MANAGEMENT’S DISCUSSION AND ANALYSIS
FCS Financial, ACA
The following commentary reviews the consolidated financial condition and consolidated results of operations of FCS Financial, ACA (the Association) and
its subsidiaries, FCS Financial, FLCA and FCS Financial, PCA and provides additional specific information. The accompanying Consolidated Financial
Statements and Notes to the Consolidated Financial Statements also contain important information about our financial condition and results of operations.
The Farm Credit System (System) is a nationwide system of cooperatively owned banks and associations established by Congress to meet the credit needs
of American agriculture. As of January 1, 2018, the System consisted of three Farm Credit Banks, one Agricultural Credit Bank, and 69 customer-owned
cooperative lending institutions (associations). The System serves all 50 states, Washington D.C., and Puerto Rico. This network of financial cooperatives is
owned and governed by the rural customers the System serves.
AgriBank, FCB (AgriBank), a System Farm Credit Bank, and its District associations are collectively referred to as the AgriBank Farm C redit District
(AgriBank District or the District). We are an association in the District.
The Farm Credit Administration (FCA) is authorized by Congress to regulate the System. The Farm Credit System Insurance Corporation (FCSIC) ensures
the timely payment of principal and interest on Systemwide debt obligations and the retirement of protected borrower capital at par or stated value.
Due to the nature of our financial relationship with AgriBank, the financial condition and results of operations of AgriBank materially impact our members’
investment. To request free copies of the AgriBank or the AgriBank District financial reports, contact us at:
FCS Financial, ACA
1934 East Miller Street
Jefferson City, MO 65101
(573) 635-7956
www.myfcsfinancial.com
[email protected]
AgriBank, FCB
30 East 7 th Street, Suite 1600
St. Paul, MN 55101
(651) 282-8800
www.agribank.com
[email protected]
Our Annual Report is available on our website no later than 75 days after the end of the calendar year and members are provided a copy of such report no
later than 90 days after the end of the calendar year. The Quarterly Reports are available on our website no later than 40 days after the end of each calendar
quarter. To request free copies of our Annual or Quarterly Reports, contact us as stated above.
FORWARD-LOOKING INFORMATION
This Annual Report includes forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties,
and assumptions that are difficult to predict. Words such as "anticipate", “believe", "estimate", "may", “expect”, “intend”, “outlook”, and similar expressions are
used to identify such forward-looking statements. These statements reflect our current views with respect to future events. However, actual results may differ
materially from our expectations due to a number of risks and uncertainties which may be beyond our control. These risks and uncertainties include, but are
not limited to:
political, legal, regulatory, financial markets, international, and economic conditions and developments in the United States (U.S.) and abroad
economic fluctuations in the agricultural and farm-related business sectors
unfavorable weather, disease, and other adverse climatic or biological conditions that periodically occur and impact agricultural productivity and
income
changes in U.S. government support of the agricultural industry and the System as a government-sponsored enterprise, as well as investor and
rating agency actions relating to events involving the U.S. government, other government-sponsored enterprises, and other financial institutions
actions taken by the Federal Reserve System in implementing monetary policy
credit, interest rate, and liquidity risks inherent in our lending activities
changes in our assumptions for determining the allowance for loan losses and fair value measurements
AGRICULTURAL AND ECONOMIC CONDITIONS
The 2017 crop season came to a close with relative success across most of the association’s service territory. Growers have reported crop yields to be
generally at or better than historical average levels. The harvest process was largely completed with favorable (dry and mild) weather conditions. Due to the
generally favorable growing conditions, crop insurance claims will not provide a material revenue source for farmers in 2017.
With much of the Corn Belt experiencing at least trend-line yields, grain prices have experienced downward pressure due to favorable U.S. production and
an adequate world market supply. In late December, the Chicago Board of Trade Corn contract is trading near its 2017 low price level. Soybean prices are
also generally near the lower end of their trading range over the last four months of the year.
Cattle prices have demonstrated resiliency through 2017. Live Cattle prices on the Chicago Mercantile Exchange experienced stronger fourth quarter 2017
prices as compared to fourth quarter 2016. A stronger feeder cattle market later in 2017 as compared to earlier in the year has enabled cow/calf producers to
operate near or above break-even levels. Lower grain prices will benefit production costs for all livestock producers. Much of Missouri’s swine and poultry
production has contract arrangements associated with these operations, partially mitigating a lower price environment for the overall protein complex.
Overall, increased domestic meat production and supply will continue to challenge profitability for U.S. livestock producers.
Due to favorable moisture conditions throughout the summer, fall pasture conditions were generally good throughout much of the state. Hay production for
the state was also at above average levels, leaving hay availability plentiful and prices moderate. During the fourth quarter of 2017, dry conditions have
expanded across the state from south to north with much of the state showing “abnormally dry” to “severe drought” conditions (per U.S. Drought Monitor).
Farmland prices have remained relatively stable over the past year across our association’s service territory. With the association’s mid-year benchmark
farm value update, there were slight declines in values observed in crop tracts across the northern portion of the state (less than a 4% decrease), and
modest gains (about 4% increase) in the value of pasture and woodland tracts in southern Missouri. Demand for crop land tracts has generally moderated
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