The Farm Credit Administration board recently received a quarterly report on economic issues affecting agriculture, as well as an update on the financial condition and performance of the Farm Credit System as of Dec. 31, 2018.
While general economic factors remain favorable, U.S. farmers face significant challenges in 2019. Retaliatory tariffs on U.S. products continue to adversely affect agriculture. Soybean exports declined $4.5 billion in the fourth quarter of 2018 as a result of China purchasing from other sources.
Soybean, corn and wheat producers could again face weak to negative margins in 2019 due to large global supplies, weak pricing and uncertain export demand. Tight margins in 2018 have slowed production growth in the livestock, poultry and dairy sectors. The decline in production should boost product prices and strengthen producer returns in 2019, according to the Farm Credit Administration. The beef and broiler markets are reasonably balanced, but production growth is strong in the pork sector because of an expected increase in exports.
Despite depressed or negative crop returns, farmland values have remained relatively stable. Stability is attributed to the volume of land that continues to be relatively modest, balanced with demand in many land markets. Farmer and investor demand for excellent-quality land remains reasonably strong, the Farm Credit Administration stated.
The Farm Credit system reported for 2018 moderate loan growth, favorable earnings and strong capital levels. Credit quality in the system’s loan portfolio continued to be good, with non-performing assets at 0.84 percent of loans and other property owned, compared with 0.78 percent at year-end 2017.