Federal Agricultural Mortgage Corporation · NYSE:AGM

Federal Agricultural Mortgage — Blacksburg VA Farmer Mac Webinar (January 2016)

22 slides from Federal Agricultural Mortgage's conference presentation, Jan 11, 2016

  1. Slide 1: Positioning for Success in the Economic Reset

    POSITIONING FOR SUCCESS IN THE ECONOMIC RESET Dr. David M. Kohl Professor Emeritus, Agricultural and Applied Economics Virginia Tech, Blacksburg, VA (540) 961-2094 (Alicia Morris) | (540) 719-0752 (Angela Meadows) | [email protected] Macro Clinic Video Blog: http://agstar.com/edge/ Road Warrior of Agr

  2. Slide 2: 2016 – 2020 Economic Reset

    2016 – 2020 Economic Reset 1  BRICS & KIMT’s – 53% world economic growth  growth moderating 8-5-3 Rule  China does matter to fly over states  2007 to 2012 aberration in commodity prices  one half of emerging nations in recession 2

  3. Slide 3: 2016 – 2020 Economic Reset

    2016 – 2020 Economic Reset 2  ethanol & biofuels  oil black gold “recession effect”  deflation in commodities  regulatory issues in developed countries  political dysfunction  technology, automation  demographics 3

  4. Slide 4: 2016 – 2020 Economic Reset

    2016 – 2020 Economic Reset 3  40% of commodity prices & asset values  U.S. Central Bank reducing stimulus  European Central Bank increasing stimulus  60 billion plus 21 months  Japan’s stimulus  China’s Central Bank stimulus  stock market appreciation  beneficial to fly over states/Canada/Au

  5. Slide 5: 2016 – 2020 Economic Reset

    2016 – 2020 Economic Reset 4  weather wild card  political military sanctions  quality & standards risk  consumers & public  “Black Swans” 5

  6. Slide 6: Global Economics: Europe

    Global Economics: Europe  France economy sluggish  Germany- export driven  Europe China connection  Greece  central bank stimulus extended  Ukraine 6

  7. Slide 7: Global Economics: China

    Global Economics: China  China PMI <50  exports down >10%  lowered rates five times  stock market up 105%, down 30 to 40%  devalued currency  natural resource issues  shadow banking 7

  8. Slide 8: Global Economics: Other

    Global Economics: Other  Russia  oil  Mr. Putin  Brazil  recession  Infrastructure  Argentina  tax  political dysfunction  Brazil & China connection 8

  9. Slide 9: Global Economics: Japan/Asia

    Global Economics: Japan/Asia  debt issues  demographic wedge  South Korea sluggish  India quite strong 9

  10. Slide 10: U.S. Economy Watch

    U.S. Economy Watch  LEI declining  PMI slowing  manufacturing, building inventory  housing 1.2 million  business cycle expansion later innings 10

  11. Slide 11: Federal Reserve's Interest Rate Barometer

    Federal Reserve’s Interest Rate Barometer Indicator Possible Change Definite Change Current Status Unemployment 7.0% 6.5% 5.0% GDP Growth 2.0% 2.5% 2.0% Core Inflation 2.0% 2.5% 2.0% Headline Inflation 4.0% 5.0% 0.5% Watch List: • Dr. Yellen • Rail traffic • FOMC voting • Shoe shiners • Overland tru

  12. Slide 12: Grain Producers: Houston, We Have a Problem

    Grain Producers: “Houston, We Have a Problem” Super Cycle Observation Constant 2014 Dollars Median Net Income 2007-2012 $169,968 2002-2006 $66,574 Super Cycle 2.42 x’s greater 2013-2014 $32,944 2000-2001 $40,123 • Lost 40% working capital in two years • Greater 60% Debt to Asset Ratios under 10% wor

  13. Slide 13: Roller Coaster Economics Reset

    Roller Coaster Economics Reset  2007 to 2012 aberration for the grain industry  dot com bubble of agriculture  asset bubble vs. credit bubble  livestock: Clayton Kersaw’s curve ball effect:  hogs  beef  dairy  poultry  asset “fixed cost” operating cost adjustment  early innings of adjustme

  14. Slide 14: Nine Innings of an Evolution of a Cycle Reset

    Nine Innings of an Evolution of a Cycle Reset 1. profits start to decline but asset appreciation continues 2. new lenders enter the market place 3. strong equity growth mentality creates complacency 4. machinery & equipment values first to decline 5. aggressive growth businesses & fraudulent activit

  15. Slide 15: Dangerous Customer 2016-2020

    Dangerous Customer 2016-2020  balance sheet bully: 80% of growth through appreciation vs. earned net worth  gunslinger never leaves money on the table  Alpha Dog & Alpha Pup: bigness on the brain  high maintenance lifestyle  interconnective risk  victims & know it all’s  fraudulent activities

  16. Slide 16: Credit Financial Analysis in the Past

    Credit Financial Analysis in the Past  stable income, high government payments  low quality information  lack of standardized information  strong debt to asset ratio  strong collateral position  few benchmark ratios 16

  17. Slide 17: Credit Financial Analysis- Now & in the Future

    Credit Financial Analysis- Now & in the Future  volatility in price, cost, and markets  international trade risk  economic cycles are more abdrupt  concentrated debt  interconnected debt  control vs. ownership of assets  sensitivity analysis- profit and cash flow  liquidity/burn rates for li

  18. Slide 18: Screening Guide for Negative Margins

    Screening Guide for Negative Margins 1 Historically has the producer/entity: Yes No Been profitable above interest rates and rate of inflation? Shown growth of balance sheet which is earned vs. appreciated net worth? Has built and protected working capital in positive cycle? Been able to cut living

  19. Slide 19: Screening Guide for Negative Margins

    Screening Guide for Negative Margins 2 Historically has the producer/entity: Yes No Been able to shed unprofitable land, machinery, livestock, & human assets if necessary? Had a burn rate for working capital 2.5 years or more? Had a term debt/EBITDA ratio <5 to 1? Scoring Key: >8 Yes boxes checked=

  20. Slide 20: Perspectives for Working Through Tight or Negative Margins

    Perspectives for Working Through Tight or Negative Margins  use an advisory team  economic cycle vs. management  progress with mini-victories  know personality styles  spouse, partners  time element  document with a paper trail  variance or plan vs. fact analysis  earns & turns  business p

  21. Slide 21: Groundhog Day Game Plan

    Groundhog Day Game Plan  set your short term (1 year) goals & long term (5 years) goals  in writing  business, family, & personal  cash flow that talks to the business  projected  actual  personal living budget  balance sheet  review your plan with trusted advisor, peer, and/or lender 21

  22. Slide 22: Questions

    Questions 22

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