Strong Exports, rising feed costs highlight Farm Credit report
Washington DC - The Farm Credit Administration board recently received a quarterly report on economic issues affecting agriculture, together with an update on the financial condition and performance of the System as of March 31.
The U.S. economy continued its strong recovery, growing 6.4% in the first quarter. Growth is largely consumer driven, fueled by pent-up demand, low interest rates, and additional government support. With the ramp-up of economic activity, supply chains and labor markets are struggling to adjust.
Demand-driven price increases, including for food, housing, and raw materials, have sparked inflationary concerns.
For agricultural producers, the U.S. food system continues to adjust to demand shifts and supply questions. Grain and oilseed prices have soared on strong export demand, tight ending stocks, and global production concerns. Higher crop prices, limited market supply, and greater investor interest are driving farmland values higher.
Rising feed costs have hurt livestock producers, but strong demand and low supplies are lifting prices for hogs and poultry. Strong exports and recovering food service demand are also expected to raise margins for dairy producers.
Drought in the western United States, especially California, is a growing concern. Recent rains in some cattle-producing areas have helped, but conditions remain dry. Snowpack and reservoir levels in California are below average for this time of year.
As of March 31, the System was safe and financially sound. Real estate mortgage lending and seasonal financing at grain and farm supply cooperatives were the principal drivers of loan growth in the first quarter of 2021. Portfolio loan quality remained very good, with little change in credit risk measures. Strong earnings for the quarter continued to support additional capital growth. Overall, System institutions are well-positioned to support the credit needs of agricultural producers and rural America.