FSA LOAN PORTFOLIO CHANGES AND … › oce › forum › past_speeches › 2017 ›...
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2017 Agricultural Outlook Forum
FSA LOAN PORTFOLIO CHANGES AND IMPLICATIONS
DC-FWD4
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Slide 1
DC-FWD4 Template taken from National Policy Meeting presenation --upper panel added for color.Dodson, Charles - FSA, Washington, DC, 2/16/2017
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2017 Agricultural Outlook Forum
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
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2017 Agricultural Outlook Forum
1980s
•FSA credit primarily direct lending•Safety net oproduction losses oprice declines
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2017 Agricultural Outlook Forum
What’s Different Today?
•Crop Insurance •Policy changes shifted focus of direct lending•Guaranteed lending provides safety net
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2017 Agricultural Outlook Forum
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
2017 Agricultural Outlook Forum
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
2017 Agricultural Outlook Forum
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
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2017 Agricultural Outlook Forum
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
2017 Agricultural Outlook Forum
2017 Agricultural Outlook Forum
Source: FSA FLP Farm Business Plan
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2017 Agricultural Outlook Forum
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
2017 Agricultural Outlook Forum
Sources: USDA FSA PLAS & 2012 Census of Agriculture
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2017 Agricultural Outlook Forum
Key factors in FSA Direct Portfolio Today
•off-farm employment •Cattle sector•General farm economy
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2017 Agricultural Outlook Forum
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
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2017 Agricultural Outlook Forum
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
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2017 Agricultural Outlook Forum
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
2017 Agricultural Outlook Forum
Sources: USDA FSA GLS & 2012 Census of Agriculture
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2017 Agricultural Outlook Forum
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
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Slide 12
DC-FWD5 Next slide (hidden) gives typology definitionsDodson, Charles - FSA, Washington, DC, 2/16/2017
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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
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Slide 13
DC-FWD1 Hidden slide--showing source data for ERS typologiesDodson, Charles - FSA, Washington, DC, 2/16/2017
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2017 Agricultural Outlook Forum
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
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2017 Agricultural Outlook Forum
Mid-size and Large Family Farms More Dependent on FSA Credit Programs
2017 Agricultural Outlook Forum
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
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2017 Agricultural Outlook Forum
FSA Guaranteed Portfolio
•Reflects loan performance in the sector
•Not substantially different from Bank Ag loan performance
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2017 Agricultural Outlook Forum
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
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2017 Agricultural Outlook Forum
..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
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2017 Agricultural Outlook Forum
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
2017 Agricultural Outlook Forum
2017 Agricultural Outlook Forum
USDA FSA R540 & GLS Data
DC-FWD6
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Slide 19
DC-FWD6 Dodson, Charles - FSA, Washington, DC, 2/16/2017
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2017 Agricultural Outlook Forum
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
2017 Agricultural Outlook Forum
Source: FSA GLS & PLAS Data merged with the USDA ARMS
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2017 Agricultural Outlook Forum
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
2017 Agricultural Outlook Forum
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2017 Agricultural Outlook Forum
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