Jeff Wiepen, Farm Credit Services of America, Pork Management Conference, June 14-17, in Clearwater, Florida.

1. AG ENVIRONMENT OUTSIDE THE
PORK INDUSTRY
Jeff Wiepen – VP Commercial Lender – Swine Industry
Farm Credit Services of America
June, 2016

2. Combined service area overview
• Serve all of Iowa,
Nebraska, South
Dakota, Wyoming, and
the eastern portion (41
counties) of Kansas
• More than 57,000
customers
2

3. Farm producers served
Grain
45.8%
Other
12.1%
Total
Landlords/Investors
9.80%
9.8%
Beef Feedlot
9.5%
Cow/Calf
7.7%
Swine
6.3%Dairy
4.0%
Total
General
Livestock
1.71%
1.7%
Total
Poultry
1.61%
1.6%
Total
Forest Products
1.31%
1.3%
PortfolioConcentration(Industry GroupTop 10)
As of December, 2015
IndustryGroupTop10
NetBookValue
(millions)
Grain $11,847
Other $3,138
Landlords/Investors $2,533
BeefFeedlot $2,469
Cow/Calf $1,992
Swine $1,638
Dairy $1,039
General Livestock $442
Poultry $417
ForestProducts $338
Total $25,853
PortfolioConcentration
December 31, 2015
3

4. Current environment
4
• Key drivers have changed:
• Demand driven by ethanol expansion leveled off
• Emerging economy slowdown
• Abundant supply – U.S. and world
• Strength of the U.S. dollar, particularly relative to
currency of competitors for U.S. ag exports

5. 5
Supply/demand have returned to an equilibrium similar to
that prior to the commodity boom in 2009 – 2013, though
at somewhat higher prices.

6. Current & Future Reality - Grain
6
• Grain production agriculture needs to
reconcile the reality of our current revenue
stream – $3.25 - $4.00 corn the likely trading
range – Until Now??
• It is not likely “price” will fix the problem. Cost
reductions are the likely solution. If we have
higher price, likely lower bushels.

7. 7
Focus on big items
Source: Purdue University estimated 2016 corn production costs

8. Adjusting to the new environment –
Message to Cash Grain Operators
8
• Understand / embrace the new realities
• Financial risk bearing capacity is critical
• Fixed cost adjustments
• Know the difference between “rental rate” and
“breakeven rent”. (Rule of Thumb: 35% of
Gross Income – i.e. 180bu x $3.75 x .35 =
$236).
• Know your “burn rate” in working capital if rent
is not reduced.

9. 9
Debt-to-asset ratio, %

10. 10
It is not the 1980s
• The key difference: The 1980s represented a
leverage crisis driven by:
• High RE prices
• High leverage
• High interest rates
• Use of variable rate loans
• Today? Cash flow challenge – driven primarily by:
• High cash rent
• Machinery & equipment investments
• Living expense

11. Impact to Grain Portfolio
• Grain Portfolio Credit Quality off by 5.1%
• About $600 million – About 400-500 Operators.
• Delinquency Rate up .30%
• Still allot of operations with strong balance sheets and
liquidity
• Impact to total portfolio softened somewhat by
strength in other industries (except Beef Feedlots)
11

12. 12
Impact to Land Values

13. 13
Impact to Land Values

14. 14
Impact to RE Sales Activity

15. Summary
15
• Grain producer focus is on cash flow adjustments
• The market will continue to re-establish the value of
a rented acre
• Land values will continue to adjust to the new
margin reality
• Still some strong grain producers
• Consolidation of industries will continue
• Political/policy/environmental risks continue
• Bullish on the future of agriculture – though cycles
are a reality and volatility risk has doubled in 10
years

16. TO BE AGRICULTURE’S MOST
VALUED FINANCIAL PARTNER
THANK YOU