FSA LOAN PORTFOLIO CHANGES AND … › oce › forum › past_speeches › 2017 › 2017...2017/02/16 · 2015 2016 2017 (Jan30) 6.6 7.2 7.9 8.2 8.3 8.2 8.6 9.2 10.1 9.9 8.9 9.3 10.3

2017 Agricultural Outlook Forum

FSA LOAN PORTFOLIO CHANGES AND IMPLICATIONS

DC-FWD4

Slide 1

DC-FWD4 Template taken from National Policy Meeting presenation --upper panel added for color.Dodson, Charles - FSA, Washington, DC, 2/16/2017


Back to the Future?1980s-•FSA (then FmHA) viewed as a bellwether of farm financial stress•Share of farm credit market grew •Loan defaults and losses increased dramatically


1980s

•FSA credit primarily direct lending•Safety net oproduction losses oprice declines


What’s Different Today?

•Crop Insurance •Policy changes shifted focus of direct lending•Guaranteed lending provides safety net


Targeting to Beginning Farmers & Implementation of Microloans Program Has Focused Direct Program on Small Farms

MOST DIRECT OBLIGATIONS GOING TO FARMS < $100,000 IN ANNUAL SALES


40% OF BORROWERS ARE COW-CALF OPERATIONS

Under 50,00036%

50.000 -100,000

15%

100,000 to 350,000

30%

350000 to 1 Mi

15%

Over 1 Mi4%

Direct Obligations (5-yrs) FBP by Farm Sales


Corn-Soybeans

21% Cotton3%

Other Cash

Grains & Oilseeds

11%

Fruits/Nuts/Veg/Potato

5%

Other Crop7%

Beef41%

Dairy9%

Poultry2%

Other Lvsk.1%

Sources: FSA OBFN and Farm Business Plan


Direct borrowers with < $100,000 in sales are more dependent on non-farm income

0 0.5 1 1.5 2 2.5

Over $1 Mi

$350,000 to 1 Mi

$100,000 to $350,000

50.000 - 100,000

Under 50,000

Avg

Farm

Sal

es

Ratio of Wages/Avg. Farm Sales

Ratio of Wages/Avg. Farm Sales



Source: FSA FLP Farm Business Plan


Number & Share of Farms Receiving Direct Loans Since 2014, by FSA County Office Area

Canada

MexicoEstimated Share of Farms Receiving Direct Loans (2014-2016)

Less than 2.5%2.5% to 10%10.1% to 20%20% or more

Canada

Mexico# of Farms Receiving Direct Loans by FSA Office (2014-2016)

None1 -1011- 2526- 50Over 50

Number of Farms Share of Indebted Farms


Sources: USDA FSA PLAS & 2012 Census of Agriculture


Key factors in FSA Direct Portfolio Today

•off-farm employment •Cattle sector•General farm economy


Majority of FSA Portfolio is Guaranteed

0

5

10

15

20

25

2008 2009 2010 2011 2012 2013 2014 20152016

2017(Jan30)

6.6 7.2 7.9 8.2 8.3 8.2 8.6 9.2 10.19.9

8.9 9.3 10.3 11.1 11.5 11.55 11.9 12.6 13.7 14.6

Billi

ons o

f $

Direct Loans Guaranteed loansSource: FSA management reports


Majority of Guarantee Borrowers Are Crop Producers

Corn-Soybeans24%

Wheat3%

Other Cash Grains & Oilseeds

7%

Cotton4%

Fruit&Nuts/Veg/Nursury7%

Other Crops10%

Beef20%

Dairy6%

Poultry18%

Hogs & Other Lvsk1%

DISTRIBUTION OF BORROWERS RECEIVING NEW FSA GUARANTEES (PAST 5 YEARS)

Source: USDA FSA GLS Data


Number & Share of Farms Receiving GteLoans Since 2014, by FSA County Office Area

Canada

Mexico# of Farms Receiving Guaranteed Loans by FSA Office (2014-2016)

None1- 1011-2021-50Over 50

Canada

MexicoEstimated Share of Indebted Farms Receiving GTE Loans by FSA Office (2014-2016)

Less than 2.5%2.5% to 10%10% to 20%Over 20%

Number of Farms Share of Indebted Farms


Sources: USDA FSA GLS & 2012 Census of Agriculture


Outstanding loans (EOY 2015), --Direct Serves Small Farms, While Guaranteed Serves Mid-Size Farms

Direct Guaranteed

Small part-timefarmsSmall family farms

Mid-size familyfarmsLarge family farms

DC-FWD5

Slide 12

DC-FWD5 Next slide (hidden) gives typology definitionsDodson, Charles - FSA, Washington, DC, 2/16/2017

Small family farms were farming occupation farms or farms with > 1,000 of operator labor. Small., part-time farms was everything else. Mid- and Large farms are the same as described below

DC-FWD1

Slide 13

DC-FWD1 Hidden slide--showing source data for ERS typologiesDodson, Charles - FSA, Washington, DC, 2/16/2017


Debt Market Shares Understates Share of Farmers Served Through FSA Loans

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0%

3%

5%

8%

10%

13%

15%

18%

20%

% o

f Tot

al D

ebt

Direct borrowers

Gte Borrowers

FLP borrowers

Direct debt

GTE debt

Direct & Gte debt

6.4% Total Debt Market Share vs 8.7% Indebted Farmer Share in 2015

% of Indebted Farm

s

Sources: FSA GLS & PLAS Data merged with the USDA ARMS; USDA ERS


Mid-size and Large Family Farms More Dependent on FSA Credit Programs


0

2

4

6

8

10

12

14

16

18

SMALL, PART-TIME FARMERS

SMALL FAMILY FARMS MID-SIZE FAMILY FARMS LARGE FAMILY FARMS

% o

f Ind

ebte

d Fa

rms

By ERS Farm Typology

Market Penetration (Dec 2015)

Direct Guaranteed Both

Source: FSA GLS & PLAS Data merged with the USDA ARMS


FSA Guaranteed Portfolio

•Reflects loan performance in the sector

•Not substantially different from Bank Ag loan performance


Loan Performance Comparison

0.981.08

1.27

0.57

0.8

1.22

0

0.2

0.4

0.6

0.8

1

1.2

1.4

FY 2014 FY 2015 FY 2016

FSA Guaranteed vs. Commercial Ag Loan Delinquencies

FSA Guaranteed Loans Commercial Bank Agricultural Loans

Source: USDA FSA GLS and Federal Reserve Data


..As are Smaller Community Banks

Under $250 Mi31%

$250 Mi. - $500 Mi38%

$500 Mi. to $1 Bil12%

$1 Bi to $10 Bi15%

Over $10 Bil4%

SHARE OF FSA GUARANTEES OUTSTANDING DEC 2015 BY BANK ASSETS

Source: USDA FSA GLS & Bank Call Report Data


Borrower Delinquency Rates Edging Up for OL Programs

0

5

10

15

20

25

30

Borrower Delinquency Rate by Qtr. (Seasonally Adjusted)

Direct OL Direct FO GTE OL GTE FO



USDA FSA R540 & GLS Data

DC-FWD6

Slide 19

DC-FWD6 Dodson, Charles - FSA, Washington, DC, 2/16/2017


0

5

10

15

20

25

30

35

40

Direct DA > 0.4 Gte DA > 0.4 Direct Debt-Asset Guarantee Debt-to-asset

Perc

ent

All FLP borrowers w/year-end outstanding debt

2004 2007 2014 2015

..As well as greater indications of financial stress--declining solvency


Source: FSA GLS & PLAS Data merged with the USDA ARMS


0

20

40

60

80

100

120

Direct DRCU GTE DRCU Direct-OPM GTE-OPM

of FLP borrowers w/FLP year-end outstanding debt

2004 2007 2014 2015

Operating profit margin

% of debt repayment capacity utilized

..and higher debt capacity utilization and lower profitability



Conclusions•FSA direct portfolio is unique•FSA credit market share is small in the sector, but critical in some segments•FSA portfolios are showing some signs of stress

Credits:Special thanks to FSA Economic and Policy Analysis StaffJoy HarwoodCharles Dodson

FSA LOAN PORTFOLIO CHANGES AND … › oce › forum › past_speeches › 2017 › 2017...2017/02/16 · 2015 2016 2017 (Jan30) 6.6 7.2 7.9 8.2 8.3 8.2 8.6 9.2 10.1 9.9 8.9 9.3 10.3

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