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Jill Long Thompson, Board Chair and Chief Executive Officer
Kenneth A. Spearman, Board Member
Leland A. Strom, Board Member
FARM CREDIT * *
ESTABLISHED 1933
MINUTES OF THE REGULAR MEETING
OF THE
FARM CREDIT ADMINISTRATION BOARD
June 12, 2014
These minutes reflect the business transacted at the June 12, 2014, Regular Meeting of the Farm
Credit Administration Board (FCA Board) pursuant to the Government in the Sunshine Act (Act), 5
U.S.C. § 552b, and the regulations of the Farm Credit Administration (FCA) adopted thereunder.
The FCA Board meeting was held at the FCA office in McLean, Virginia, beginning at 9:00 a.m. and
concluding at 11:09 a.m. Members of the Board present were:
Jill Long Thompson, Board Chair and Chief Executive Officer
Kenneth A. Spearman, Member
Leland A. Strom, Member
The above named constitute the full Board.
Others present included Charles Rawls, General Counsel; Dale Aultman, Secretary to the Board; staff
of the FCA and Farm Credit System Insurance Corporation (FCSIC); and six members of the general
public. (A list of staff attendees is attached as Exhibit A.)
The Secretary read a statement that announced the meeting would be conducted according to the
requirements of the Government in the Sunshine Act.
The Board Chair reviewed the published Agenda. (A copy of the Public Announcement publishing the
Agenda for the meeting is attached as Exhibit B.)
Mr. Spearman moved to adopt the Agenda as published.
Mr. Strom seconded the motion.
1
There being no further discussion, Board Chair Long Thompson called the question.
The Secretary polled the Board Members and the motion carried unanimously.
Mr. Strom noted that the Agenda did include portions of the meeting that should be closed to the
public as permitted by the Government in the Sunshine Act and therefore moved that the meeting
be closed at that point.
Mr. Spearman seconded the motion.
There being no further discussion, Board Chair Long Thompson called the question.
The Secretary polled the Board Members and the motion carried unanimously.
OPEN SESSION
Approval of Minutes
Minutes for May 8, 2014
(BM-12-JUN-14-01)
Mr. Spearman moved to approve the minutes for May 8, 2014, FCA Regular Board Meeting.
Mr. Strom seconded the motion.
There being no further discussion, Board Chair Long Thompson called the question.
The Secretary polled the Board Members and the motion carried unanimously. (BM-12-JUN-14-01)
(A copy of the official "Board Action Item" is attached as Exhibit C.)
New Business
Investment Eligibility - Proposed Rule
(BM-12-JUN-14-02)
Tim Nerdahl of the Office of Regulatory Policy and Jennifer Cohn and Richard Katz of the Office of
General Counsel presented the Investment Eligibility - Proposed Rule.
Board Chair Long Thompson opened the discussion for questions by the Board.
Board Chair Long Thompson asked if there was any further discussion and asked staff to provide
their recommendation Staff provided their recommendation.
Board Chair Long Thompson called for a motion on the staff's recommendation regarding the
Investment Eligibility - Proposed Rule.
2
Mr. Strom moved that the Board approve staff's recommendation to approve the Investment
Eligibility - Proposed Rule.
Mr. Spearman seconded the motion.
Board Chair Long Thompson asked if there was any further discussion.
There being no further discussion, the Board Chair called the question.
The Secretary polled the Members and the motion carried unanimously. (BM-12-JUN-14-02)
(A copy of the official "Board Action Item" is attached as Exhibit D.)
REPORTS
Annual Report on the Farm Credit System's
Young, Beginning, and Small Farmer Mission Performance: 2013 Results
Steve Koenig and Chris Wilson of the Office of Regulatory Policy presented the Annual Report on the
Farm Credit System's Young, Beginning, and Small Farmer Mission Performance: 2013 Results.
Board Chair Long Thompson asked if there were any questions or further discussion from the Board.
There were no further questions or discussion.
(A copy of the PowerPoint presentation is attached as Exhibit E.)
OE and ORP Quarterly Report on
Economic Conditions and Farm Credit System Conditions
Steve Gabriel of the Office of Regulatory Policy and Hal Johnson of the Office of Examination
presented the Quarterly Report on Economic Conditions and Farm Credit System Conditions.
Board Chair Long Thompson asked if there were any questions or further discussion from the Board.
There were no further questions or discussion.
(A copy of the PowerPoint presentation is attached as Exhibit F.)
Semi-Annual Report on Office of Examination Operations
Hal Johnson of the Office of Examination presented the Semi-Annual Report on Office of Examination
Operations.
Board Chair Long Thompson asked if there were any questions or further discussion from the Board.
3
There were no further questions or discussion.
(A copy of the PowerPoint presentation is attached as Exhibit G.)
Before convening the closed session, Board Chair Long Thompson announced a 10 minute break,
without objection.
CLOSED SESSION
The Board Chair noted that this was a Closed Session and ensured that members of the public and
nonessential FCA and FCSIC staff were not in the room so the Board could meet with Office of
Examination staff in Closed Session.
Board Chair Long Thompson convened the closed session of the meeting at 10:42 a.m. and
instructed the Secretary to activate the electronic recording device so that the proceedings of the
closed session were properly recorded as required by the Government in the Sunshine Act.
The Board Chair then instructed the General Counsel to furnish the Secretary with a certification,
pursuant to 5 U.S.C. $ 552b(f), that the portions of the meeting held in closed session may be
properly closed to the public.
(A copy of the Certification is attached hereto as Exhibit H.)
Members of the Board present were:
Jill Long Thompson, Board Chair and Chief Executive Officer
Kenneth A. Spearman, Member
Leland A. Strom, Member
The above named constitute the full Board.
Others present included Dale Aultman, Secretary to the Board; and Charles Rawls, General Counsel.
(A list of staff attendees is attached as Exhibit A).
Office of Examination Quarterly Report
Robert Coleman and Roger Paulsen of the Office of Examination presented the update on OE
Supervisory and Oversight Activities.
The Board Chair thanked the OE staff at the conclusion of their report.
ADJOURNMENT
There being no further business to come before the Board, Board Chair Long Thompson indicated she
would entertain a motion to adjourn the meeting.
Mr. Spearman moved that the meeting be adjourned.
4
Mr. Strom seconded the motion.
Board Chair Long Thompson called the question.
The Secretary polled the Board Members and the motion carried unanimously.
The meeting adjourned at 11:09 a.m.
NOTATIONAL VOTE ACTIONS
There were three notational vote actions approved by the FCA Board from May 9, 2014, through
June 11, 2014 as follows:
Item Number
Action Date
Voting Results
Subject
NV 14-12
06/09/2014
Approved
Final Rule to Remove Non-Binding, Advisory Vote Provisions
NV 14-11
05/20/2014
Approved
Standards of Conduct Proposed Rule - Extend or Reopen Comment
Period
NV 14-10
05/19/2014
Approved
Review of Significant Regulatory Actions Pursuant to Executive Order
12866
The undersigned hereby certify that the foregoing minutes are the official minutes of the Regular
Meeting of the Farm Credit Administration Board held on June 12, 2014.
/s/
/s/
Jill Long Thompson
Dale L. Aultman
Board Chair and Chief Executive Officer
Secretary to the Board
Approved: July 10, 2014
5
Exhibit A
Page 1 of 2
STAFF PRESENT AT THE
FCA REGULAR BOARD MEETING
June 12, 2014
JILL LONG THOMPSON, Board Chair and Chief Executive Officer
KENNETH A. SPEARMAN, Board Member
LELAND A. STROM, Board Member
OPEN
CLOSED
OFFICE
SESSION
SESSION
Office of the Board
Aultman, Dale
X
X
Corey, Kathryn
X
Smulkstys, Inga
X
X
Calhoun, Gaye
X
Middleton, Russell
X
X
Buccolo, Deb
X
Johansen, Mark
X
X
COO
Hoffman, William
X
X
OCPA
Stokke, Mike
X
X
Yaghmour, Emily
OSMO
Rea, Laurie
X
X
OGC
Rawls, Charles
X
X
Strickland, Joy
X
X
Cohn, Jennifer
X
Katz, Richard
X
Donner, Mary Alice
X
6
Exhibit A
Page 2 of 2
OPEN
CLOSED
OFFICE
SESSION
SESSION
OE
Coleman, Robert
X
X
Paulsen, Roger
X
X
Johnson, Hal
X
X
OIG
Dean, Elizabeth
X
X
Cerne, Sonya
X
X
ORP
Van Meter, Gary
X
Mardock, Barry
X
X
Gabriel, Steve
X
X
Koenig, Steve
X
Nerdahl, Tim
X
Wilson, Chris
X
Leist, Ryan
X
OMS
Smith, Stephen
X
X
FCSIC
Pfitzinger, Rick
X
X
Rubin, Howard
X
X
GENERAL PUBLIC
6
7
Exhibit B
Farm Credit Administration
Farm Credit Administration
1501 Farm Credit Drive
McLean, Virginia 22102-5090
PUBLIC ANNOUNCEMENT OF
MEETING SUBJECT TO THE GOVERNMENT IN THE SUNSHINE ACT
Farm Credit Administration Board
Regular Meeting
June 12, 2014
Summary: Notice is hereby given, pursuant to the Government in the Sunshine Act (5 U.S.C. Sec. 552b(e) (1)), of the
forthcoming regular meeting of the Farm Credit Administration Board.
Date and Time: The regular meeting of the Board will be held June 12, 2014. The meeting is scheduled to be held at the
office of the Farm Credit Administration in McLean, Virginia, from 9:00 a.m. until such time as the Board may conclude its
business.
Address: Farm Credit Administration, 1501 Farm Credit Drive, McLean, Virginia 22102-5090. Submit attendance
requests via e-mail to [email protected]. See SUPPLEMENTARY INFORMATION for further information about
attendance requests.
For Further Information Contact: Dale L. Aultman, Secretary to the Farm Credit Administration Board (703) 883-4009.
TTY is (703) 883-4056.
Supplementary Information: Parts of this meeting of the Board will be open to the public (limited space available), and
parts will be closed. Please send an e-mail to [email protected] at least 24 hours before the meeting. In your e-
mail include: name, postal address, entity you are representing (if applicable), and telephone number. You will receive
an e-mail confirmation from us. Please be prepared to show a photo identification when you arrive. If you need
assistance for accessibility reasons, or if you have any questions, contact Dale L. Aultman, Secretary to the Farm Credit
Administration Board, at (703) 883-4009. The matters to be considered at the meeting are:
OPEN SESSION
Approval of Minutes
1
May 8, 2014
New Business
2
Investment Eligibility - Proposed Rule
Reports
3
Annual Report on the Farm Credit System's Young, Beginning, and Small Farmer Mission Performance: 2013
Results
4
Quarterly Report on Economic Conditions and FCS Conditions
5
Semi-Annual Report on Office of Examination Operations
CLOSED SESSION
6
Office of Examination Supervisory and Oversight Activities Report¹
June 2, 2014
/s/
Date
Dale L. Aultman
Secretary to the Board
1 Session Closed-Exempt pursuant to 5 U.S.C. Section 552b(c)(8) and (9).
8
Exhibit c
Farm Credit Administration
1501 Farm Credit Drive
McLean, Virginia 22102-5090
(703) 883-4000
BOARD ACTION ITEM
FCA
FARM CREDIT ADMINISTRATION
FCA BOARD ACTION ON
Minutes for May 8, 2014 Board Meeting
BM-12-JUN-14-01
Effective Date:
June 12, 2014
Effect on Previous Action:
None
THE FCA BOARD HEREBY:
Approves the minutes for May 8, 2014, Regular Board Meeting as submitted.
DATED THIS 12th DAY OF JUNE MAY 2014
BY ORDER OF THE BOARD
/s/
Dale L. Aultman
Secretary to the Board
9
Exhibit D
Farm Credit Administration
1501 Farm Credit Drive
McLean, Virginia 22102-5090
(703) 883-4000
BOARD ACTION ITEM
FCA
FARM CREDIT ADMINISTRATION
FCA BOARD ACTION ON
Investment Eligibility - Proposed Rule
BM-12-JUN-14-02
Effective Date:
June 12, 2014
THE FCA BOARD:
Hereby approves the proposed rule that would amend FCA regulations at part 615
pertaining to eligible investments for Farm Credit banks and associations and make
conforming changes to other regulations in parts 611 and 615; and
Also authorizes staff to make any technical or grammatical changes that may be
necessary prior to publication in the Federal Register.
DATED THIS 12th DAY OF JUNE 2014
BY ORDER OF THE BOARD
/s/
Dale L. Aultman
Secretary to the Board
10
1000
RINKS
FCA
FARM CREDIT ADMINISTRATION
FCA's Annual Report on the Farm Credit
System's Young, Beginning, and Small
Farmer Mission Performance:
2013 Results
Office of Regulatory Policy
FCA Board Meeting
June 12, 2014
Steve Koenig, Senior Economist
Exhibit E
Chris Wilson, Policy Analyst
11
1000
BANKS
FCA
FARM CREDIT ADMINISTRATION
Outline
System's YBS Mission
2013 Numbers and Trends
District and Association Activity
YBS Survey
12
2
1000
FCA
FARM CREDIT ADMINISTRATION
The YBS Mission
Farm Credit Act - 1980 Amendments
- FCS institutions to have a program for furnishing sound, constructive
credit, and related services to YBS farmers and ranchers
- FCS banks to submit an annual report on YBS activities to FCA
- FCA to submit an annual YBS report to Congress
Regulation — 614.4165 (2004)
- Sets minimum YBS program components and reporting and disclosure
requirements for direct-lender associations
Revised Bookletter-040 (2007)
— Provides flexibility on lending opportunities for YBS farmers and ranchers
Bookletter-066 (2012)
- Provides guidance for meeting the credit and related services needs of
farmers who market their agricultural products through local or regional
food systems
13
3
1000
FCA
FARM CREDIT ADMINISTRATION
YBS Definitions
Definitions for FCA Reporting:
Young Farmer: age 35 or younger
Beginning Farmer: 10 years or less farming experience
Small Farmer: gross annual farm sales of $250,000 or less
Important Data Clarifications:
Data are reported separately for each category
Borrowers may qualify under more than one category; one should
not add Y, B, and S data together
Dollar volumes include advances and commitments
Counts are for loans, not borrowers
14
4
1000
FCA
FARM CREDIT ADMINISTRATION
2013 YBS Results
YBS Loans Outstanding
Number
Percentage
Dollar volume
Percentage
As of December 31, 2013
of
of total
of loans
of total
*
loans
number
in millions
volume
Young farmers/ranchers
175,583
17.8
$23,788
11.2
Beginning farmers/ranchers
253,272
25.7
$36,968
17.3
Small farmers/ranchers
484,745
49.3
$44,894
21.1
YBS Loans Made During 2013
Number
Percentage
Dollar volume
Percentage
As of December 31, 2013
of
of total
of loans
of total
loans
number
in millions
volume
Young farmers/ranchers
57,854
16.3
$8,294
11.0
Beginning farmers/ranchers
72,662
20.5
$10,989
14.6
Small farmers/ranchers
142,357
40.1
$11,433
15.2
Totals include loans, advancements, and commitments made to farmers, ranchers, and aquatic producers by the associations, and excludes
rural home and Title III loans, and the Leasing Corporation activity.
Note: Because the three (young, beginning, and small) categories are not mutually exclusive, one should not add across the categories to count
total YBS lending activity.
5
Sources: Annual Young, Beginning, and Small Farmer Reports submitted by each System lender through the District Banks.
1000
FCA
FARM CREDIT ADMINISTRATION
YBS New Loan Count Trends
180
160
155
150
148
148
148
151
150
146
143
142
138
140
130
120
114
Loan counts, (1,000s)
100
80
73
64
67
69
66
61
62
it.
60
55
58
51
50
44
37
51
51
54
57
58
53
53
40
46
36
39
40
42
33
20
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Young
Beginning
Small
6
Sources: Annual Young, Beginning, and Small Farmer Reports submitted by each System lender through the District Banks.
1000
FCA
FARM CREDIT ADMINISTRATION
YBS Share of Total New Loan Counts
70
58.7
59.6
60
57.2
57.6
54.5
54.3
51.0
47.7
47.2
Percent of total farm loans made
50
45.3
41.2
41.7
40.1
40
30
20.0
21.3
21.2
21.1
21.1
19.3
19.8
19.9
19.9
20.2
20.5
20
17.7
18.6
15.6
15.7
16.0
16.5
17.0
16.6
16.7
15.3
16.4
16.2
15.8
16.5
16.3
10
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Young
Beginning
Small
7
Sources: Annual Young, Beginning, and Small Farmer Reports submitted by each System lender through the District Banks.
1000
FCA
FARM CREDIT ADMINISTRATION
YBS New Loan Volume Trends
$16
14.2
$14
13.0
13.2
12.5
11.9
11.6
11.2
11.4
$12
11.0
10.9
9.8
12.0
11.5
$10
9.5
Loan Volume (Billions)
11.0
10.4
10.2
9.5
9.6
7.6
9.3
$8
8.8
8.2
8.3
7.7
7.5
$6
6.8
7.1
6.5
6.3
6.6
5.4
5.5
$4
5.0
4.2
4.4
4.4
3.8
$2
3.1
$0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Young
Beginning
Small
8
Sources: Annual Young, Beginning, and Small Farmer Reports submitted by each System lender through the District Banks.
1000
FCA
FARM CREDIT ADMINISTRATION
YBS Share of Total New Loan Volume
35
30.3
28.9
30
25.8
25.0
24.2
25
Percent of total farm dollar volume
22.2 22.2
20.6
20.3
19.5
20
17.5
15.7
17.8
18.3
17.2
17.8
17.8
15.2
15
17.3
16.6
16.2
15.9
15.2
14.2
it.
14.6
13.5
10
11.6
12.0
11.2
11.2
10.5
10.7
11.1
11.3
11.1
11.7
10.3
10.5
11.0
5
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Young
Beginning
Small
19
9
Sources: Annual Young, Beginning, and Small Farmer Reports submitted by each System lender through the District Banks.
1000
FCA
FARM CREDIT ADMINISTRATION
District Lending to YBS Borrowers in 2013
35
29.6
30
27.8
Percent of total new loan volume
25
20
18.8
15.2
15.6 16.1
14.6
14.1
15
12.6
11.0
10
8.5
8.7
9.4
7.7
6.6
5
0
Systemwide
AgriBank
AgFirst
Texas
CoBank
Young
Beginning
Small
20
10
Source: Annual Young, Beginning, and Small Farmer Reports submitted by each System lender through the District Banks.
1000
FCA
FARM CREDIT ADMINISTRATION
Association YBS Lending Growth
Associations with YBS measures that rose in 2013 relative to 2012
60
50
48
New loan counts as a percentage of
total farm loan counts
43
39
39
Number of associations
40
37
37
34
New loan volume as a percentage of
31
30
30
total farm loan volume
30
Outstanding loan counts as a
20
18
16
percentage of total farm loan counts
10
Outstanding loan volume as a
percentage of total farm loan volume
0
Young
Beginning
21 Small
11
Source: Annual Young, Beginning, and Small Farmer Reports submitted by each System lender through the District Banks.
1000
FCA
FARM CREDIT ADMINISTRATION
Conclusions - The Numbers
Recent YBS trends continued in 2013
YBS performance measures vary by district and
associations reflecting the different markets served
Many associations increased the percentage of their
total new lending that went to YBS customers
22
12
1000
THE
AND
BANKS
FCA
FARM CREDIT ADMINISTRATION
2013 YBS Survey Results
23
1000
FCA
FARM CREDIT ADMINISTRATION
Program Evaluation: Did Your Association Meet or Exceed Your 2013
YBS Loan Volume Goal?
Percent of Associations Meeting or Exceeding Their YBS
Loan Volume Goals
2013
2012
2011
Young
68%
65%
55%
Beginning
64%
63%
65%
Small
54%
56%
48%
Loan volume goals were used by two-thirds of the associations
Approximately half indicated they had raised this goal relative to their 2012 goal
24
14
Source: YBS Surveys.
1000
FCA
FARM CREDIT ADMINISTRATION
Program Management: Does Your Association Receive Input on
YBS Farmer Issues from an Advisory Committee?
YBS Advisory Committee Representatives
41 percent indicated "Yes"
40
35
34
35
Most YBS committees
annually or semi-annually
Percent of Associations Using the Group
30
provide input to their
25
21
20
18
17
respective boards either
15
15
15
13
10
7
5
5
0
Current YBS
Board Member
Organization
"Potential" YBS
Government
Borrowers
Comprised
Representatives
Borrowers
Representatives
(ex. FFA)
2013
2012
25
15
Source: YBS Surveys.
1000
FCA
FARM CREDIT ADMINISTRATION
Program Components: Did Your YBS Program Use One of the
Following Methods to Provide Credit to YBS Farmers in 2013?
80
70
67 67
61 60
62
Percent of Assocations Using the Method in 2013
60
52
54 54
50
44
40
35 37
32
29 29
30
24
20
17 17
15
10
7
6 6
0
Customized
Concessionary
Concessionary
Differential
Government
Government
Other methods
Underwriting
Loan Fees
Interest Rates
Loan
Guarantees
Loan
Covenants
Participations
Young
Beginning
Small
(eg. FSA)
16
Source: 2013 YBS Survey.
1000
FCA
FARM CREDIT ADMINISTRATION
Program Outreach: Identify Outside Parties or Organizations Used
to Coordinate Delivery of Your YBS Program?
Ongoing YBS Coordination With:
2013
Farm Service Agency (FSA)
97.6%
Other FCS Associations
63.4%
State/Local Governments
59.8%
District Bank
53.7%
Producer Groups and Organizations
50.0%
Non-profit Organizations
42.7%
Natural Resources Conservation Service (NCRS)
37.8%
USDA Outreach Staff
29.3%
Farmer Mac
23.2%
Small Business Administration (SBA)
19.5%
Other (Primarily Extension Service)
19.5%
Commercial Lenders
17.1%
Agricultural Marketing Service (AMS)
4.9%
Source: 2013 YBS Survey.
17
1000
FCA
FARM CREDIT ADMINISTRATION
Program Outreach: Special Initiatives Undertaken in 2013
One-third of the associations undertook special studies or new
market research efforts to improve their understanding of the
demographics and financial needs of their YBS customers.
Nearly half of the associations undertook new or significantly
revised outreach and/or training activities to achieve their YBS
program objectives.
28
18
Source: 2013 YBS Survey.
1000
FCA
FARM CREDIT ADMINISTRATION
Program Outreach: Common Methods or Programs to
Train/Educate or Reach Out to Potential YBS Customers
Sponsorship of and participation in Ag events (trade shows, conferences, etc.)
Cooperative efforts with FSA and county extension
Social Media (Facebook, Twitter, etc.)
Sponsorship of local farmers' markets
Providing scholarships and grants & funding
Supporting Ag leadership groups
Educational programs & seminars
Outreach (4-H, FFA, High Schools, and Colleges)
29
19
Source: 2013 YBS Survey.
1000
FCA
FARM CREDIT ADMINISTRATION
Conclusions - The Survey
Associations showed improvement in meeting or exceeding their
YBS lending goals
YBS Advisory Committees saw somewhat broader representation
Federal loan guarantees and customized underwriting standards
continue to be the most commonly used tools in YBS programs
Programs are coordinated with a variety of parties and use an
assortment of methods to increase service to YBS borrowers
30
20
FCA Board Meeting
ESTABLE ISHED
June 2014
Quarterly Report on
FCS Condition
June 12, 2014
Stephen Gabriel
Exhibit F
Hal Johnson
31
Topics for Open Session
Economic Conditions Affecting the FCS
FCS Condition and Performance
32
2
Economic Conditions Affecting
the Farm Credit System
Stephen Gabriel
Chief Economist
Office of Regulatory Policy
33
The economy: Recovery on track
with downside risks
Consensus Forecasts (percent)*
2013
2014
2015
GDP growth
1.9
2.5
3.1
CPI
1.5
1.8
1.9
Unemployment rate
7.4
6.4
5.9
10 Yr T-Bond (Dec '13; Aug '14; May '15)
3.0
3.0
3.5
Source: Consensus Economics, Inc.
*Survey date - May 12, 2014
34
4
DUEDE
Farm sector developments and
concerns
Spring planting - slow start; rapid catch up
Strong livestock/dairy profitability
Crop margins are compressing
Farmland markets are cooling
PEDv remains on hog industry radar
Severe drought in the West
Tensions in the Ukraine
5
A large corn crop would push
prices lower
70%
8.00
65%
6.89
60%
7.00
55%
6.00
50%
45%
5.00
40%
4.65
35%
4.20
4.00
30%
25%
3.00
20%
2.00
15%
10%
1.00
5%
0%
0.00
1975/76
19971/19
/////////
1111111
//////////
/////////////
//////////
mmmm //////////
Ending U.S. Corn Stocks/Use Ratio (left axis)
Average Farm Corn Price - dollars/bu (right axis)
6
Source: USDA
High soybean prices to boost
acreage and increase supplies
30%
16.00
14.40
14.00
25%
13.10
12.00
20%
10.75
10.00
15%
8.00
6.00
10%
4.00
5%
2.00
0%
0.00
1980/81
1983/84
1986/87
1989/90
1992/93
1995/96
1998/99
2001/02
2004/05
2007/08
2010/11
2013/14/15
Ending U.S. Sqybeans Stocks/Use Ratio (left axis)
7
Source: USDA
Average Farm Soybeans Price - dollars/bu (right axis)
Weather problems curtail wheat
yields sending prices higher
100%
9.00
90%
7.77
8.00
7.30
80%
7.00
70%
6.85
6.00
60%
5.00
50%
4.00
40%
3.00
30%
20%
2.00
10%
1.00
0%
0.00
1975/76 !!!!!!!!!
//////////// ///////// IIIIIII <<<<<<<<<< 2014/15
Ending U.S. Wheat Stocks/Use Ratio (left axis)
8
Source: USDA
Average Farm Wheat Price - dollars/bu (right axis)
Corn producers' profit margins
are tightening
As of 5/9/14
Iowa Season-average Corn Profit Margin Estimates¹
8.00
Iowa State University Cost of Production Estimates
7.00
6.00
5.00
Dollars per Bushel
4.00
3.00
2.23
1.64
1.73
2014
2.00
0.96
1.00
0.05
0.23
0.00
-1.00
(0.10)
(0.17)
2008
2009
2010
2011
2012
2013
Fall Delivery
2014
WASDE
Cash
WASDE
Margin Including Gov. Payments
Iowa Price
Total Cost per Bushel
1 2008-2012 are the season average prices received by lowa farmers, while the USDA/WASDE season average price estimates are adjusted for
lowa. The 2014 fall delivery cash price in lowa is based on December futures. Margins reflect total production costs and actual state average
9
yields, except for 2014, which reflects the 177 bushel per acre ISU budget estimate yield.
Soybean profit margins continue
to decline
As of 5/09/14
Iowa Season-average Soybean Profit Margin Estimates¹
16.00
Iowa State University Cost of Production Estimates
14.00
12.00
Dollars per Bushel
10.00
8.00
6.00
3.55
4.00
2.85
1.98
2.34
2014
2.00
1.38
0.06
0.53
0.00
-2.00
-0.22
2008
2009
2010
2011
2012
2013
Fall Delivery
2014
WASDE
Cash
WASDE
Margin Including Gov. Payments
Iowa Price
Total Cost per Bushel
1 2008-2012 are the season average prices received by Iowa farmer while the USDA/WASDE season average price estimates are adjusted
for lowa. The 2014 fall delivery cash price in Iowa is based on November futures. Margins reflect total production costs and actual state
10
average yields, except for 2014, which reflects the 50 bushel per acre ISU budget yield estimate.
44% of winter wheat acres are in
IHI
BLISHED
poor condition or worse
% of Acres in
Poor or Very
Top 10 Winter Wheat
% of 2013
Poor Condition
Producing States
Production
(Wk ending 6/1)
KANSAS
20.1%
62
WASHINGTON
7.2%
23
OKLAHOMA
6.6%
78
MONTANA
5.2%
7
TEXAS
4.1%
64
IDAHO
3.9%
1
MISSOURI
3.5%
10
ILLINOIS
3.5%
7
NORTH CAROLINA
3.3%
3
OREGON
3.0%
15
41
11
Source: USDA
NDYMNIST
High corn prices precipitated a
global supply response
8.00
Harvested acres (outside U.S.) increased 25% in each period
160000
1974 to 2005 (31 years)
7.00
2005 to 2014 (9 years)
140000
Corn Production outside the U.S. is
6.00
up nearly 50% since 2005
120000
5.00
100000
4.00
80000
3.00
60000
2.00
40000
1.00
20000
0.00
0
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012
Corn harvested acreage outside U.S. (1,000 Hectares) - right axis
Corn price received by farmers ($/bu) - left axis
12
Source: USDA
Farmland values are retreating in
DEPARTMENT
key Midwest states
Percent change in the dollar value of "good" farmland
in the Chicago Federal Reserve District
Jan 1, 2014
April 1 2013
to
to
April 1, 2014
April 1, 2014
Illinois
-4
0
Indiana
-4
+7
lowa
+1
-2
Michigan
-3
-1
Wisconsin
+1
+2
Chicago District
-1
+1
Source: Federal Reserve Bank of Chicago
13
Drought conditions expected to
persist through the summer
U.S. Drought Monitor
May 27, 2014
U.S. Seasonal Drought Outlook
NOAA
(Released Thursday, May. 29, 2014)
Drought Tendency During the Valid Period
Valid 8 a.m. EDT
Valid for May 15 . August 31, 2014
L
Released May 15, 2014
SL
L
SL
SL
SL
Drought Impact Types:
Delineates dominant impacts
S
= Short-Term, typically less than
6 months (e.g. agriculture, grasslands)
L = Long-Term, typically greater than
SL
SL
6 months (e.g. hydrology, ecology)
Intensity:
Author:
DO Abnormally Dry
Michael Brewer
D1 Moderate Drought
KEY:
NCDC/NOAA
S
D2 Severe Drought
D3 Extreme Drought
Drought persists or
Author: Rich Tinker, Climate Prediction Center, NOAA
D4 Exceptional Drought
intensifies
http://www.cpc.ncep.noaa.gov/products/expert_assessment/season_drought.html
The Drought Monitor focuses on broad-
Drought remains but
Depicts large-scale trends based on subjectively derived probabilities guided by short- and
L
scale conditions. Local conditions may
long-range statistical and dynamical forecasts. Short-term events -- such as individual storms --
vary. See accompanying text summary for
improves
forecast statements.
cannot be accurately forecast more than a few days in advance. Use caution for applications
-- such as crops that can be affected by such events. "Ongoing" drought areas are
USDA
Drought removal likely
approximated from the Drought Monitor (D1 to D4 intensity).
For weekly drought updates, see the latest U.S. Drought Monitor.
Drought development
NOTE: The tan area areas imply at least a 1-category improvement in the Drought Monitor
http://droughtmonitor.unl.edu/
likely
intensity levels by the end of the period although drought will remain.
The Green areas imply drought removal by the end of the period (D0 or none)
44
14
Preliminary CA drought analysis
suggests significant losses
2014 Drought and Central Valley Agriculture Summary
Drought impact
Loss
Normal
Percent
(crops only)
Quantity
Quantity
Loss
Water delivery reduction
6.5 maf
20 maf
32.5%
Shortage after increased groundwater pumping
1.5 maf
20 maf
7.5%
Fallowed irrigated land
410,000 acres
7,000,000 acres
6%
Crop revenue loss
$740 million
$25 billion
3%
Revenue lost plus additional pumping cost
$1.2 billion
$25 billion
4.8%
($450 million)
Central Valley economic loss
$1.7 billion
N.A.
Direct crop production job losses (seasonal
6,400
152,000
4.2%
and full time)
Direct, indirect and induced job losses
14,500
N.A.
maf = million acre feet
Source: Howitt, Richard, Josue Medillin-Azuara, and Jay Lund, "Preliminary 2014 Drought
Economic Impact Estimates in Central Valley Agriculture," May 19, 2014.
GREDE
Risks to Watch
Midwest growing conditions
Farmland values
Crop producers' margin compression
Western drought
Long-term interest rate trends
Economic developments in China
Geopolitical developments
46
16
STABL SHED 1933
Questions
THANK YOU
47
X
Farm Credit System
Condition and Performance
as of
March 31, 2014
Hal Johnson
Office of Examination
BLISHED 19
Topics
System Growth
Earnings / Capital
Portfolio Credit Quality
FIRS
49
19
NEW ESTABLE
Modest growth to start 2014
Total Assets ($B)
Gross Loans ($B)
% change in Gross Loans (quarter-over-quarter)
261
264
247
248
248
253
236
240
230
231
230
228
230
231
221
214
215
216
215
215
213
216
205
201
192
192
193
194
179
182
185
178
175
174
171
175
161
162
163
162
165
163
162
168
3.9%
4.1%
3.5%
3.5%
2.1%
2.4% 2.3%
2.1%
1.6%
0.6% 0.6%
1.3%
1.6%
1.7%
0.5%
0.7%
-0.6%
-0.2%
-0.1%
-1.4%
-2.1%
-1.8%
4Q-08
1Q-09
2Q-09
3Q-09
4Q-09
1Q-10
2Q-10
3Q-10
4Q-10
1Q-11
26211
3Q-11
4Q-11
1Q-12
2Q-12
3Q-12
4Q-12
1Q-13
2Q-13
3Q-13
4Q-13
1Q-14
Source: FCS Quarterly Information Statements
20
Seasonality dominant influence
on loan portfolio in the 1st quarter
Loan Growth by Loan Type (% change quarter-over-quarter)
Loan Growth by District (% change quarter-over-quarter)
Mar-12
Mar-13
Mar-14
Mar-12
Mar-13
Mar-14
-1.5%
22.7%
AgFirst
21.0%
District
-1.5%
(11%)
-0.2%
11.2%
-0.7%
AgriBank
District
-2.0%
4.6%
(41%)
-1.1%
2.3%
1.7%
2.0% 2.0%
0.8%
0.5% 0.0%
-0.1%
CoBank
5.4%
District
2.0%
(40%)
5.2%
-7.8%
-7.5%
-9.6%
Texas
2.4%
District
1.3%
Total Gross
RE
Production &
Loans
Mortgage
Intermediate
Agribusiness
Other
(8%)
1.3%
[46%]
[21%]
[16%]
[17%]
Source: FCS Quarterly Information Statements
21
System financials remain sound
System Earnings
System Capital ($B)
Full year 2012
Net Income: $4,118M
Full year 2013
43.7
Loan Provisions: $313M
Net Income: $4,640M
42.6
Loan Provisions: -$31M
41.7
40.6
39.6
Net Income ($M)
38.5
38.6
1,253
37.5
36.6
1,067
1,142
1,104
1,141
1,145
1,052
1,039
960
2.9%
2.8%
2.7%
2.5%
2.4%
2.4%
2.0%
1.9%
Provision for Loan Losses ($M)
0.2%
121
125
32
35
22
19
Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14
(32)
(40)
(12)
Total less
Restricted
% change
Restricted
Capital
(qtr-over-qtr)
Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14
52
Restricted capital represents capital associated with the Insurance Fund.
Source: FCS Quarterly Information Statements
22
Portfolio credit quality is strong;
credit measures stable
% of Nonperforming Loans-to-Total Loans
Loans
% of Loans Classified
Outstanding
as OAEM or Substandard
Loan Type
Mar-14
Mar-14
Mar-13
Mar-12
1.66%
1.53%
1.53%
1.36%
1.41%
1.31%
Real Estate Mortgage
94,201
4.2%
5.3%
7.5%
1.15%
1.01% 1.01%
Production & Intermediate
42,023
6.5%
7.3%
9.7%
2,970
2,784
2,832
2,608
2,711
Agribusiness
33,431
5.0%
6.5%
8.1%
2,522
2,238
2,040
2,068
Rural Utility
20,223
1.9%
2.9%
2.3%
Other
14,685
1.6%
1.8%
2.4%
Total FCS
204,563
4.4%
5.4%
7.2%
Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14
Nonaccrual Loans
Other nonperforming Loans ($M)
53
Source: FCS Quarterly Information Statements
23
ADVINIST
System FIRS ratings
Composite FIRS Ratings - System Banks & Associations
1 Rated
2 Rated
3 Rated
4 Rated
1
4
2
9
1
1
13
12
12
11
8
39
30
36
50
46
45
46
44
38
26
29
29
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Source: FCA's FIRS ratings database
54
24
Summary and final points
The risk environment for agriculture is changing:
Profitability is strong in the livestock/dairy sectors, but
margins for crop producers are compressing,
Farmland values are retreating in key Midwest states,
Western drought remains an ongoing concern.
The System remains financially sound, well-
capitalized, has strong earnings and favorable
portfolio credit quality.
System institutions are well-positioned for the
challenges facing agriculture.
25
ANDWIN
ISTRAT
Questions
ISHED
THANK YOU
56
THEDE
FCA Board Meeting
DEPARTMENT
ISHED
June 2014
Semi-Annual Report on
Office of Examination
Operations
June 12, 2014
Exhibit G
Hal Johnson
Office of Examination
57
Highlights of OE Operations
Operating Plan Objectives
OE Budget Results
Staffing Update
Summary
58
2
2014 Operating Plan Objectives
Risk Supervision & Examination Activities
Onsite at 71% of associations, all banks, 2 other
System entities, and Farmer Mac
Issued 37 Reports of Examination and 22 Interim
Activity letters
6 institutions under Enforcement and 2 institutions
under Special Supervision
59
3
DEPARTMENT
2014 Operating Plan Objectives
Risk Supervision & Examination Activities (Cont.)
Issued Standards of Conduct:
Examination guidance
System communication summarizing findings from
2013 Standards of Conduct examination activity
Guidance under development:
Update to Loan Underwriting Standards module
Governance procedures
60
4
DEPARTMENT
2014 Operating Plan Objectives
Public Mission as GSE
Completed 2013 Diversity and Inclusion
examination activities
Issued System communication and developed
Frequently Asked Questions on Diversity and
Inclusion in business planning
Updated business plan examination guidance to
include expectation on Diversity and Inclusion.
61
5
2014 Operating Plan Objectives
Human Capital
Implemented new assessment questionnaire and
online tests for Associate Examiner applicants
Initiated examiner job survey analysis and OE
human capital analysis
Operational Efficiency & Effectiveness
Ongoing progress in Loan Database, EDGe,
Examination Manual, 62 and leveraging technology
6
CHEDE ESTABLE
OE Budget Results (Fiscal YTD thru 3/31/14)
FY 2014 OE Budget - $30.5M
Travel
Funds Used
FY 2014 Travel Budget Used
47%
Funds
$14.3
Remaining
FY 2014 Travel Days Used
39%
47%
$16.2
53%
FTEs
Projected Full Year FTE's
165.3
Budgeted Full Year FTE's
176.5
Budget Variance
(11.2)
63
7
Staffing Challenges Remain
Staffing Levels
Planned
Projected
Variance
Staff on Board @ start of FY 2014
173
168
(5)
Staff Attrition
(1)
(12)
(12)
0
Projected Hirings
19
14
(5)
Staff on Board @ yearend FY 2014
180
170
(10)
(1) There have been 8 staff attritions fiscal YTD through May 2014.
64
8
INSUED
Summary
On-site presence at institutions maintained
A small number of institutions remain under a
higher level of supervision
Continued progress on other OE Operating
Plan objectives
Actual spending is below budget
Recruiting challenges and attrition result in
staffing levels below planned levels
9
Discussion
THANK YOU
66
Exhibit H
Farm Credit Administration
1501 Farm Credit Drive
McLean, Virginia 22102-5090
FCA
FARM CREDIT ADMINISTRATION
CERTIFICATE OF CLOSED MEETING
The General Counsel, in accordance with the Government in the Sunshine Act, 5 U.S.C. § 552b(f)(1),
hereby certifies that the Farm Credit Administration Board regular meeting of June 12, 2014, was
properly closed to the public on the basis of the exemption set forth below:
Supervisory and Oversight Activities of FCS Institution(s) - 5 U.S.C. § 552b(c)(8)
and (9).
/s/
Date: June 12, 2014
Charles R. Rawls
General Counsel
67