Farmland Collateral Risk
FCA is closely monitoring rapidly rising farmland values, especially in the Midwest, and the potential effects of this trend on lenders that make loans backed by farmland. Since farmland accounts for about 85 percent of all farm assets, a significant drop in farmland values could have a dramatic impact on the safety and soundness of Farm Credit System institutions.
To help System lenders more effectively measure the risk they face from changes in farmland values, FCA has developed the following guidance.
- National Oversight Plan for Fiscal Year 2011 (Informational Memorandum – December 2010)
- Collateral Risk Management in Farm Credit System Institutions (Informational Memorandum – June 2010)
- FCA's Stress Testing Expectations for All FCS Institutions (Informational Memorandum – March 2010)
- Guidance for Evaluating the Safety and Soundness of FCS Real Estate Lending—Focusing on Land in Transition (FCA Examination Bulletin 2009-2 – December 2009)
- Financing Agricultural Land in Transition (in the Path of Development)—Eligibility and Scope of Financing Considerations (FCA Bookletter 058 – May 2009)
- Asset Growth, Market Volatility, and Best Practices for Fast-Growing Institutions (Informational Memorandum – May 2008)
- Significant Asset Growth and Its Implications (Informational Memorandum – February 2007)
On February 17, 2011, FCA hosted a Regulators Roundtable to facilitate discussion among financial regulators about agricultural land values and associated risks to loan collateral. FCA sought to encourage a broad-based interchange on the appropriate regulator response to these risks, as well as to foster a productive working relationship among regulators on the topic. The following presentations were delivered at this meeting.
- Opening remarks by the Honorable Leland A. Strom (PDF, 3 pages, 41 KB)
- Land Values: Current and Future Prospects by Brent Gloy, Director, Center for Commercial Agriculture (PDF, 37 pages, 1.2 MB)
- Farm Real Estate Collateral: Trends in Debts, Leverage, and Prospects for Future Income Growth by Mitch Morehart (PDF, 27 pages, 4.6 MB)
- Tiny Bubbles ... or The New Land Paradigm by James Farrell, AFM, President/CEO, Farmers National Company (PDF, 32 pages, 3.8 MB)
- Also see Farmland Values and Collateral Risk Guidance (PDF, 20 pages, 2.6 MB), which was presented at the FCA Board Meeting on December 9, 2010