CoBank Announces Redemption of $500 million in Subordinated Notes

CoBank today announced that is has redeemed $500 million of subordinated notes originally issued in 2007 with a 10-year call date.

“Recent changes to capital regulations provide less favorable capital treatment for subordinated debt instruments. Coupled with the bank’s strong capital ratios and capacity, and as part of our long-term capital strategy, it is prudent for the bank to redeem these notes now,” said CoBank Chief Financial Officer David P. Burlage. “We will continue to evaluate a range of capital market strategies in order to ensure our capacity to serve customers and optimize the cost and effectiveness of our capital.”

On April 17, 2017, the bank announced the intention to redeem the notes after receiving approval from its regulator, the Farm Credit Administration, on April 13, 2017. The notes have been redeemed at par, together with accrued and unpaid interest to, but excluding, the redemption date (less any applicable tax withholding as require by law). The redemption and paying agent for the redemption is The Bank of New York Mellon Trust Company, N.A.

US Pork Industry Expanding in Response to Rising Global Demand and Strong Profitability

Strong profitability and rising global demand create a strong incentive for U.S. pork processors to expand capacity. The impending increase in demand for hog supplies will create favorable terms for producers, while intensified competition among processors could lead to a short-term compression in packer margins, according to a new report from CoBank.

"U.S. pork packing capacity will increase eight to ten percent by mid-2019, when five processing facility construction projects are complete and fully operational," said Trevor Amen, an economist with CoBank who specializes in animal protein. "Hog production is expected to increase two to four percent in both 2017 and 2018 to meet the demand for more supplies, with the bulk of the increased production coming from small to mid-size pork producers in the Midwest."

Three new state-of-the-art pork processing facilities with the capacity to process more than 10,000 hogs per day are currently under construction. Two of the facilities are being built in Iowa and one in Michigan. Two smaller plants with daily capacities of less than 5,000 head are being renovated in Missouri and Minnesota.

Surging Demand for Organic Produce Widens US Supply Gap

Produce processors and retailers are finding it increasingly difficult to secure sufficient supplies of organic produce, as domestic demand continues to rise at a pace that exceeds production, according to a new report from CoBank. The dollar value of U.S. organic produce sales doubled from 2011 to 2015 and annual sales now amount to $5.5 billion. Currently, 15 percent of all U.S. produce sales are organic. While organic acres have nearly doubled over the last decade, that pace of supply-side growth has been sluggish relative to demand.

“Sales of organic fruit, vegetables and nuts have increased dramatically in recent years and this growth trend will continue,” said Christine Lensing, CoBank senior economist, specialty crops. “More than half of U.S. households are now purchasing some organic produce. But for a variety of reasons, production has not been keeping pace with demand and the supply gap is widening.”

Bloomberg: U.S. Agriculture 'Vulnerable' Amid Trade Risks Farm Lender Says

By Shruti Date Singh

U.S. agriculture is in a worse position than it was just a few years ago to withstand the effects of losing access to a big export market, according to one farm lender, who cited the risks from rising trade tensions.

“We are already in a vulnerable position,” Tom Halverson, chief executive officer of Greenwood Village, Colorado-based CoBank ACB, said in an interview. “We hope, trust and believe that we will not intentionally or inadvertently step into a dispute that damages our access to those markets.”

President Donald Trump has taken the U.S. out of the Trans-Pacific Partnership and talked of withdrawing from or renegotiating the North American Free Trade Agreement. His claims that Mexico is gaining an unfair advantage from Nafta has prompted the country to make overtures to Brazil and Argentina about securing farm supplies as an alternative to U.S. imports.

CoBank Reports 2017 First Quarter Financial Results

CoBank today announced financial results for the first quarter of 2017. Net income for the quarter rose 8 percent to $262.8 million, primarily driven by higher net interest income and noninterest income, partially offset by a higher provision for loan losses and increased operating expenses. Net interest income for the quarter increased 6 percent to $356.1 million, from $336.9 million in the same period last year, primarily due to higher average loan volume.