The U.S. Farm Credit System, a government-sponsored enterprise and the single-largest lender to U.S. agriculture, on Wednesday said fourth-quarter earnings rose nearly 19 percent, boosted by strong demand for farm products.
The System, which uses proceeds from debt securities issued to domestic and foreign investors to fund farmers and agribusiness, earned $1.141 billion for the quarter ended Dec. 31, up from $960 million in the same period a year earlier.
Annual earnings for 2013 climbed to $4.640 billion, or 12.7 percent from $4.118 billion in 2012, a drought year for U.S. farmers.
"Strong global and domestic demand for U.S. agricultural products continued throughout 2013, enhancing the earnings of agricultural producers and contributing to solid earnings," Tracey McCabe, chief executive officer of the Federal Farm Credit Banks Funding Corporation that funds FCS' securities, said in a statement.
"Capitalization remains strong and the System is well positioned to withstand adverse changes that may arise in future agricultural economic conditions," she added.
Full-year earnings reflected a 3 percent rise in net interest income to $6.674 billion due to higher loan volume and a loan loss reversal of $31 million. That compared with a provision for loan losses of $313 million in 2012.
Offsetting these partially was an increase in noninterest expenses of $139 million.
For the fourth quarter, Farm Credit's 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.
DEMAND FOR REAL ESTATE LOANS RISES
Gross loans grew by $9.156 billion, or 4.8 percent, to $201.06 billion at 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 favorable due to the high levels of farmers' net cash income over the past several years, the System said.
FCS 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 due to an expected drop in crop receipts of $26.7 billion, according to USDA.
Farm Credit also reported cash and investments rose by $4.965 billion to $51.893 billion at Dec. 31, compared with a year earlier.