At its monthly meeting today, the Farm Credit Administration board received a quarterly report (PDF) on economic issues affecting agriculture, together with an update on the financial condition and performance of the Farm Credit System (System) as of Dec. 31, 2022.
Inflation continues to be a core economic issue despite recent declines. Inflation has been driven in part by the tightness in the labor market, and rising production costs and consumer demand. Recent events in the commercial banking sector have led to tighter financial conditions and less certainty about future interest rates.
Strong prices for many commodities have continued into 2023. Tight global grain stocks, declining cattle inventory, and disruptions to specialty crop production continue to support prices. However, exports have fallen from record 2022 levels because of high prices and strong foreign competition. Net farm income is projected to fall in 2023 but remain well above the historic average.
Input costs are expected to remain high for producers in 2023, curbing farm profitability. National supply chain constraints have normalized, but residual impacts remain for agricultural machinery and selected inputs. Fertilizer costs have fallen with declines in energy prices although they remain above historic averages. Producers have seen persistent growth in costs for labor, rent, and interest expense this year.
With the end of the three-year La Niña pattern, drought conditions have improved across much of the country. Drought coverage has reached its lowest level in nearly three years following record snowpack across the West and northern Plains. In contrast, a large part of the central and southern Plains remains in severe drought as the growing season gets underway.
The System reported strong financial results in 2022, including strong loan growth and higher earnings. (See the latest financial indicator data. The System’s loan portfolio continued to perform well, and portfolio credit quality remained strong. Although total capital declined slightly for the year, capital levels remained sound. The System liquidity position of 180 days at year-end was unchanged from a year ago and well above the 90-day regulatory minimum.
About the FCA
The Farm Credit Administration is the safety and soundness regulator of the Farm Credit System. The System consists of two government-sponsored enterprises — a nationwide network of cooperative banks and associations established in 1916, and a secondary market entity known as the Federal Agricultural Mortgage Corporation (Farmer Mac) that was established in 1988. The System’s borrower-owned banks and associations provide credit to farmers, ranchers, residents of rural communities, agricultural and rural utility cooperatives, and other eligible and creditworthy borrowers. Farmer Mac provides a secondary market for agricultural real estate loans, rural housing mortgage loans, and certain rural utility loans.
Note: FCA news releases are available on the web at www.fca.gov.