1/18

Number of Rated Institutions

1/1/19 1/1/20 1/1/21

1 Rated 2 Rated

1/1/22 1/1/23 1/1/24

3 Rated or lower
Risks we are monitoring

We anticipate a more challenging operating environment for both 

borrowers and System institutions moving forward:

• Declining net farm income and margin compression (especially for cash 

grains) resulting from lower commodity prices

• Increased stress in certain industry segments including swine, dairy, tree 

nuts, and poultry

• Higher interest rates during a period of declining liquidity and increased 

reliance on operating lines

• The impact of lower profit margins and higher interest rates on real property 

values

• Other concerns – weather, avian influenza, and increased global tensions

9