Earnings up following drought Strong sales of cropland contribute to greater demand for services for U.S. Farm Credit System
CHICAGO (Reuters) — An American government farm lender says fourth quarter earnings rose nearly 19 percent, boosted by strong demand for farm products.
The U.S. Farm Credit System, a government-sponsored enterprise and the single-largest lender to U.S. agriculture, uses proceeds from debt securities issued to domestic and foreign investors to fund farmers and agribusiness.
It earned $1.141 billion for the quarter that ended Dec. 31, up from $960 million in the same period a year earlier.
Annual earnings for 2013 climbed to $4.64 billion, or 12.7 percent from $4.118 billion in 2012, which was a drought year for U.S. farmers.
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“Strong global and domestic demand for U.S. agricultural products continued throughout 2013, enhancing the earnings of agricultural producers and contributing to solid earnings,” said Tracey McCabe, chief executive officer of the Federal Farm Credit Banks Funding Corp., which funds FCS’s securities.
“Capitalization remains strong and the System is well positioned to withstand adverse changes that may arise in future agricultural economic conditions.”
Full-year earnings reflected a three percent rise in net interest income to $6.674 billion because of higher loan volume and a loan loss reversal of $31 million. That compared with a provision for loan losses of $313 million in 2012.
They were partially offset by an increase in non-interest expenses of $139 million.
FCS’s fourth quarter net income increased by $181 million, primarily reflecting a loan loss reversal of $40 million in 2013, compared with a provision for loan losses of $125 million in the fourth quarter of 2012.
Gross loans grew by $9.156 billion, or 4.8 percent, to $201.06 billion Dec. 31 from the end of 2012. Demand increased for real estate mortgages, production, processing and marketing loans.
“Real estate mortgage loans increased primarily due to continued strong demand for cropland in the Midwest,” the System said.
Overall, borrowers’ financial conditions remained very favourable due to the high levels of farmers’ net cash income over the past several years, the FCS said.
It cited the U.S. Department of Agriculture’s 2014 forecast for farmers’ net cash income to decrease to $101.9 billion, a $28.2 billion decrease from 2013 but $11 billion above the 10-year average.
The projected decrease is primarily because of an expected drop in crop receipts of $26.7 billion, according to USDA.
FCS also reported that cash and investments rose by $4.965 billion to $51.893 billion Dec. 31, compared with a year earlier.
