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Jill Long Thompson, Board Chair and Chief Executive Officer
Kenneth A. Spearman, Board Member
Leland A. Strom, Board Member
COMMUNICATION CREET FARM * * EEGI
ESTABLISHED
MINUTES OF THE REGULAR MEETING
OF THE
FARM CREDIT ADMINISTRATION BOARD
April 10, 2014
These minutes reflect the business transacted at the April 10, 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 10:05 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 three 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 presented.
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 March 13, 2014
(BM-10-APR-14-01)
Mr. Spearman moved to approve the minutes for March 13, 2014, 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-10-APR-14-01)
(A copy of the official "Board Action Item" is attached as Exhibit C.)
REPORTS
Quarterly Report on
Economic Conditions and FCS 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 D.)
2
CLOSED SESSION
The Board Chair convened the closed session of the meeting at 9:37 a.m. and instructed the
Secretary to activate the electronic recording device so the proceedings of the Closed Session could
be properly recorded, as required by the Government in the Sunshine Act.
The Board Chair then instructed the Deputy 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 E.)
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 a quorum of the Board.
Others present included Dale Aultman, Secretary to the Board; Joy Strickland, Deputy General
Counsel; Inga Smulkstys, Executive Assistant to the Board Chair and CEO; Russell Middleton,
Executive Assistant to Board Member Spearman; and Mark Johansen, Executive Assistant to Board
Member Strom. (A list of staff attendees is attached hereto as Exhibit A).
OE Quarterly Report
The Board Chair asked the Secretary to ensure that recording continued for this portion of the
meeting.
Robert Coleman and Roger Paulsen of the Office of Examination presented the OE Quarterly Report.
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. Strom moved that the meeting be adjourned.
Mr. Spearman seconded the motion.
Board Chair Long Thompson called the question.
The Secretary polled the Board Members and the motion carried unanimously.
3
The meeting adjourned at 10:05 a.m.
NOTATIONAL VOTE ACTIONS
There was one notational vote action approved by the FCA Board from March 14, 2014, through April
9, 2014 as follows:
Item Number
Action Date
Voting Results
Subject
NV 14-07
03/24/2014
Approved
Mission-Related Investments in Peak Ridge AgTech Funds II by United FCS,
ACA
The undersigned hereby certify that the foregoing minutes are the official minutes of the Regular
Meeting of the Farm Credit Administration Board held on April 10, 2014.
/s/
/s/
Jill Long Thompson
Dale L. Aultman
Board Chair and Chief Executive Officer
Secretary to the Board
Approved:
May 8, 2014
4
Exhibit A
Page 1 of 2
STAFF PRESENT AT THE
FCA REGULAR BOARD MEETING
April 10, 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
EEO-I
Burlew, Thais
X
OCPA
Stokke, Mike
X
X
Quinn, Christine
X
X
Meaux, Willy
X
X
OSMO
Rea, Laurie
X
X
Hudson, Bruce
X
X
OGC
Rawls, Charles
X
X
Strickland, Joy
X
X
Donner, Mary Alice
X
X
5
Exhibit A
Page 2 of 2
OPEN
CLOSED
OFFICE
SESSION
SESSION
OE
Coleman, Robert
X
X
Paulsen, Roger
X
X
Johnson, Hal
X
X
Fennewald, Dan
X
X
OIG
Dean, Elizabeth
X
X
ORP
Van Meter, Gary
X
X
Mardock, Barry
X
X
Gabriel, Steve
X
X
OMS
Smith, Stephen
X
X
Fowlkes, Jerome
X
X
FCSIC
Pfitzinger, Rick
X
X
Rubin, Howard
X
X
GENERAL PUBLIC
3
6
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
April 10, 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 April 10, 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 to the public. 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
March 13, 2014
Reports
2
Quarterly Report on Economic Conditions and FCS Conditions
CLOSED SESSION
3
Office of Examination Quarterly Report¹
March 31, 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).
7
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 March 13, 2014 Board Meeting
BM-10-APR-14-01
Effective Date:
April 10, 2014
Effect on Previous Action:
None
THE FCA BOARD HEREBY:
Approves the minutes for March 13, 2014, as submitted.
DATED THIS 10th DAY OF APRIL 2014
BY ORDER OF THE BOARD
Dale L. Aultman
Secretary to the Board
8
GREDE ESTABLE BLISHED MISSOURI COMPANY
FCA Board Meeting
April 2014
Quarterly Report on
FCS Condition
April 10, 2014
Stephen Gabriel
Hal Johnson
Exhibit D
9
GREDE
Topics for Open Session
Economic Conditions Affecting the FCS
FCS Condition and Performance
10
2
Economic Conditions Affecting
the Farm Credit System
Stephen Gabriel
Chief Economist
Office of Regulatory Policy
11
The economy: Steady, but slow
improvement expected
Consensus Forecasts (percent)*
2014
2015
GDP growth
2.8
3.1
CPI
1.7
2.0
Unemployment rate
6.4
5.9
10 Yr T-Bond (Jun '14; Mar '15)
3.0
3.5
*Survey date - March 10, 2014
12
4
Farm sector developments and
concerns
We have a new Farm Bill
Farm income to drop sharply in 2014
Crop margins are compressing
Farmland markets are cooling
PEDv threatens hog industry
Severe drought in the West
Tensions in the Ukraine
5
Lower crop receipts and
government payments in 2014
Key Farm Income Components
2012 - 2013F 2013F - 2014F
% Change
% Change
Cash receipts
0.8
-6.4
Crops
-3.3
-12.4
Livestock
6.2
0.7
Direct Gov. payments
5.3
-45.4
Cash expenses
3.3
-1.5
Net cash income
-3.2
-21.7
Net farm income
14.7
-26.6
14
6
Source: USDA
DINIST
Farm sector net cash income is
projected to drop sharply in 2014
160
140
Net cash income (Billion 2009 $)
120
—
Net cash income (Billion $)
100
80
60
40
20
0
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
7
Source: USDA, ERS
Profits for crop producers to
drop sharply in 2014
Farm Business Average Net Cash Income (percent change from prior year)
140
120
2012P/2011
114
100
2013F/2012P
80
2014F/2013F
58
60
40
26
31
3028
19
22
20
12
16
5
6
1
6
4
8
0
-20
-3
-5
-4
-9
-11
-21
-40
-24
-43
-39
-37
-60
-47
Wheat
Corn
Soybeans
Cotton
Specialty
Beef
Hogs
Poultry
Dairy
& peanuts
and rices
crops
cattle
8
Source: USDA, ERS
NEW LISHED IDVINIST
The long-term outlook points to
much lower grain prices
Average Price Received by Farmers (Dollars Per Bushel)
16.00
Soybeans
14.00
14.40
Wheat
12.00
Corn
10.00
8.85
8.00
7.77
6.00
6.89
4.30
4.00
3.30
2.00
0.00
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
9
Source: USDA
lowa farmland prices decelerate
in 2013
Percent Change in Iowa Farmland Values
35
32.5
30
25
23.7
22.0
20
15.6
15.9
14.3
15
10.8
9.2
10.0
10
8.2
4.3
5.1
5
3.7
0
-5
-2.2
2000 2001 2002 2003 2004 2005 182006 2007 2008 2009 2010 2011 2012 2013
10
Source: Iowa State University, 2013 Farmland Value Survey
Chicago Fed District also has a
BLISHED
cooling farmland market
Percent Change in the Value of Good Farmland in 4th Qtr, Chicago Federal Reserve District
12
10
8
6
4
2
0
-2
-4
Chicago District
Illinois
-6
Indiana
-8
lowa
-10
Wisconsin
2005
2006
2007
2008
2009
2010
2011
2012
2013
19
11
Source: Federal Reserve Bank of Chicago
NDYMNIST
Cropland markets subdued in the
LISHED
Kansas City Federal Reserve District
Percent Change in Farmland Values from the Previous Quarter
10
9.1
2010:Q4
9
2011:Q4
8
2012:Q4
7
6.1
6.2
2013:Q4
5.9
6.0
5.9
6
5.2
5
4
3.3
3
2.5
2
1.3
1
0.7
0
Nonirrigated Cropland
Irrigated Cropland
Ranchland
12
Source: Federal Reserve Bank of Kansas City
DIVENSI
Hog virus continues to spread
New Cases of Porcine Epidemic Diarrhea Virus (PEDv) Reported by Week
350
300
250
200
150
100
50
0
06/16/13
07/16/13
08/16/13
09/16/13
10/16/13
11/16/13
12/16/13
01/16/14
02/16/14
03/16/14
21
13
Source: American Association of Swine Veterinarians
PEDv has spread to 27 States as
ESTABLE
of March 22, 2014
AK
WA
MT
ND
ME
1
1
MN
OR
793
VT
ID
NY
NH
3
SD
WI
5
MA
WY
47
11
MI
CT
8
83
RI
PA
NE
IA
73
NJ
NV
64
1646
OH
IL
IN
215
UT
DE
CO
407
261
CA
62
KS
WV
MD
MO
7
KY
VA
1
214
96
14
NC
TN
518
AZ
OK
9
5
NM
331
AR
SC
2
MS
AL
GA
TX
LA
52
HI
FL
Created: March 26, 2014
22
14
Source: American Association of Swine Veterinarians
IDVINIST
Over two-thirds of California is in
extreme drought or worse
U.S. Drought Monitor
March 25, 2014
California
(Released Thursday, Mar. 27, 2014)
Valid 8 a.m. EDT
Drought Conditions (Percent Area)
None
D0-D4
D1-D4
D2-D4
D3-D4
D4
Current
0.00
100.00
99.80
95.21
71.78
23.42
Last Week
0.01
99.99
99.80
93.08
71.78
22.37
3/18/2014
3 Months Ago
2.61
97.39
94.25
84.88
27.59
0.00
12/24/2013
Start of
Calendar Year
2.61
97.39
94.25
87.53
27.59
0.00
12/31/2013
Start of
Water Year
2.63
97.37
95.95
84.12
11.36
0.00
10/1/2013
One Year Ago
0.00
100.00
48.38
24.22
0.00
0.00
3/26/2013
Intensity:
D0 Abnormally Dry
D3 Extreme Drought
D1 Moderate Drought
D4 Exceptional Drought
D2 Severe Drought
The Drought Monitor focuses on broad-scale conditions.
Local conditions may vary. See accompanying text summary
for forecast statements.
Author:
David Simeral
Western Regional Climate Center
USDA
23
National Drought Mitrigation Conter
15
http://droughtmonitor.unl.edu/
GREAT
Risks to Watch
BLISHED
Farmland values
Crop producers' margin compression
Long-term interest rate trends
Porcine Epidemic Diarrhea Virus (PEDv)
Western drought
Midwest planting conditions
Economic developments in China
Geopolitical developments
16
ESTABLE ISHED 1933
Questions
THANK YOU
25
ABLISHED 19
Farm Credit System
Condition and Performance
as of
December 31, 2013
Hal Johnson
Office of Examination
PRATION***
Topics
System Growth
Earnings / Capital
Portfolio Credit Quality
FIRS
27
19
System reports modest growth in 2013;
driven largely by gains in the 4th quarter
Total Assets ($B)
Gross Loans ($B)
% change in Gross Loans (year-over-year)
300
275
261
247
250
230
230
225
214
215
200
186
201
175
163
192
175
175
150
140
165
125
161
125
117
143
111
101
100
94
123
106
96
75
83
90
93
16.2%
15.8%
13.0%
75
10.3%
9.9%
50
9.9%
8.9%
7.5%
6.4%
3.9%
3.1%
2.1%
4.8%
25
-0.4%
2000
2001
2002
2003
2004
2005
22006
2007
2008
2009
2010
2011
2012
2013
Source: FCS Annual Information Statements
20
Real estate lending was the largest
driver of loan growth in 2013
Loan Growth by Loan Type (% change year-over-year)
Loan Growth by District (% change year-over-year)
2011
2012
2013
2011
2012
2013
16.8%
AgFirst
-2.4%
District
2.0%
(11%)
1.5%
9.9%
9.4%
9.5%
6.7%
6.3%
4.8%
4.7%
AgriBank
5.1%
3.4%
3.5%
3.1%
1.7%
District
12.8%
0.6%
(41%)
7.4%
-0.4%
CoBank
-4.5%
District
8.8%
(40%)
3.2%
Texas
0.0%
-16.4%
District
8.0%
(8%)
5.1%
Total Gross
RE
Production &
Loans
Mortgage
Intermediate Agribusiness
Other
[47%]
[23%]
[13%]
[17%]
Source: FCS Annual Information Statements
21
System posts continued strong
ESTABLE
financial results in 2013
System Net Income ($M)
System Capital ($B)
4,640
4,118
Capital-to-Assets Ratio
16.3%
3,940
15.6%
15.7%
14.2%
14.5%
3,495
13.9%
12.7%
42.6
38.6
3.5
2,916
2,850
35.9
2,703
33.3
3.3
3.4
30.0
3.2
26.4
27.1
3.3
2.6
2.9
39.1
Provision for Loan Losses ($M)
30.0
32.5
35.3
925
23.8
24.2
26.7
667
408
430
313
81
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
(31)
Total System Capital less Restricted
Restricted Capital
2007
2008
2009
2010
2011
2012
2013
30
- Restricted capital represents capital associated with the Insurance Fund -
Source: FCS Annual Information Statements
22
ADYMNIST
Portfolio credit quality is sound; credit
LISHED
indicators continued to improve in 2013
% of Nonperforming Loans to Total Loans
Nonaccruals as a % of Loans Outstanding
Total FCS
1.6%
1.2%
($201,060)
Dec-11
2.14%
0.9%
1.93%
Sectors
Dec-12
2.9%
1.72%
1.50%
Combined
2.4%
Dec-13
1.36%
(27%)
1.8%
1.01%
Cattle
1.8%
1.4%
0.43%
(9.2%)
3,535
1.0%
3,386
2,997
Dairy
3.2%
2.4%
2,416
2,608
(7.6%)
2.2%
2,040
Forestry
3.0%
1.9%
(6.0%)
1.2%
Poultry/Eggs
1.4%
621
1.3%
(2.6%)
1.7%
Horticulture
8.8%
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
10.5%
(1.3%)
8.0%
Nonaccrual Loans
Other nonperforming Loans ($M)
Biofuels
3.5%
5.7%
(0.6%)
2.7%
31
Source: FCS Annual Information Statements
23
LISHED
System FIRS ratings
Composite FIRS Ratings - System Banks & Associations
1 Rated
2 Rated
3 Rated
4 Rated
3
1
3
6
2
14
1
1
14
12
12
10
8
31
38
31
50
46
44
83
57
43
37
26
29
30
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
32
Source: FCA's FIRS ratings database
24
Summary and final points
Risk profile for agriculture is changing. Profitability for the
protein sector is improving while crop producers face tighter
margins.
The farmland market is cooling as lower farm profitability puts
pressure on prices
The System's financial performance remains strong. Credit
quality in the System's loan portfolio is good and credit
indicators continue to improve.
The System remains fundamentally safe and sound and is
well-positioned for the risks 33 facing agriculture
25
ESTABL SHED 1933
Questions
THANK YOU
34
Exhibit E
Farm Credit Administration
1501 Farm Credit Drive
McLean, Virginia 22102-5090
FCA
FARM CREDIT ADMINISTRATION
CERTIFICATE OF CLOSED MEETING
The Deputy 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 April 10,
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: April 10, 2014
Joy Strickland
Deputy General Counsel
35