The Farm Credit System - Federal Farm Credit Banks Funding

Transcription

The Farm Credit System
REGINA GILL
VP INVESTOR RELATIONS
FEDERAL FARM CREDIT BANKS FUNDING CORPORATION
OCTOBER 2016
10/3/16
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 40% of all US farm business debt. (August 2016,
USDA ERS)
Farm Credit supports rural communities and agriculture
with reliable, consistent credit and financial services today and tomorrow.
Part of the Farm Credit System
2
STRUCTURE/OWNERSHIP
3
GROSS LOANS



The System continues to experience moderate loan growth
A variety of loan types are available to qualified borrowers
Loan eligibility is based on credit, collateral AND repayment
capacity/cash flow.
235.9
($ billions)
217.1
191.9
4.7
9.6
17.8
23.9
43.4
5.1
201.1
4.8
11.4
4.7
10.7
25.8
10.1
21.6
19.8
27.0
44.3
36.6
243.9
5.4
11.4
26.9
41.4
32.9
46.3
49.2
47.7
 Agriculture Export
Finance
 Rural residential real
estate and other loans
 Rural Infrastructure
 Agribusiness loans
 Production &
intermediate-term
loans
 Generally ag loans-
collateralized by land
92.5
95.2
100.8
107.8
111.1
12/31/2012
12/31/2013
12/31/2014
12/31/2015
6/30/2016
4
NONPERFORMING ASSETS



Nonperforming assets
represented 0.78% of the
System’s loans at 6/30/16.
Nonaccrual loans
represented 0.58% of the
System’s loans at 6/30/16.
Credit risk of certain loans
is reduced by off-farm
income sources and crop
insurance.
Nonperforming Assets ($ billions)
2.93
2.24
0.04
0.02
0.27
56.4% of nonaccruals were
current as to principal and
interest payment at
6/30/16.
1.74
0.58%*
1.91
0.03
0.02
0.05
0.34
0.29
0.35
1.37
1.32
1.43
Accruing - 90 Days or
More Past Due
Nonaccrual Loans
Other Property Owned
0.32
0.20
0.13
0.10
0.08
2012
2013
2014
2015
6/30/2016
Nonaccrual Loans (as a % of Total Loans)
6.00%
1.73
Restructured Loans
2.30

0.28
1.87
As a Percentage of Loans
1.53%
1.11%
0.86%
0.73%
0.78%
4.00%
2.00%
0.00%
* At 6/30/2016
5
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.
Mortgage- and asset-backed investments must be rated AAA/Aaa/AAA.
Ineligible investments must be reported to the FCA within 15 calendar days.
Regulatory minimum liquidity = 90 days. As of 6/30/16, FCS liquidity position = 180 days
FCS Investments Available-For-Sale
(Fair Value at 6/30/16 by contractual maturity)
($ millions)
Due in 1 year Due after 1 year Due after 5 Due after 10
or less
- 5 years
years - 10 years
years
Total
Weighted
Avg. Yield
Commercial paper, CDs, bankers’
acceptances, and other securities
5,137
260
0
0
5,397
0.79%
US Treasury securities
4,248
8,965
2,270
0
15,483
1.16
942
2,410
2,450
9
5,811
1.56
Mortgage-backed securities*
2
1,112
2,374
22,731
26,219
1.61
Asset-backed securities
5
1,556
11
855
2,427
1.31
Total fair value
$10,334
$14,303
$7,105
$23,595
$55,337
Total amortized cost
$10,327
$14,091
$6,999
$23,369
$54,786
US agency securities
1.39%
* Agency collateralized ($23,156), Agency whole-loan pass through ($2,248),
Non-agency ($235), Private label-FHA/VA ($580)
6
NET INCOME



Net Interest Spread* at
6/30/16 was 2.30% as
compared to 2.41% at
6/30/15.
Net Interest Margin**at
6/30/16 was 2.47% as
compared to 2.56% at
6/30/15.
($ billions)
$4.724
$4.640
$4.688
$4.118
$2.337
Net interest spread and
net interest margin
impacted by an
increasingly competitive
landscape.
2012
2013
2014
2015
6/30/2016
For the Year Ended
*Net Interest Spread = average rate on total earning assets – average rate on interest bearing liabilities
**Net Interest Margin = net interest income / average earnings assets
7
SYSTEM CAPITAL
Regulatory Capital Requirements
(at June 30, 2016)
Permanent Capital Ratio
Total Surplus Ratio
Core Surplus Ratio
Net Collateral Ratio
7.0%*
7.0%*
3.5%*
103%†‡
Banks
15.0% - 21.2%
14.0%-20.2%
9.4% - 18.1%
105.8% - 107.5%
Associations
13.4% - 36.0%
13.1% - 35.5%
11.9% - 34.5%
Not Applicable
Regulatory Minimum Required
* Percentage of risk-adjusted assets
† Percentage of total liabilities
‡ In connection with subordinated debt offerings, certain Banks are
required by FCA to maintain a minimum net collateral ratio of 104%
System Capital
($ billions)
$38.61
2012
Capital-to-asset Ratio
15.7%
(at December 31st)
$42.60
2013
16.3%
$45.71
$48.83
$51.40
2014
2015
6/30/2016
16.1%
16.3%
16.2%
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. The amounts of combined Bank capital,
combined Association capital and the Insurance Fund for the period 2011- 2Q, 2016 are reflected on pages 33-34 of the Farm Credit System Quarterly Information Statement – 2nd Q
2016.
8
NEW CAPITAL REGULATIONS

In March, 2016 the FCA published their revised capital framework to:
– Modernize System capital requirements to assure sufficiency as a GSE
– Increase transparency
– Align the requirements to the Basel III framework while recognizing the cooperative structure of the
System
Farm Credit System Capital Framework - Effective Jan 1, 2017
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 $4.2 billion in the Insurance Fund (at 6/30/16)
– Insurance Fund has never been used for the payment of principal or interest on
Systemwide Debt Securities.
10
TOTAL CAPITAL AND ALLOWANCE FOR LOAN LOSSES

Measure of risk bearing
capacity

Total risk funds as a
percentage of loans =
21.7% (as of 6/30/16)
(additional paid-in-capital + allowance
+ Insurance Fund + surplus +
preferred stock + capital stock +
participation certificates)

Surplus continues to grow
due to net income earned
and retained
($ billions)
52.8
50.1
43.8
39.9
0.7
1.3
3.3
30.9
0.7
1.2
3.5
46.9
1.4
1.4
4.2
1.3
1.3
4.0
1.1
1.2
3.8
Additional paid incapital
Allowance for Loan
Losses
Restricted CapitalInsurance fund
34.3
42.1
39.0
36.5
Surplus
Preferred Stock,
Capital and
Participation
Certificates
3.7
2012
4.1
2013
3.7
4.5
4.3
2014
2015
6/30/2016
Total Risk Funds as a Percentage of Loans
20.8%
21.8%
21.6%
21.2%
21.7%
11
THIRD PARTY CAPITAL OUTSTANDING
Issue Date
Amount
Dividend Rate and Security Type
Preferred Stock
AgFirst
AgriBank
CoBank
June 2007 69.25 3M LIBOR plus 1.13% non‐cumulative perpetual, payable quarterly
Oct. 2013
250
April 2016
375
Nov. 2014
April 2013
Texas
6.875% non-cumulative perpetual, payable quarterly. Beginning 01/01/14,
dividends will accrue at an annual rate of 3M LIBOR + 4.225%
6.25% non‐cumulative perpetual, payable semi-annually. Beginning 10/1/26, Redeemable on 10/1/26 and any
dividend payment date thereafter
dividends will accrue at the annual rate 3M LIBOR + 4.660%
Redeemable on 1/1/25 and any
300 6.20% non‐cumulative perpetual, payable quarterly. Beginning 1/1/25,
dividends will accrue at the annual rate 3M LIBOR + 3.744%
200 6.125% non‐cumulative perpetual, payable quarterly.
6.25% non‐cumulative perpetual, payable quarterly. Beginning 10/1/22, dividends
will accrue at an annual rate of 3M LIBOR +4.557%
3M LIBOR plus 1.18% non‐cumulative perpetual, payable quarterly
Oct. 2012
400
Jan. 2012
225
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%
Aug. 2010
300
10.0% non‐cumulative subordinated, perpetual payable semi‐annually
Agstar
May 2013 100 6.75% non-cumulative perpetual payable quarterly. Beginning 8/15/23, dividends
Financial
will accrue at an annual rate of 3M LIBOR plus 4.58%
Services, ACA
Subordinated Debt
June 2007 500 Three-month LIBOR plus 0.60%, reset quarterly, unsecured subordinated
CoBank
notes
Texas
AgStar
Financial
Services, ACA
Redeemable on 6/15/17, and each
five year anniversary thereafter
Redeemable on 01/01/24, and any
Redeemable on 7/10/17, and each
five year anniversary thereafter
Redeemable after the dividend
payment date in 6/20/20
Redeemable at any time upon the
occurrence of certain defined
regulatory events.
Redeemable starting on 6/15/17
Due in 2022
Sept. 2008
50
8.406% unsecured subordinated notes
Due in 2018
March 2010
100
9.0% unsecured subordinated notes
Due in 2025
As of 7/1/2016
12
FARM CREDIT RATINGS
Fitch
Moody's
S&P
Long-term
AAA
Aaa
AA+
Short-term
F1+
P-1
A-1+
Stable
Stable
Stable
Farm Credit System
Outlook
BCA (baseline credit assessment)
a1
SACP (stand-alone credit profile)
AgFirst
Issuer ratings - LT
Noncumulative preferred
Agribank
Issuer ratings - LT
Subordinate debt
CoBank
Issuer ratings - LT
Subordinate debt
Farm Credit Bank of Texas
Issuer ratings - LT
Subordinate debt
aa
AABBB
AAA+
BBB
AABBB+
Aa3
A2
Baa1
AAA+
BBB
AAA+
BBB
AAABBB+
AAABBB+
Aa3
A2
Baa1
13
GEOGRAPHIC DIVERSIFICATION
Farm Credit System Loan Portfolio




Farm Credit System
required to lend in all 50
states, the Commonwealth
of Puerto Rico and U.S.
territories
Loan portfolio has broad
geographic diversification
Highest concentration is
less than 10%
Geographic diversification
minimizes overall effects of
local agricultural events
(percent of total loan volume at 12/31/15)
STATE
%
STATE
%
California
9.88
Washington
2.23
Texas
6.80
Colorado
2.21
Illinois
5.32
Tennessee
2.04
Iowa
5.20
Kentucky
1.94
Minnesota
4.51
Arkansas
1.90
Nebraska
3.95
Florida
1.86
Ohio
3.86
Virginia
1.74
Wisconsin
3.05
Oregon
1.60
Indiana
3.04
Pennsylvania
1.51
Kansas
2.98
Idaho
1.44
Missouri
2.80
Oklahoma
1.34
Michigan
2.75
Alabama
1.25
South Dakota
2.44
Mississippi
1.20
Georgia
2.40
Maryland
1.02
New York
2.39
South Carolina
1.02
North Carolina
2.34
All other states
9.67
North Dakota
2.32
100.00
Source: Farm Credit System Annual Information Statement - 2015
14
AGRICULTURAL DIVERSIFICATION
(at 12/31/15)



Broad diversification
within the Farm Credit
System loan portfolio
Highest concentration
is 18%
Diversification
minimizes
concentration risk
Cattle 9%
Cash Grains (corn,
wheat, soybeans) 18%
Other livestock 1%
Cotton 1%
Hogs 2%
Ag services and fish 3%
Horticulture 1%
Ag export finance 2%
Forestry 6%
Communications 3%
Dairy Farms 6%
Other 3%
Poultry and eggs 3%
Field Crops (sugar beets,
potatoes, vegetables)
5%
General farms, primarily
livestock 2%
General farm, primarily
crop 4%
Energy & water/waste
water 8%
Rural home loans, farm
landlords, part-time
farms 7%
Farm supplies &
marketing 4%
Tree fruits, nuts, grapes
5%
Food products
7%
Source: Based on loans described in the Farm Credit System Annual Information Statement – 2015
15
LOANS BY DOLLAR SIZE
(at 12/31/15)


Farm Credit System lends
to qualified borrowers of
all sizes
87% borrowers between
$1,000 and $499,000
Amount
Outstanding
($ millions)
% of Portfolio
$1 -- $249
32,643
14
402,724
76
$250 -- $499
20,871
9
59,528
11
$500 -- $999
23,956
10
34,298
6
$1,000 -- $4,999
51,137
22
26,454
5
$5,000 -- $24,999
35,954
15
3,654
<1
$25,000 -- $99,999
29,718
13
620
<1
$100,000 -- $249,999
21,188
9
135
<1
Over $250,000
20,423
8
49
<1
235,890
100
527,462
Range
($ thousands)
TOTAL
# of Borrowers
% of Portfolio
(# of borrowers)
100
Source: Based on loans described in the Farm Credit System Annual Information Statement – 2015
16
FINANCIAL SUMMARY (as of 6/30/16)
(In billions)
6/30/16
12/31/15
12/31/14
12/31/13
12/31/12
Total assets
$315.3
$303.5
$282.8
$260.8
$246.7
Total loans
$243.9
$235.9
$217.1
$201.1
$191.9
Cash and investments
$62.8
$59.4
$57.8
$51.9
$46.9
Net income
$2.3
$4.7
$4.7
$4.6
$4.1
$48.8
$45.7
$42.6
$38.6
$4.0
$3.7
$3.5
$3.3
System combined capital
$51.4
Farm Credit Insurance
Fund
$4.2
Capital to assets ratio
16.3%
16.1%
16.2%
16.3%
15.7%
Nonaccrual loans as a
percentage of total
loans
.58%
.56%
.63%
.86%
1.2%
Total risk funds as a
percentage of total
loans
21.7%
21.2%
21.6%
21.8%
20.8%
17
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

Name diversification in fixed income portfolios

Supported by Selling Group of 27 investment firms

A broad range of investors purchase Systemwide Debt Securities
(Basel II, June 2006; Basel III, July 2013)
18
FARM CREDIT DEBT (as of 9/30/16)
Discount Notes
Maturity
Issued
Floating Rate
Callables
1 to 365 days
Bullets
Designated Bonds
1 to 30 years
Daily
Daily and/or as needed
Periodically
Settlement
Cash/regular
5 to 7 business days
5 to 7 business days
Typical
Maturity Range
O/N-30 days
1 – 3 years
1 – 5 years
Indices/Call
Feature
N/A
LIBOR, Prime,
T-Bills,
Fed Funds
(monthly,
quarterly, daily,
weekly resets)
American,
Bermudan,
European
N/A
(3mo or longer
lockouts)
Fixed
Floating
Callable
Avg. Issuance
size (YTD)
N/A
$ 186.6 MM
$ 98.5 MM
$ 73.6 MM
$1.0 B
$92.8 B
$55.5 B
$65.9 B
$4.5 B
$36.4 B
$49.0 B
$17.2 B
$1.0 B
Outstanding
YTD Issuance
Distribution
Method
$33.0 B
$131.7 B (total)
$75.1 B (o/n)
9 member core
group
1 – 5 years
27 Member Selling Group (Auction/Negotiated)
 Bloomberg FFCB<go>, Reuters FFCB07, FFCB08
2 – 10 years
Syndicate
 Periodic offering of Retail Bonds available on Incapital.com
19
DISCOUNT NOTES (as of 9/30/16)

Maturity Range
Outstanding
2016 YTD Issuance
WAM YTD Issuance
1 to 365 days
$33.0 B
$56.6 B (excludes o/n maturities)
$75.1 B (o/n maturities)
70 days (includes o/n)
Generally issued daily
–
–
–
–
Sizes and maturities posted to the window at 4pm EDT
Priced next morning
Investor orders receive priority
Remaining DNs are allocated on a first come first served basis

Reverse inquires considered

Distributed through 9 member core group, available to entire selling group with re-allowance
Reported Orders
(October 1, 2015 – September 30, 2016)
Other, 21%
Insurance
Companies,
13%
State & Local
Gov'ts, 4%
Corporations
1%
Investment
Managers,
61%
Discount Notes Issuance
Maturity
2016 YTD
2015
O/N-30
60 (57 o/n)
73 (63 o/n)
31-60
15
8
> 60
25
19
(days)
(%)
(%)
20
FLOATING RATE BONDS (as of 9/30/16)
Typical Maturity
Outstanding
YTD Issuance
1 to 3 years
$92.8 B
$36.4 B
Indices (YTD Issuance)
1ML
82%
3ML
4%

1 to 2 year Floating Rate Bonds are typically auctioned

2+ years Floating Rate Bonds may be auctioned or negotiated

Issuance practices are responsive to market conditions
FRNs
$ millions
1,400
1,200
PRIME
8%
T-Bills
3%
Fed Funds
2%
Recent Trades (September)
Fed Funds
Issuance
(October 1, 2015 - September 30, 2016)
6ML
1%
1M LIBOR
Index
Coupon
(Spreads)
Structure
Trade Date
Size ($ MM)
2-year
9/6/2016
125
Fed Funds
24
3-year
9/14/2016
120
3M LIBOR
-1
2-year
9/20/2016
150
PRIME
-283
400
1.1-year
9/23/2016
300
1M LIBOR
-3
200
2-year
9/23/2016
100
1M LIBOR
9
5-year
9/29/2016
50
1M LIBOR
26.5
3M LIBOR
1,000
6M LIBOR
800
Prime
600
3M TBill
0
0
1
2
Years 3
4
5
6
21
FIXED RATE NON-CALLABLE BONDS (as of 9/30/16)
Typical Maturity
Outstanding
YTD Issuance
Average Issuance Size (YTD)
1 to 5 years
$65.9 B
$17.2 B
$73.6 M

Offerings vary in size and maturity

Auctioned as needed

Reopen outstanding issues when possible

May be swapped back to floating (2015 issuance swapped to LIBOR=15%)
600
Bullets
$ millions
Issuance
500
400
300
200
100
0
0
5
10
15
Years
20
25
Trade Date
Size ($ MM)
Coupon (%)
1.6-year
9/6/2016
235
0.79
2-year
9/13/2016
285
0.875
10-year
9/15/2016
81
2.02
5-year
9/22/2016
80
1.28
18-year
9/22/2016
15
2.53
28-year
9/29/2016
10
2.78
Structure
30
35
22
FIXED RATE CALLABLE BONDS (as of 9/30/16)
Typical Maturity
Outstanding
YTD Issuance
Average Issuance Size
1 to 5 years
$55.5 B
$49.0 B
$98.5 M

Offerings vary in size and maturity

Auctioned as needed

Reopen outstanding issues when possible

Predominantly American Calls
$ millions
500
450
(YTD)
Possible Call Feature
American, Bermudan, European
Callables
Structure
Issuance
400
Trade Date
Size ($ MM)
Coupon
(%)
20Y NC 3Y
9/7/2016
12
2.54
6Y NC 6M
9/7/2016
30
1.65
10Y NC 1Y
9/7/2016
100
2.09
200
2Y NC 1Y
9/8/2016
80
0.93
150
4Y NC 1Y
9/15/2016
168
1.35
100
14.5Y NC 3M
9/19/2016
50
2.57
7.75Y NC 3M
9/21/2016
50
1.97
350
300
250
50
0
0
5
10
Years
15
20
25
23
DESIGNATED BONDS (as of 9/30/16)
Maturity
Structure
Outstanding
YTD Issuance
Minimum Sizes
2 to 10 years
Non-Callable, Callable and Floating-Rate Bonds
$4.5 B
$1.0 B
$1B Bullets
$500 M Callables

Issued as needed

May be fixed or callable

Majority of fixed rate offerings are swapped back to 1 or 3-month LIBOR

Syndicated offerings (2 to 3 lead managers), bonds made available to the entire selling group
Reported Orders
April 12, 2016 – April 18, 2018
Bank & Credit Union
10%
Other/Undisclosed
1%
Central Banks
7%
Outstanding Issues
Investment Managers
41%
State & Local Gov'ts
41%
Coupon
Issue Date
Size ($ B)
0.750 %
4/12/2016
1.0
4/18/2018
1M LIBOR+5
4/17/2014
1.0
4/17/2017
1M LIBOR+5.5
2/27/2014
1.0
2/27/2017
4.875 %
1/9/2007
1.5
1/17/2017
Maturity
Date
24
SYSTEMWIDE DEBT SECURITIES OUTSTANDING

Consistent use of established debt programs
Outstanding
(Par value)
($ billions)
$243.2
$224.8
$196.6
$183.5
0.4
57.6
0.4
64.2
$206.6
57.2
44.0
50.1
46.4
52.0
56.5
13.6
15.3
14.6
11.4
18.6
12/31/11
12/31/12
12/31/13
21.5
0.3
Other*
0.4
0.4
62.4
0.4
$252.0
75.2
86.3
92.8
Floating-Rate Bonds
Fixed-Rate Non Callable Bonds
57.5
60.4
65.9
Fixed-Rate Callable Bonds
Designated Bonds
56.5
58.8
55.5
8.2
5.0
4.5
27.0
32.3
33.0
12/31/14
12/31/15
9/30/16
Discount Notes
*Includes Linked Deposits and Retail Bonds
25
APPENDIX – U.S. AGRICULTURE
USDA 2017 Forecasts
$ billions
per fiscal year
160
140


US agricultural trade
surplus to increase by 5.6B.
2016 surplus revised
upward.
2017 imports to increase
by $400M over 2016.
USDA Trade Balance
120
Trade Balance
100
Exports
80
Imports
133.0
113.5
60
40
20
0

2017 exports will increase
by $6.0B over 2016
forecast.
Anticipated improvement
in world per capita GDP in
2017, although not as
strong as the previous
decade.
Top U.S. agricultural export destinations
30.0
$U.S. value by fiscal year
25.0
20.0
$ billions

China
Canada
15.0
Mexico
Japan
10.0
European Union-28
5.0
0.0
2010
2011
2012
2013
2014
2015 2016F 2017F
Source: USDA Outlook for U.S. Agricultural Trade 8/25/16
26
Production and Demand

Larger global grain
production pushes prices
lower.
Dollars per
bushel
2012/13
2013/14
2014/15
2016F
Wheat
$7.77
$6.87
$5.99
$3.30-$3.90
Corn
$6.89
$4.46
$3.70
$2.90-$3.50
Soybean
$14.40
$13.00
$10.10
$8.30-$9.80
Dollars per
cwt.
2013
2014
2015F
2016F
Cattle
$125.89
$154.56
$148.12
$123-$125
Hogs
$64.05
$76.03
$50.23
$47-$47
Broilers
$99.70
$104.90
$90.50
$85-$86
Milk
$20.05
$23.97
$17.08
$16.10-$16.30
Million MTs
3,000
Grain Production and Use
30%
2,500
25%
2,000
20%
1,500
15%
1,000
10%
5%
500
0%
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Source: USDA WASDE 9/12/16
27
Farm Income – 2016 Forecasts






2016 Net cash income
expected to decline 13.3%
over 2015.
Net farm income expected
to decline 11.5%.
Both declining for the third
consecutive year after highs
in 2012-2013.
Production expenses
expected to decline by 2.8%
in 2016. If realized,
expenses will have fallen for
3 straight years.
Debt-to-Asset ratios remain
low relative to historical
levels despite slight increase
in 2016 forecast.
Direct government farm
payments are forecasted to
increase in 2016 by 25%.
140
120
Net Cash Income
$ Billion
Emergency Payments
Commodity/Conservation programs
100
Net Cash Income
Net Cash Income less government payments
80
60
40
20
0
25%
Debt-to-Asset Ratio
20%
15%
10%
5%
30 Year Average
10 Year Average
0%
Source: USDA U.S. Farm Income Data 8/30/2016
28

Cropland values
vary widely
across the U.S.

Farm Credit
generally uses
benchmarking to
evaluate loans
(not sale price)

Slight decrease
in average
cropland value
(2016 vs. 2015)
Average U.S. Cropland Value per Acre
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
$2,390
$2,530
$2,760
$2,670
$2,700
$2,980
$3,550
$3,810
$4,100
$4,130
$4,090
Source: USDA Land Values 2016 Summary 8/5/16
29
Projected 2014 Farm Bill Allocations
Farm Bill
(over 10 years)
1%

Farm Bill negotiated every 5 years

Majority of Farm Bill supports/funds non-farm programs (nutrition, etc.)

The Agricultural Act of 2014 (H.R. 2642)
 Eliminates direct payments
 Maintains crop insurance programs
- Price Loss Coverage or
- Agricultural Risk Coverage options
 Establishes the Dairy Margin Protection program
 Establishes a permanent livestock disaster program
 Continues USDA Rural Development programs.
6%
5%
9%
79%
Food Stamps and Nutrition, $756B
Other key components: trade and foreign ag, Research, Conservation
Crop Insurance, $90B
Conservation, $58B
Negotiations for 2018 Farm Bill will begin in 2017
Commodity Programs, $44B
Other, $8B
Source: House Committee on Agriculture, 2/7/2014
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, by calling the Funding Corporation at (201) 2008000, through selling group members, and 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.
31

The Farm Credit System - Federal Farm Credit Banks Funding

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