U.S. Farm Credit earnings up 2nd quarter; CoBank income also up

CHICAGO Fri Aug 1, 2014 5:45pm EDT

CHICAGO Aug 1 (Reuters) - The U.S. Farm Credit System, a government sponsored enterprise and the single largest lender to U.S. agriculture, said on Friday that second quarter earnings rose 8.3 percent, reflecting a rise in interest income.

The System, which uses proceeds from debt securities issued to domestic and foreign investors to fund farmers and agribusiness, earned $1.196 billion for the April-June period, up from $1.104 billion for the same period last year.

Quarterly net income rose $92 million, reflecting a jump in net interest income of $53 million and a loan loss reversal of $23 million, versus a provision for loan losses of $19 million for the same period a year ago.

Gross loans increased $3.994 billion, or 2.0 percent to $205.054 billion at June 30, 2014, as compared with $201.060 billion at December 31, 2013.

The increase reflected higher loan demand from food and agribusiness companies, as well as a rise in real estate mortgage loans, FCS said a statement. The increase was partially offset by a drop in production and intermediate-term loans as borrowers sold crops and paid down lines of credit.

The livestock, dairy and ethanol businesses under stress in recent years due by pricey corn, the main feedstock used by all three, are seeing margins improve as corn prices fell below $5 a bushel during the quarter. The prices of corn and other grains remain under pressure on outlooks for a bumper 2014 harvest, which will mean lower income for grain farmers for the first time in years.

Denver-based CoBank, the largest of the System's cooperative banks, also on Friday posted a rise in quarterly earnings, up 10 percent as interest income rose.

For the quarter ending June 30, net income rose to $232.9 million, from $212.0 million in the same period a year ago.

Average loan volume for the quarter rose 7 percent to $76.9 billion, compared to $71.6 billion in the same quarter 2013, CoBank said.

The rise resulted from increased borrowing from food and agribusiness companies, affiliated Farm Credit associations and rural power providers, CoBank said. (Reporting by Christine Stebbins. Editing by Andre Grenon)

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