NEW YORK -- The Farm Credit System today reported combined net income of $2.096 billion for the year ended Dec. 31, 2005, compared with combined net income of $2.993 billion for the prior year.



"System earnings for the year continued to reflect strong financial performance by system institutions," said Jamie B. Stewart Jr., president and CEO of the Federal Farm Credit Banks Funding Corp. "Earnings were favorably impacted by the continued growth in the system's loan portfolio, while the credit quality of the system's loan portfolio remained healthy. Further, the System's capital levels remained strong, thus leaving the system well positioned to provide sound and dependable credit to the agricultural and rural sectors."



Overall agricultural borrowers' financial conditions remained healthy due to the high levels of farmers' net cash income over the past several years. The USDA's current forecast (February 2006) estimates 2005 farmers' net cash income of $82.8 billion, a slight decrease from $85.5 billion for 2004, which significantly exceeds the average level of farmers' net cash income over the past ten years of $64.4 billion (1996-2005). This forecast predicts a slight decline in crop receipts and a significant increase in production expenses offset by a sizable increase in direct federal government payments.



The increase in direct government payments is expected to result primarily from the timing of certain payments moving from calendar year 2004 to 2005. The USDA estimates 2006 farmers' net cash income will decrease to $64.8 billion, which is just above the 10-year average of farmers' net cash income. This estimated decline is primarily due to decreases in direct government payments and cash receipts for crops and livestock and to an increase in production expenses.



The Farm Credit System is a nationwide network of federally chartered agricultural and rural lending institutions cooperatively owned by their borrowers.



SOURCE: Farm Credit System via Business Wire.