U.S. Farm Credit System quarterly earnings up 3.5 pct
CHICAGO, Aug 2 (Reuters) - The U.S. Farm Credit System, a government sponsored enterprise and the single largest lender to U.S. agriculture, on Friday said second quarter earnings rose 3.5 percent, reflecting rising interest income and smaller loan losses.
The System, which uses proceeds from debt securities issued to domestic and foreign investors to fund farmers and agribusiness, earned $1.104 billion for the April-June period, up from $1.067 billion a year earlier.
"The increase for the three-month period resulted primarily from an increase in net interest income of $35 million and to decreases in the provision for loan losses of $16 million," the Federal Farm Credit Banks Funding Corp, which funds the Farm Credit System's (FCS) securities, said in a statement.
FCS said gross loans increased by $880 million, or 0.5 percent, to $192.784 billion at June 30, compared to $191.904 billion on Dec. 31, 2012, reflecting a rise in real estate mortgage and energy loans.
"Real estate mortgage loans increased primarily due to strong demand for cropland in the Midwest," it said.
Strong crop prices and near-record farm income have kept the demand for prime U.S. farmland hot this year after record-setting gains last year.
The System said it made provisions for loan losses of only $19 million, down from $35 million last year.
"However, the loan portfolio continues to be impacted by volatility in certain agricultural sectors and by the overall weakness in the general U.S. economy," the FCS said.
Among the sectors under continuing stress are ethanol, dairy and livestock businesses. Margins have been hit hard by pricey corn - the main feedstock for all three - following last year's historic drought that cut crop yields and sent corn to record highs. Ideal weather and a bumper corn crop look set to provide some relief for corn consumers, however, after harvest supplies enter the market in the fourth quarter.
Net loan charge-offs of $61 million were recorded during the first six months of 2013, down from $93 million for the same period of the prior year.
"The net loan charge-offs recognized in both 2013 and 2012 were due, in part, to loans in specific industries such as ethanol, forestry, horticulture, dairy and livestock," FCS said.