2012 Drought: Joint Statement by Farm Credit Bank CEOs
Sept. 12, 2012 – The following joint statement can be attributed to Tim Amerson, CEO and President of AgFirst FCB in Columbia, South Carolina; Bill York, CEO of AgriBank FCB in St. Paul, Minnesota; Bob Engel, President and CEO of CoBank ACB in Denver, Colo.; and Larry Doyle, CEO of Farm Credit Bank of Texas in Austin, Texas:
“Over the past 12 weeks, national attention has been focused on the drought and the real challenges it presents for the U.S. agricultural economy. Extreme drought conditions across much of the country have drastically reduced the outlook for many crops, particularly corn and soybeans. As a result, futures prices for those commodities have risen to record or near-record highs. More than half the counties in the United States have now been designated as disaster areas by the USDA.
“Not surprisingly, the financial impact of the drought varies significantly by market sector and geography. The hardest-hit areas of the Grain Belt are experiencing sharply lower yields and acreage abandonment, and many farmers in that region will see reduced harvest revenues this year. In other parts of the country farmers and ranchers are experiencing a second consecutive year of drought. At the same time, grain farmers who can produce an acceptable crop stand to benefit from higher prices in the market. Ranchers, cattle feeders and those in the dairy, hog and poultry sectors will be negatively impacted, given the high cost of corn, soybeans, hay and other feedstuffs. For cooperatives, reduced yields will in many cases lead to lower volume and lower revenues from storage, drying and blending on behalf of farmer-members.
“Despite these myriad challenges, we believe that financial conditions for American agriculture are far better than they were in 1988, the last time the nation experienced a drought of similar magnitude. Many producers are coming off several consecutive years of strong profits, which have enabled them to reduce leverage, improve liquidity and invest in new equipment. In addition, the agriculture sector has become much more sophisticated in utilizing important risk management tools to mitigate earnings volatility, such as futures contracts and crop insurance. Agricultural cooperatives, meanwhile, have also strengthened their balance sheets in recent years and are in a better overall position to withstand any drought-related business impacts.
“In addition, the Farm Credit System has the necessary size, strength and flexibility to manage through the drought crisis. Today, the System has approximately $230 billion in total assets and solid levels of capital and liquidity. Aggregate loan quality is very strong by historic standards. The U.S. is fortunate to have an organization like the Farm Credit System, as well as other lenders, that are devoted to supporting agriculture and the rural economy.
“In short, the Farm Credit System remains well positioned to meet the borrowing needs of rural America, notwithstanding the difficult conditions brought on by the drought of 2012. The drought’s impacts may differ from region to region, but Farm Credit’s commitment to its mission is the same everywhere. The System’s role is to stand by its customers, in good times and bad, and it will continue to fulfill that need in a safe and sound manner. That includes working collaboratively with borrowers who are experiencing distress related to the drought on a case-by-case basis.
“We remain enormously optimistic about the long-term prospects for American agriculture. Whatever the challenges presented by the drought, access to credit will not be one of them. The System will continue to focus on delivering dependable credit to U.S. agriculture and supporting its ongoing growth and success.”
About The Farm Credit System
For 95 years, Farm Credit has been a national provider of credit and related services to rural America through a cooperative network of customer-owned lending institutions and specialized service organizations. Created by Congress in 1916, the Farm Credit System provides over $180 billion in loans and leases to farmers, ranchers, rural homeowners, aquatic producers, timber harvesters, agribusinesses, and agricultural and rural utility cooperatives. For more information about the Farm Credit System, please visit www.farmcredit.com.