Farm Credit Administration reports stable Farm Credit System earnings as agricultural risks rise

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Farm Credit System earnings stable

Highlights

Farm Credit System total capital rises to $86.4 billion, up 7.3% year-over-year as of March 31, despite increasing credit risk indicators.
Nonperforming assets ratio increases to 1.09% from 0.96% year-over-year, but the System remains positioned to meet U.S. agricultural funding needs.
The FCA expects net farm income to decline in 2026 but remain above average, with declining consumer spending, rising loan delinquencies, and persistent inflation driven by Middle East conflict.

Quarterly financial update and oversight

As reported by the Farm Credit Administration, the System posts sound financial results for the period ended March 31, with stable earnings and total capital of $86.4 billion, up 7.3% from a year earlier. Portfolio loan quality remains sound overall, although credit risk measures increase as difficult operating conditions affect producers in some agricultural sectors.

Nonperforming assets as a share of loans outstanding and other property owned rise to 1.09%, from 0.96% a year earlier. Even so, the agency says the System remains well positioned to meet the funding and liquidity needs of U.S. farmers and ranchers.

During the same meeting, the board also receives a semiannual report on Office of Examination operations. Through the first six months of fiscal year 2026, examiners complete the objectives and strategies in the operating plan, including risk supervision and examination work at all funding banks, 36 associations and two other entities.

Agriculture outlook and budget actions

The FCA says the conflict in the Middle East is pushing inflation and energy market volatility higher, with oil reserves nearing critically low levels and price pressures likely to persist through 2026. The broader economy is slowing as consumer spending weakens, savings decline and loan delinquencies rise, while labor markets stabilize and interest rate cuts are no longer expected.

Net farm income is expected to decline in 2026, although it remains above average because of strong federal support. Crop returns should improve modestly, livestock returns remain strong despite drought concerns, and farmland values stabilize early in 2026 even as softer cash rents and drought create risks in some regions.

Since the FCA board's May 14 meeting, the board has taken one notational vote between formal sessions. On May 19, it authorizes the chief financial officer to reallocate funds within the FCA budget to help reduce the fiscal year 2026 System assessment and support additional investments to modernize information technology.

In our earlier coverage of energy-driven inflation tied to the Iran conflict, we outlined how higher oil prices were pushing the U.S. inflation rate above 4% and intensifying pressure on household budgets. We also noted that wage growth was lagging price gains and that consumer sentiment on personal finances was deteriorating, highlighting how an energy shock can quickly spill into broader economic conditions and policy expectations.

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