the farm credit system · fca regulations define eligible investments: ratings, maturities, percent...
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The Farm Credit SystemREGINA GILLSVP INVESTOR RELATIONSFEDERAL FARM CREDIT BANKS FUNDING CORPORATION
JULY 2020
7/1/20
Part of the Farm Credit System 2
OVERVIEW OF THE SYSTEM
Created by an Act of Congress (1916)
Government Sponsored Enterprise (GSE) created to support rural communities and agriculture with reliable, consistent credit and financial services
Network of cooperatives owned by its borrowers (farmers, ranchers, agricultural cooperatives and rural customers)
Regulated and examined by the Farm Credit Administration (FCA), an independent agency in the Executive Branch of the US Government
Federal Farm Credit Banks Consolidated Systemwide Debt Securities are issued to fund the System’s loan portfolio, investments and operations
The Farm Credit System funds approximately 41% of all US farm business debt. (February 2020,
USDA ERS)
Farm Credit supports rural communities and agriculturewith reliable, consistent credit and financial services today and tomorrow.
Part of the Farm Credit System 3
STRUCTURE/OWNERSHIP
Part of the Farm Credit System
GROSS LOANS
A variety of loan types are available to qualified borrowers
Underwriting standards are based on credit, collateral AND repayment capacity/cash flow
4
($ billions)
12/31/2016 12/31/2017 12/31/2018 12/31/2019 3/31/2020
115.5 120.6 126.3 132.2 134.0
50.3 51.753.4
56.1 53.7
39.642.2
46.150.1 54.427.4
28.029.2
29.7 31.9
11.511.8
11.812.2 12.1
5.55.6
6.66.7
6.5
Agricultural ExportFinance
Rural residential realestate and other loans
Rural Infrastructure
Agribusiness loans
Production &intermediate-term loans
Generally ag loans -collateralized by land
$292.6
249.8259.9
273.4($ billions)287.0
Part of the Farm Credit System
2016 2017 2018 2019 3/31/20
0.08 0.05 0.08 0.07 0.07
1.59 1.66 1.88 1.91 1.91
0.34 0.29 0.27 0.30 0.31
0.03 0.02 0.04 0.07 0.16
2.04 2.02 2.28 2.35 2.45
Nonperforming Assets
Accruing - 90 Days orMore Past Due
Restructured Loans
Nonaccrual Loans
Other Property Owned
NONPERFORMING ASSETS
Nonperforming assets represented 0.84% of the System’s loans and OPO at 3/31/20, as compared with 0.82% at 12/31/19.
Nonaccrual loans represented 0.65% of the System’s loans at 3/31/20, as compared with 0.67% at 12/31/19.
Credit risk of certain loans is reduced by off-farm income sources and crop insurance.
55.2% of nonaccruals were current as to principal and interest payment at 3/31/20, as compared with 60.1% at 12/31/19.
5
Nonaccrual Loans (as a % of Total Loans)
0.82% 0.78% 0.83% 0.82% 0.84%
Nonperforming Assets as a Percentage of Loans & OPO
0.65%
At 3/31/2020
0%
1%
2%
3%
4%
5%
($ billions)
Part of the Farm Credit System 6
FARM CREDIT SYSTEM LIQUIDITY
System Banks are authorized to hold highly rated investments in an amount not to exceed 35% of the Bank’s average loans outstanding for the quarter.
Investments are generally classified as available-for-sale and carried at fair value.
FCA regulations define eligible investments: ratings, maturities, percent of portfolio.
Ineligible investments must be reported to the FCA within 15 calendar days.
As of 3/31/20, FCS liquidity position = 197 days
($ millions)Due in 1 year
or lessDue after 1 year
- 5 yearsDue after 5
years - 10 yearsDue after 10
yearsTotal
Weighted Avg. Yield
Commercial paper, CDs, bankers’ acceptances, and other securities 7,506 344 199 - 8,049 1.88%
US Treasury securities 6,013 9,217 2,815 - 18,045 1.77%
US agency securities 75 1,464 1,239 262 3,040 2.22%
Mortgage-backed securities* 25 2,256 5,579 19,274 27,134 2.15%
Asset-backed securities 109 2,050 461 1,428 4,048 2.50%
Total fair value $13,728 $15,331 $10,293 $20,964 $60,316 2.03%
Total amortized cost 13,696 $14,967 $9,878 $20,642 $59,183
*Agency collateralized ($25,819), Agency whole-loan pass through ($1,185), Private
label-FHA/VA ($130)
FCS Investments Available-For-Sale(Fair Value at 3/31/20 by contractual maturity)
Part of the Farm Credit System 7
NET INCOME
Net Interest Spread* increased to 2.16% at 3/31/20 from 2.00% at 3/31/19.
Net Interest Margin** increased to 2.47% at 3/31/20 from 2.40% at 3/31/19.
*Net Interest Spread = average rate on total earning assets – average rate on interest bearing liabilities
**Net Interest Margin = net interest income / average earnings assets
2016 2017 2018 2019 1Q 2020
$4.848 $5.189 $5.332 $5.446
$1.432
For the Year Ended
($ billions)
Part of the Farm Credit System
2016 2017 2018 2019 1Q 20
$52.31 $55.38 $58.44 $61.73 $63.35
System Capital (at period end)
($ billions)
8
SYSTEM CAPITAL
Note: Systemwide Debt Securities are the general unsecured joint and several obligations of the Banks and are not the direct obligations of the Associations. The System combined capital reflects Association capital which may not be available to support principal or interest payments on Systemwide Debt Securities.
Regulatory Capital Requirements(at March 31, 2020)
Capital-to-asset Ratio 16.4% 16.8% 16.7% 16.9% 16.4%
CET 1 Capital Tier 1 Capital Total Capital Tier 1 Leverage Permanent Capital
Minimum Requirement 4.5% 6.0% 8.0% 4.0% 7.0%
Minimum Requirement w/ Conservation Buffer
7.0% 8.5% 10.5% 5.0% --
Banks 9.3% - 17.3% 14.2% - 18.0% 15.2% - 18.1% 5.5% - 7.2% 14.3% - 18.0%
Associations 12.2% - 37.0% 12.2% - 37.0% 12.6% - 38.2% 10.7% - 34.9% 13.3% - 37.4%
Part of the Farm Credit System 9
INSURANCE CORPORATION & FUND
Farm Credit System Insurance Corporation
– Created in 1988 through an amendment to the Farm Credit Act
– Primary responsibility is managing the Farm Credit Insurance Fund
– Secured a $10B liquidity line to be used in exigent market circumstances that threaten our ability to pay maturing obligations.
Farm Credit Insurance Fund
– Primarily to insure the timely payment of principal and interest on Systemwide Debt Securities (provides additional protection for investors)
– Funded by premiums assessed on System Banks, which may be passed on to the Associations
– Insurance Fund target is 2% of aggregate outstanding insured debt (primarily Systemwide Debt Securities outstanding)
– Insurance Fund invested only in U.S. Government guaranteed securities
– Assets of $5.2 billion in the Insurance Fund (at 3/31/20)
– Insurance Fund has never been used for the payment of principal or interest on Systemwide Debt Securities.
Part of the Farm Credit System 10
TOTAL CAPITAL AND ALLOWANCE FOR LOAN LOSSES
Measure of risk bearing capacity
Total risk funds as a percentage of loans = 22.3% (as of 3/31/20)
(additional paid-in-capital + allowance + Insurance Fund + surplus + preferred stock + capital stock + participation certificates)
Surplus continues to grow due to net income earned and retained
Total Risk Funds as a Percentage of Loans
21.5% 21.9% 22.0% 22.1% 22.3%
($ billions)
2016 2017 2018 2019 1Q 20
4.8 4.9 5.1 5.1 5.1
41.6 41.944.7 47.7
49.3
4.5 4.8
5.0
5.2 5.2
1.5 1.61.7
1.8 1.9
1.4 3.7
3.7
3.73.753.8
56.960.2
63.565.2
Additional paid-in-capital
Allowance for LoanLosses
Restricted Capital-Insurance Fund
Surplus
Preferred Stock, CapitalStock and ParticipationCertificates
Part of the Farm Credit System
THIRD PARTY CAPITAL OUTSTANDING (as of 3/31/2020)
Issue Date Amount Dividend Rate and Security Type
Preferred Stock
AgFirst June 2007 49.25 3M LIBOR plus 1.13% non‐cumulative perpetual, payable quarterly Redeemable on 6/15/12, and each five year anniversary thereafter
AgriBank Oct. 2013 250 6.875% non-cumulative perpetual, payable quarterly. Beginning 01/01/24, dividends will accrue at an annual rate of 3M LIBOR + 4.225%
Redeemable on 01/01/24, and any dividend payment date thereafter
CoBank April 2016 375 6.25% non‐cumulative perpetual, payable semi-annually. Beginning 10/1/26, dividends will accrue quarterly at the annual rate of 3M LIBOR +4.660%
Redeemable on 10/1/26 and any dividend payment date thereafter
Nov. 2014 300 6.20% non‐cumulative perpetual, payable quarterly. Beginning 1/1/25, dividends will accrue at the annual rate 3M LIBOR + 3.744%
Redeemable on 1/1/25 and any dividend payment date thereafter
April 2013 200 6.125% non‐cumulative perpetual, payable quarterly Redeemable on 7/1/18 and any dividend payment date thereafter
Oct. 2012 400 6.25% non‐cumulative perpetual, payable quarterly. Beginning 10/1/22, dividends will accrue at an annual rate of 3M LIBOR +4.557%
Redeemable on 10/1/22 and any dividend payment date thereafter
Jan. 2012 225 3M LIBOR plus 1.18% non‐cumulative perpetual, payable quarterly Redeemable on 7/10/12, and each five year anniversary thereafter
Texas June 2018 100 6.20% non-cumulative perpetual payable quarterly. Beginning 6/15/28, dividends will accrue at annual rate of 3M LIBOR plus 3.223%
Redeemable on 6/15/28 and any dividend payment date thereafter
July 2013 300 6.75% non-cumulative perpetual payable quarterly. Beginning 9/15/23, dividends will accrue at annual rate of 3M LIBOR plus 4.01%
Redeemable on 9/15/23 and any dividend payment date thereafter
Aug. 2010 300 10.0% non‐cumulative subordinated, perpetual payable semi‐annually Redeemable after the dividend payment date in 6/20/20
CompeerFinancial
May 2013 100 6.75% non-cumulative perpetual payable quarterly. Beginning 8/15/23, dividends will accrue at an annual rate of 3M LIBOR plus 4.58%
Redeemable on 8/15/23 and any dividend payment date thereafter
AgTexasFarm Credit Services
March 2017 20 5.00% cumulative perpetual payable semi-annually Redeemable on March 24, 2022 and thereafter
11
Part of the Farm Credit System
FARM CREDIT RATINGS
12
Fitch Moody's S&P
Farm Credit System
Long-term AAA Aaa AA+
Short-term F1+ P-1 A-1+
Outlook Stable Stable Stable
BCA (baseline credit assessment) a1
SACP (stand-alone credit profile) aa
AgFirst
Issuer ratings - LT AA- Aa3
Noncumulative preferred BBB+ Baa1
Agribank
Issuer ratings - LT AA- Aa3 AA-
Noncumulative preferred BBB+ Baa1 BBB+
CoBank
Issuer ratings - LT AA- AA-
Noncumulative preferred BBB+ BBB+
Farm Credit Bank of Texas
Issuer ratings - LT AA- Aa3
Noncumulative preferred BBB+ Baa1
Part of the Farm Credit System 13
GEOGRAPHIC DIVERSIFICATION
STATE %
California 11.36
Texas 6.95
Iowa 5.35
Illinois 5.02
Minnesota 4.47
Nebraska 3.76
Ohio 3.66
Kansas 3.10
Indiana 3.00
Wisconsin 2.92
Missouri 2.74
Michigan 2.70
South Dakota 2.52
North Carolina 2.50
New York 2.34
Georgia 2.34
Washington 2.30
Source: Farm Credit System Annual Information Statement - 2019
Farm Credit System Loan Portfolio(percent of total loan volume at 12/31/19)
STATE %
Florida 2.16
North Dakota 2.13
Colorado 1.93
Tennessee 1.73
Virginia 1.73
Arkansas 1.69
Kentucky 1.63
Idaho 1.56
Oregon 1.31
Pennsylvania 1.28
Alabama 1.27
Oklahoma 1.24
Mississippi 1.11
Louisiana 1.00
All other states 11.20
Total 100.00
Farm Credit System lends in all 50 states, the Commonwealth of Puerto Rico and U.S. territories
Loan portfolio has broad geographic diversification
Highest concentration is 11%
Geographic diversification minimizes overall effects of local agricultural events
Part of the Farm Credit System 14
AGRICULTURAL DIVERSIFICATION
Broad diversification within the Farm Credit System loan portfolio
Highest concentration is 16%
Diversification minimizes concentration risk
Farm Credit System Loan Portfolio(at 12/31/19)
Source: Based on loans described in the Farm Credit System Annual Information Statement – 2019
Cash grains (includes corn, wheat and soybeans)
16%
Other livestock 1%
Cattle 9%
General farms, primarily crop
3%
Rural power 7%
Other 3%
Food products (includes meat, dairy and bakery products)
7%Cotton
1%Dairy farms 7%
Rural water/waste water
1%
Forestry 6%
Field crops (includes sugar beets, potatoes and vegetables)
6%
Tree fruits, nuts and grapes
6%
Farm supplies and marketing 5%
Biofuels, primarily ethanol 1%
Agricultural services and fish 3%
Poultry and eggs 3%
Rural home loans, farm landlords and part-time farms
6%
Rural communication 3%
Hogs 2%
Agricultural export finance
2%
General farms, primarily livestock
2%
Horticulture 1%
Part of the Farm Credit System 15
LOANS BY DOLLAR SIZE
Farm Credit System lends to qualified borrowers of all sizes
87% borrowers between $1,000 and $499,000
Range
($ thousands)
Amount Outstanding
($ millions)
% of Portfolio # of Borrowers % of Portfolio
(# of borrowers)
$1 -- $249 31,426 11 430,067 75
$250 -- $499 23,510 8 67,364 12
$500 -- $999 25,782 9 36,944 6
$1,000 -- $4,999 60,677 21 31,103 5
$5,000 -- $24,999 44,297 15 4,527 1
$25,000 -- $99,999 39,320 14 830 <1
$100,000 -- $249,999 33,165 12 214 <1
Over $250,000 28,787 10 71 <1
TOTAL 286,964 100 571,120 100
Source: Based on loans described in the Farm Credit System Annual Information Statement – 2019
(at 12/31/19)
Farm Credit System Loan Portfolio
Part of the Farm Credit System 16
DEBT SECURITIES OVERVIEW
Issued by the 4 System Banks on a joint and several basis
Aaa/P-1 rating by Moody’s, AAA/F1+ by Fitch and AA+/A-1+ rating by S&P on Systemwide Debt Securities
Interest is generally exempt from state, local and municipal income taxes
20% BIS (Bank for International Settlements) risk-weighting (Basel II, June 2006; Basel III, July 2013)
Name diversification in fixed income portfolios
Supported by Selling Group of 30 investment firms
A broad range of investors purchase Systemwide Debt Securities
Part of the Farm Credit System 17
FARM CREDIT DEBT (as of 6/30/20)
Bloomberg FFCB<go>
Discount Notes
Floating Rate Callables Bullets Designated Bonds
Maturity 1 – 365 days 1 – 30 years
Issued Daily Daily and/or as needed Periodically
Settlement Cash/regular 5 – 7 business days
Typical Maturity Range
O/N – 30 days 1 – 3 years 1 – 5 years 2 – 10 years
Indices/Call Feature
N/A
LIBOR, SOFR, Prime, T-Bills,
Fed Funds(monthly, quarterly,
daily)
American,Bermudan, European
(3mo or longer lockouts)
N/A Fixed
Avg. Issuance size (YTD)
N/A $398.9 MM $204.4 MM $155.4 MM $1.1 B
Outstanding $29.1 B $120.6 B $73.1 B $84.8 B $2.1 B
YTD Issuance $104.1 B (total)
$35.5 B $69.5 B $16.0 B $2.1 B$59.0 B (o/n)
Distribution Method
10 Member Core Group
30 Member Selling Group (Auction/Negotiated) Syndicate
Part of the Farm Credit System 18
DISCOUNT NOTES (as of 6/30/20)
Maturity Range Outstanding YTD Issuance WAM YTD Issuance
1 to 365 days $29.1 B $45.1 B (excludes o/n maturities) $59.0 B (o/n maturities)
60.33 days (includes o/n)
Generally issued daily
– Sizes and maturities posted to the window at 4pm ET – Priced next morning – Investor orders receive priority – Remaining DNs are allocated on a first come first served basis
Reverse inquiries considered
Distributed through 10 member core group, available to entire selling group with re-allowance
Discount Notes Issuance
Maturity(days)
2020 YTD (%) 2019 (%)
O/N-30 62 (57 o/n) 76 (70 o/n)
31-60 12 12
> 60 25 13
Please note columns above may total over 100% due to rounding.
Reported Orders*(July 1, 2019 – June 30, 2020)
Investment Managers
69%State & Local
Govt.3%
Other22%
Insurance Companies
2%
Corporations4%
*Excludes overnights.
Part of the Farm Credit System 19
FLOATING RATE BONDS (as of 6/30/20)
Typical Maturity Outstanding YTD Issuance Indices (YTD Issuance)
1 to 3 years $120.6 B $35.5 B 1ML 3ML SOFR PRIME Fed Funds T-Bills
17% 4% 62% 7% 5% 5%
Issuance practices are responsive to market conditions
1 to 2 year Floating Rate Bonds are typically auctioned
2+ years Floating Rate Bonds are typically posted
Recent Issuance (June)
Structure Trade Date Size ($ MM) IndexCoupon(Spread)
2-year 6/1/2020 300 Prime -297
3-year 6/3/2020 600 SOFR 32
1.25-year 6/8/2020 50 3M LIBOR -8
1.6-year 6/8/2020 200 T-Bill 10
1.7-year 6/10/2020 325 Fed Funds 20
2-year 6/16/2020 900 SOFR 20
1-year 6/18/2020 300 1M LIBOR 0.5
1-year 6/26/2020 275 SOFR 11
Issuance(July 1, 2019 – June 30, 2020)
Years
$millions
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
0 1 1 2 2 3 3 4
FRNs Fed Funds
1M LIBOR
3M LIBOR
Prime
3M TBill
SOFR
Part of the Farm Credit System 20
FIXED RATE CALLABLE BONDS (as of 6/30/20)
Typical Maturity Outstanding YTD IssuanceAverage Issuance Size
(YTD)Possible Call Feature
1 to 5 years $73.1 B $69.5 B $204.4 MM American, Bermudan, European
Offerings vary in size and maturity
Auctioned as needed
Reopen outstanding issues when possible
Predominantly American calls Recent Issuance (June)
Structure Trade Date Size ($ MM) Coupon (%)
2Y NC 3M 6/2/2020 530 0.270
6Y NC 3M 6/8/2020 330 1.040
5.5Y NC 6M 6/9/2020 110 0.940
10Y NC 5Y 6/15/2020 75 1.150
1Y NC 3M 6/16/2020 625 0.210
1.5Y NC 6M 6/16/2020 515 0.230
3.75Y NC 3M 6/18/2020 450 0.590
20Y NC 1Y 6/24/2020 100 2.020
Years
$ millions
Issuance(July 1, 2019 – June 30, 2020)
0
200
400
600
800
1000
1200
0 5 10 15 20 25 30
Callables
Part of the Farm Credit System 21
FIXED RATE NON-CALLABLE BONDS (as of 6/30/20)
Typical Maturity Outstanding YTD Issuance Average Issuance Size (YTD)
1 to 5 years$84.8 B $16.0 B $155.4 MM
Offerings vary in size and maturity
Auctioned as needed
Reopen outstanding issues based on funding needs
May be swapped back to floating
$ millions
Recent Issuance (June)
Structure Trade Date Size ($ MM) Coupon (%)
3-year 6/2/2020 300 0.300
4-year 6/2/2020 120 0.375
12-year 6/9/2020 95 1.420
15-year 6/9/2020 15 1.680
2-year 6/12/2020 505 0.260
1-year 6/16/2020 400 0.180
7-year 6/18/2020 75 0.760
1.75-year 6/25/2020 185 0.250
Years
Issuance(July 1, 2019 – June 30, 2020)
0
100
200
300
400
500
600
700
800
900
0 5 10 15 20 25 30 35
Bullets
Part of the Farm Credit System 22
DESIGNATED BONDS (as of 6/30/20)
Reported Orders5/6/20 – 5/6/22
3133ELYR9
Possible Maturities Structure Outstanding YTD Issuance Minimum Sizes
2 to 10 years Non-Callable $2.1 B $2.1 B $1.0 B
Issued as needed
Fixed rate offerings may be swapped
Syndicated offerings (2 to 3 lead managers), bonds may be made available to the entire selling group
Recent Issues
Coupon Issue Date Size ($ B) Maturity Date
0.250 % 5/6/2020 1.0 5/6/2022
0.375 % 4/8/2020 1.1 4/8/2022Investment Managers
59%
Federal, State & Local Gov'ts
38%
Charity / Fraternal / Endowments
2%
Other1%
Part of the Farm Credit System 23
SYSTEMWIDE DEBT SECURITIES OUTSTANDING
($ billions)
Please note columns may not sum to total due to rounding *Includes Linked Deposits and Retail Bonds
12/31/15 12/31/16 12/31/17 12/31/18 12/31/19 6/30/20
31.3 29.6 25.6 22.8 19.1 29.1
5.0 4.51.0 2.1
58.8 59.7 72.2 79.0 77.973.1
60.4 68.0 67.1 71.1 79.184.8
86.395.8
99.2108.6 117.2
120.6
0.4
0.30.2 0.3 0.3 0.2
$242.2
$257.9 $265.4 $281.8 $293.6 $309.9 Other*
Floating-Rate Bonds
Fixed-Rate Non CallableBondsFixed-Rate Callable Bonds
Designated Bonds
Discount Notes
Part of the Farm Credit System
APPENDIX – U.S. AGRICULTURE
American agriculture and its related industries provide 11 percent of U.S. employment
Majority of U.S. farms are operated by families –individuals, family partnerships or family corporation
95% of the world’s consumers live outside of the United States
The global population is expected to increase to 9.7 billion by 2050 (www.un.org)
Approximately 20% of total volume of U.S. agricultural production is exported*
U.S. exports account for more than 30% of gross agricultural cash income
24
7.4%
15.4%
14.0%
9.0%9.3%
44.9%
2019 U.S. ag exports total $136 billion
China
Canada
Mexico
Japan
EU
Other
Export destinations Major Ag Commodities
ChinaSoybeans, Cotton, Coarse Grain**, Pork, Dairy, Wheat, Hay
CanadaPrepared Food, Fresh Vegetables, Fresh Fruit, Snack Foods, Non-Alcoholic Beverages, Beef & Beef Products, Pork & Pork Products
MexicoCorn, Soybeans, Pork & Pork Products, Dairy Products,Beef & Beef Products, Poultry Meat, Wheat
Japan Corn, Pork & Pork Products, Beef and Beef Products, Soybeans, Wheat
EU Tree Nuts, Soybeans, Wine & Beer, Prepared Foods
Source: www.ers.usda.gov
*US exports 70% of cotton, 70% of tree nuts, 50% of wheat, 50% of rice, 50% of soybeans
**excludes corn
Part of the Farm Credit System
APPENDIX – U.S. AGRICULTURE
The COVID-19 outbreak has resulted in an unusually high level of uncertainly in world economies and the supply and demand for agricultural products
USDA forecast for 2020 ag trade balance remains positive
Slowing global GDP growth may temper demand
25
Source: USDA Outlook for U.S. Agricultural Trade 5/25/20
0
20
40
60
80
100
120
140
160
$ Billionsper fiscal year
Agricultural Trade Balance
Trade Balance
Exports
Imports
137
130
0.0
5.0
10.0
15.0
20.0
25.0
30.0
2013 2014 2015 2016 2017 2018 2019 2020F
$ B
illio
ns
Top U.S. agricultural export destinations$U.S. value by fiscal year
China
Canada
Mexico
Japan
European Union-28
Part of the Farm Credit System
APPENDIX – U.S. AGRICULTURE
26
Production and Demand
Source: USDA OCE 04/09/2020
Dollars per bushel 2016/17 2017/18 2018/2019 2019/2020F 2020F/2021F
Wheat $3.89 $4.72 $5.16 $4.55 $4.90
Corn $3.36 $3.36 $3.61 $3.85 $3.60
Soybeans $9.47 $9.33 $8.48 $8.75 $8.80
Dollars per cwt. 2016 2017 2018 2019F 2020F
Cattle $120.86 $121.52 $117.12 $116.78 $117.00
Hogs $46.16 $50.48 $45.93 $47.95 $49.00
Broilers $84.30 $93.50 $97.80 $88.60 $87.0
Milk $16.30 $17.65 $16.27 $18.60 $18.85
0%
5%
10%
15%
20%
25%
30%
35%
0
500
1,000
1,500
2,000
2,500
3,000
1991 1996 2001 2006 2011 2016
Million MTsGrain Production and Use
World Production
US Production
US Stock-to-Use
World Stock-to-use
2019F
The COVID-19 pandemic has led to price volatility in some commodities.
Global grain supplies remain at record levels and share of stocks to use is historically high.
Part of the Farm Credit System
2020 Forecasts
27
APPENDIX – U.S. AGRICULTURE
After peaking in 2012, Net Cash Income dipped but recovered in subsequent years. It is now forecast to decrease in 2020 due to lower sales.
Debt-to-Asset ratio has increased since 2012, but is expected to increase slightly in 2020 above the 30-year average.
Working capital, accumulated in high income years, now being drawn on to pay normal business expenses.
Source: USDA U.S. Farm Income Data 02/05/2020
0%
5%
10%
15%
20%
25%Debt-to-Asset Ratio
10 Year Average
30 Year Average
0%
10%
20%
30%
40%
50%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F 2020F
Working Capital to Gross Revenues Ratio
0
20
40
60
80
100
120
140 Emergency Payments
Commodity/Conservation programs
Net Cash Income
Net Cash Income less government payments
$ Billion Net Cash Income
Part of the Farm Credit System
APPENDIX – U.S. AGRICULTURE
28
Source: USDA Land Values, 2019 Summary, August 2019
Average U.S. Cropland Value per Acre
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
$2,640 $2,700 $2,980 $3,350 $3,810 $4,090 $4,100 $4,040 $4,030 $4,050 $4,100
Cropland values vary widely across the U.S.
Farm Credit generally uses benchmarking to evaluate loans (not sale price)
1.2% YoY increase in average cropland value (2019 vs. 2018)
Part of the Farm Credit System
Lawmakers continue to demonstrate support for U.S. farmers, ranchers and agribusinesses
– The 2018 Farm Bill enhanced crop insurance coverage and maintained disaster relief and farm support programs
– The Market Facilitation Program (MFP) payments helped mitigate the adverse effects of trade restrictions
– The $19 billion Coronavirus Food Assistance Program (CFAP) to support farmers and ranchers during the COVID-19 pandemic
APPENDIX - SUPPORT FOR AGRICULTURE IN CHALLENGING TIMES
Program Date Amount Details
2018 Farm Bill Dec. 2018 • $78bn crop insurance• $61bn farm commodity programs
• Maintains a strong crop insurance program with improvements to Price Loss Coverage and Agricultural Risk Coverage options
• Improves the safety net for dairy producers
Market Facilitation Program (MFP)
Jul. 2018 • $10.6bn in direct payments to farmers• $1.2bn Food Purchase and Distribution
Program• $200m Ag. Trade Promotion Program
MFPs consisted of: • Direct payments • The Food Purchase and Distribution Program
purchased unexpected surplus of affected commodities
• The Agricultural Trade Promotion Program sought to identify and access new markets for US agricultural products
May 2019 • $14.5bn in direct payments to farmers• $1.4bn Food Purchase and Distribution
Program• $100m Ag. Trade Promotion Program
CARES Act Mar. 2020 • $14bn USDA funding (not available until July)
• $619bn SBA Paycheck Protection Program offers relief to small businesses, including farm operations
• Replenishment of the USDA’s Commodity Credit Corporation (CCC) funds through which MFP payments were made in 2018 and 2019
• Farm Credit institutions have been approved to lend under the Payment Protection Program
• For the first time, the SBA is accepting Economic Injury Disaster Loan (EIDL) applications to provide relief to U.S. agricultural businesses
Coronavirus Food Assistance Program (CFAP)
April 2020 • $16bn in direct payments to farmers• $3bn Food Purchase and Distribution
Program
• Direct payments targeting dairy and livestock producers, fruit and vegetable growers, and fresh food markets
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Part of the Farm Credit System 30
DISCLAIMER
This overview is provided for general information purposes only. It is not an offer to sell or a solicitation of an offer to buy any Systemwide Debt Securities. Debt Securities are offered only in jurisdictions where permissible by offering documents available through our Selling Group. Systemwide Debt Securities may not be eligible for sale in certain jurisdictions or to certain persons and may not be suitable for all types of investors. All statements made in this overview are qualified in their entirety by the information in the most recent Federal Farm Credit Banks Consolidated Systemwide Bonds and Discount Notes Offering Circular, including the financial and other Systemwide information incorporated therein, and other offering documents. Copies of offering documents can be obtained, if permitted by applicable law through Selling Group members or through the Funding Corporation’s website at www.farmcreditfunding.com.
Any forward-looking statements in this presentation are based on current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from expectations due to a number of risks and uncertainties. More information about these risks and uncertainties is contained in the System’s most recent Annual and Quarterly Information Statements. The System undertakes no duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Part of the Farm Credit System 31
NATIONAL MESSAGING CAMPAIGN
The “One Mission. Many Voices.” national messaging campaign brings FarmCredit’s mission to life through the many voices of its customers, directors,employees, and others. Please visit www.farmcreditvoices.com to learn more.