Fiscal Conservatism Keeps Farm Credit Strong
Farm Credit remains rock solid amidst financial market turmoil.
John Vogel
Published: Oct 1, 2008
Farm Credit System institutions remain on solid financial ground, despite the upheaval going on in the U.S. credit market. But there are good reasons for it, contends Ken Auer, CEO of the Farm Credit Council.
One reason is that farm land is a core asset. And agriculture's booming economy still inspires confidence when Farm Credit goes to Wall Street for bonds.
"Farm Credit continues to tap national debt markets to bring capital to agriculture, and it remains financially strong," affirms Auer. "A key strength of Farm Credit's cooperative structure is that customer-elected directors keep these institutions focused on serving their mission and maintaining the financial strength necessary during difficult times." In other words, its directors are fiscal conservatives.
No link to Farmer Mac troubles
The Farm Credit System and the Federal Agricultural Mortgage Corporation, known as Farmer Mac, share authorizing legislation. "But they are separate entities with very different operating structures," clarifies Auer.
"Farmer Mac is a secondary market credit provider, and isn't integral to the operation or business profile of any Farm Credit institution. If something happens to Farmer Mac, it won't impact the system," he adds.
Early this year, Farm Credit banks increased their own credit lines to accommodate higher credit needs of farmers, cooperatives and agribusinesses. Those credit needs were handled outside of Farmer Mac, notes Auer.
Mid-year Farm Credit review
Here's a glimpse at mid-year numbers posted by the Farm Credit System:
- Net income through June 30, 2008 increased to $1.55 billion, up from $1.29 billion for the year-earlier period.
- 2007 net income surpassed a record $2.7 billion.
- Credit quality, as of June 30, 2008, remained favorable with 98.4% of all loans ranked in the highest loan quality classifications.
- Capital reached $27 billion-plus by June 30, up from $21.5 billion on Dec. 31, 2007.
- Capital as a percentage of assets was 13.1% on June 30.
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