At its monthly meeting Dec. 13, the Farm Credit Administration board 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.
According to the report, USDA forecasts an 8 percent drop in net cash farm income in 2018. Although favorable economic conditions continue to support domestic and foreign demand for agricultural products, increasing production costs have cut into net income levels. Also, trade policy remains unsettled, especially with the all-important China market, adding price uncertainty for producers.
Marketing opportunities for cash grains could be limited in early 2019, putting continued financial pressure on corn and soybean producers. With large soybean supplies, production may shift to corn and other crops, putting downward pressure on prices. For high-debt producers, limited marketing opportunities will put more stress on liquidity levels.
Poor margins have been forcing some high-cost dairy producers to liquidate their herds. In contrast, cow-calf producers have seen moderate profits the past two years, and the same is expected in 2019.
Overall, the system is safe and financially sound. For the first nine months of 2018, the system reported strong earnings, which continued to support capital growth. While portfolio credit quality has slipped compared to a year ago, system institutions have strong risk-bearing ability and are well-positioned for the challenges facing agriculture.
