The Farm Credit Administration board today received a quarterly report on
economic issues affecting agriculture, together with an update on the financial
condition and performance of the Farm Credit System as of Sept. 30, 2017.
According to the report, USDA's latest forecast indicates farm income appears
to be stabilizing near its historical average. USDA expects net cash farm
income to increase from $93.3 billion in 2016 to $96.9 billion in 2017. The
gain is driven by stronger cash receipts for cattle and calves, hogs, broilers,
and dairy.
Cash receipts are forecast down for most crop categories in 2017. Adjusted for
inflation, net cash income is near the long-term average (1960 to 2016) for the
second consecutive year.
Several economic and policy issues could affect the System. With strong
production levels weighing down prices, demand is key to the strength of the
crop and protein sectors. A
lso, changes to farm and trade policy in 2018 could affect farm sector income
and the ability of farmers to manage risk. Therefore, concerns remain about
whether some farmers will have enough liquidity to cover farm expenses and to
repay their loans. Current farm debt is relatively high - at four times the
income for the sector, whereas the historical average for farm debt is three
times the sector's income.
As interest rates increase, producers with debt are at greater risk. Overall,
the System is safe and financially sound, and System institutions are well
positioned for the risks facing agriculture.
For the first nine months of 2017, the System reported favorable earnings and
higher capital levels. Overall, loan growth has been lower in 2017 compared
with the same period in 2016. Portfolio loan quality remains favorable although
credit risk for certain agricultural sectors is likely to intensify.