Federal Agricultural Mortgage Corporation · NYSE:AGM
Federal Agricultural Mortgage — Investor Presentation (March 2016)
37 slides from Federal Agricultural Mortgage's investor presentation, Mar 16, 2016
Slide 1: Farm Sector Income & Finances 2016 Outlook
Farm Sector Income & Finances 2016 Outlook By Ryan Kuhns and Kevin Patrick March 16, 2016
Slide 2: Background
Background The Economic Research Service forecasts the farm sector’s income statement and balance sheet Last released February 9th Includes 2015 and 2016 forecasts of: – Income statement – Balance sheet – Financial metrics – Farm business-level outlook 2
Slide 3: Net cash income (NCI) forecast down 2.5% in 2016
Net cash income (NCI) forecast down 2.5% in 2016 3
Slide 4: Crop receipts drive the expected decline in NCI from 2013 to 2016
Crop receipts drive the expected decline in NCI from 2013 to 2016 4
Slide 5: 2016F crop receipts significantly lower than 2013, but flat from 2015
2016F crop receipts significantly lower than 2013, but flat from 2015 5
Slide 6: Animal receipts are also expected to fall for most categories in 2016
Animal receipts are also expected to fall for most categories in 2016 6
Slide 7: Government payments are forecast to rise over 30 percent in 2016
Government payments are forecast to rise over 30 percent in 2016 $ billion 14 12 10 8 6 4 2 0 2009 2010 2011 2012 2013 2014 2015F 2016F F= Forecast. Source: USDA, Economic Research Service, Farm Income and Wealth Statistics using FSA, NRCS, and CCC data. Data as of February 9, 2016. 7
Slide 8: Government payments based on price are a larger share in 2016
Government payments based on price are a larger share in 2016 $ billion 14 12 10 8 6 4 2 0 2009 2010 2011 2012 2013 2014 2015F 2016F F= Forecast. Source: USDA, Economic Research Service, Farm Income and Wealth Statistics using FSA, NRCS, and CCC data. Data as of February 9, 2016. Fixed payments Crop
Slide 9: Cash expenses are expected to decline for the second consecutive year
Cash expenses are expected to decline for the second consecutive year $ Billion 400 350 339 328 325 320 300 250 200 150 100 50 0 2009 2010 2011 2012 2013 2014 2015F 2016F F = forecast. Source: USDA, Economic Research Service, Farm Income and Wealth Statistics. Data as of February 9, 2016. 9
Slide 10: Feed, fuel, fertilizer, and livestock expenses drive decline in 2016
Feed, fuel, fertilizer, and livestock expenses drive decline in 2016 $ billion 60 50 40 Decreased Increased 30 20 10 0 Feed Livestock & Fertilizer Fuels & Oils Pesticides Labor Net rent Seeds Interest Property poultry taxes/fees F = forecast 2014F Source: USDA, Economic Research Service, Farm Income
Slide 11: Outlook for crop receipts improved, animal and product receipts declined
Since our first 2015 forecast the outlook for crop receipts improved, and animal and product receipts declined 8.7 3.7 93.2 89.4 6.5 -1.8 -13.4 2015 net cash income forecast increased $3.8 billion from February 2015 to February 2016 Net cash income Crop receipts Animals and Cash farm- Production Gov
Slide 12: Improvement in 2015 crop receipt forecasts largely due to fruits/nuts
Improvement in 2015 crop receipt forecasts largely due to fruits/nuts $ billion 50 47 47 45 40 36 35 35 30 30 28 25 25 23 20 19 20 15 10 6 5 5 0 Corn Soybeans Feed, food, & oil Fruits & nuts Vegetables & Cotton crops* melons F= Forecast. * Excluding corn and soybeans. 2014F Source: USDA, Economic Re
Slide 13: Decline in 2015 animal and product receipt forecasts largely due to cattle/calves
Decline in 2015 animal and product receipt forecasts broad based, but largely due to cattle/calves $ billion 100 90 86 80 77 70 60 50 40 38 35 32 29 30 18 20 16 10 0 Cattle and calves Dairy Broilers All other poultry F= Forecast Source: USDA, Economic Research Service, Farm Income and Wealth Statist
Slide 14: Farm Sector Balance Sheet Outlook
Farm Sector Balance Sheet Outlook
Slide 15: Farm real estate represents the majority of the sector's assets
Farm real estate* represents the majority of the sector’s assets 15
Slide 16: Forecast drop in net cash income drives lower farm real estate values
Forecast drop in net cash income drives lower farm real estate values* 16
Slide 17: Drop in 2016F farm real estate assets drive change in total assets
Drop in 2016F farm real estate assets drive change in total assets Percent change 25 20 15 10 Total assets Real estate assets* 5 0 -5 -10 1.2% decline in real estate assets* from 2015F to 2016F -15 -20 1970 1975 1980 1985 1990 1995 2000 2005 2010 2016F F= Forecast. *Real estate includes the value of
Slide 18: Farm real estate and nonreal estate debt approaching historic levels
Farm real estate and nonreal estate debt approaching historic levels $ billion (2009 Dollars) 200 Real estate debt 150 Nonreal estate debt 100 50 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2016F F= Forecast. Values are adjusted using the chain-type GDP deflator, 2009=100. Source: USDA, Economic
Slide 19: But below the late '70s – early '80s peak in inflation-adjusted terms
But below the late ‘70s – early ‘80s peak in inflation-adjusted terms $ billion (2009 Dollars) 200 Real estate debt 150 Nonreal estate debt 100 50 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2016F F= Forecast. Values are adjusted using the chain-type GDP deflator, 2009=100. Source: USDA, Economic
Slide 20: Farm debt is forecast to grow rapidly from 2013 to 2016
Farm debt is forecast to grow rapidly from 2013 to 2016 20
Slide 21: Leverage increased since 2012, but remains low relative to historic levels
Leverage increased since 2012, but remains low relative to historic levels 21
Slide 22: Rate of return on farm assets (ROA) expected to remain flat in 2016
Rate of return on farm assets (ROA) expected to remain flat in 2016 4 3.7 3.7 3 2 1.6 1 1.0 0.9 Rate of return on assets from income 0 2000 2002 2004 2006 2008 2010 2012 2014 2016F F = forecast. Source: USDA, Economic Research Service, Farm Income and Wealth Statistics. Data as of February 9, 2016.
Slide 23: Decomposing the rate of return on farm assets (ROA)
Rate of return on farm assets (ROA) expected to remain flat in 2016 4 3.7 3.7 3 2 1.6 1 1.0 0.9 Rate of return on assets from income 0 2000 2002 2004 2006 2008 2010 2012 2014 2016F F = forecast. Source: USDA, Economic Research Service, Farm Income and Wealth Statistics. Data as of February 9, 2016.
Slide 24: Decomposing the rate of return on farm assets (ROA)
Rate of return on farm assets (ROA) expected to remain flat in 2016 4 3.7 3.7 3 2 1.6 1 1.0 0.9 Rate of return on assets from income 0 2000 2002 2004 2006 2008 2010 2012 2014 2016F F = forecast. Source: USDA, Economic Research Service, Farm Income and Wealth Statistics. Data as of February 9, 2016.
Slide 25: Lower profit margins drive decline in ROA from 2013 to 2016
Lower profit margins drive decline in ROA from 2013 to 2016 4 3.7 3.7 3 2 1.6 1 1.0 0.9 Rate of return on assets from income 0 2000 2002 2004 2006 2008 2010 2012 2014 2016F 0.25 0.20 0.19 Asset Turnover Ratio 0.15 0.15 0.15 0.10 0.05 0.07 Operating profit margin ratio 0.00 2000 2002 2004 2006 2008 2
Slide 26: Lower profit margin ratio in 2015 and 2016 consistent with other low income years
Lower profit margin ratio in 2015 and 2016 consistent with other low income years 0.25 Asset Turnover Ratio 0.20 0.15 0.10 0.05 Operating profit margin ratio 0.00 2000 2002 2004 2006 2008 2010 2012 2014 2016F F = forecast. Source: USDA, Economic Research Service, Farm Income and Wealth Statistics. D
Slide 27: Farm Business Outlook
Farm Business Outlook
Slide 28: Farm businesses account for 45% of farms, but over 90% of production
Farm businesses account for 45% of farms, but over 90% of production Farm Businesses Residence Intermediate Commercial Operators report they are retired or have a Gross cash farm income less than $350,000 Gross cash farm income greater than major occupation other than farming. and operators report f
Slide 29: Average net cash income up for most crop farm businesses
Average net cash income up for most crop farm businesses 1/ 2010 2011 2012 2013 2014 2015F 2016F 29
Slide 30: Average net cash income expected to fall for most farm businesses specializing in animals
Average net cash income expected to fall for most farm businesses specializing in animals and products 1/ 2010 2011 2012 2013 2014 2015F 2016F 30
Slide 31: All Farm Businesses $87,700 in 2016
All Farm Businesses $87,700 in 2016 31
Slide 32: Share of highly leveraged crop farm businesses increased substantially since 2011
Share of highly leveraged crop farm businesses increased substantially Percent of farm businesses since 2011 10% Crops 8% 6.1% 5% 5.0% 3% 0% 1996 2000 2004 2008 2012 2016F D/A (41-70) D/A (71 +) F = forecast. Source: USDA, Economic Research Service, Farm Income and Wealth Statistics. Data as of Febr
Slide 33: Share of highly leveraged animal and product farm businesses also trending upward
Share of highly leveraged animal and product farm businesses also Percent of farm businesses trending upward since 2011 10% Animals and products 8% 5.4% 5% 3.4% 3% 0% 1996 2000 2004 2008 2012 2016F D/A (41-70) D/A (71 +) F = forecast. Source: USDA, Economic Research Service, Farm Income and Wealth S
Slide 34: Presentation takeaways
Presentation takeaways • Net cash income expected down slightly in 2016, but relatively flat from 2015. • Large declines in net cash income since 2013 are driven by lower crop receipts paired with increasing expenses. • Lower income is expected to put modest downward pressure on farm real estate ass
Slide 35: Farm Sector Income and Wealth Statistics
Additional analysis and data Farm Sector Income and Wealth Statistics Data product updated 3 times per year. Next update: August 30th, 2016. Historical State Estimates Historical National Estimates National Forecasts http://www.ers.usda.gov/data-products/farm-income-and-wealth-statistics.aspx 35
Slide 36: Explore the data
Explore the data Visualizations let you dive into the financials of the farm sector Get to Know Your State Digging into the Farm Balance Sheet Farm Income Atlas http://www.ers.usda.gov/data-products/farm-income-and-wealth-statistics/data-files-us-and-state-level-farm-income-and-wealth-statistics.asp
Slide 37: Questions?
QUESTIONS? Ryan Kuhns RNKuhns@ers.usda.gov Kevin Patrick KTPatrick@ers.usda.gov Farm Income Team farmincometeam@ers.usda.gov 37
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