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| Best of NAMA 2025 |
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FARM CREDIT SYSTEM UPDATES ITS 2025 AG ECONOMY OUTLOOK
Dec. 16, 2024
Source: Farm Credit Administration
McLEAN, Va. -- At its monthly meeting today, the Farm Credit Administration board received a quarterly report (PDF) on economic issues affecting agriculture, together with an update on the financial condition and performance of the Farm Credit System (System) as of Sept. 30, 2024.
Quarterly report on conditions in agriculture and the Farm Credit System
The U.S. economy has continued to show modest growth through 2024, as gains in productivity support real wage growth and boost consumer spending. As the year draws to a close, the Federal Reserve's preferred inflation measures have plateaued modestly above the 2% target level. Labor markets have finally returned to baseline levels, alleviating the tight conditions of the past several years. There are early indicators of reductions in the growth of housing costs, which are responsible for more than half of current inflation.
For agriculture, a sharp divergence in returns for crop and livestock sectors has become apparent as producers enter 2025. Cash grain farmers are seeing low returns, with average incomes down sharply this year. In contrast, cattle and dairy farms are forecast to see strong income as lower feed costs benefit producers across the livestock sector. Specialty commodity producers continue to be exposed to fast-growing costs such as labor and interest on farm debt.
Farmland values in most regions have been flat in real terms this year. Early indicators find increasing softness in farmland markets, as values decline for low-quality land and the number of transactions falls. Premiums for metro-adjacent farmland have risen, raising exposure to any potential decline in the general economy.
The System reported solid financial results through the first nine months of 2024. Loan growth continued at a modest pace, slightly ahead of the same period a year ago. Portfolio credit quality remained favorable although nonperforming assets as a percentage of loans outstanding, and other property owned increased to 0.79%, up from 0.53% as of Sept. 30, 2023.
Year-to-date earnings through September were $5.9 billion, up 7.3% compared to a year ago. Total capital equaled $79.1 billion, up 9.4% year over year, with strong earnings supporting continued capital growth. Overall, the System remains financially sound and is well positioned to meet the funding and liquidity needs of U.S. farmers and ranchers.
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