The company holds more than enough capital now but expects crunch in the long run
Farmer Mac has announced efforts to monitor the impact of COVID-19 while continuing to provide secondary market credit and liquidity for America's farmers and ranchers.
The company said that it is assessing the effect of the coronavirus crisis on new customer applications by stress-testing its credit portfolio and interest rate risk levels.
"Farmer Mac is closely tracking the impact of COVID-19, with our primary focus on safeguarding the wellbeing of our employees while continuing to fulfill our mission and serve our customers in rural America," Farmer Mac CEO Brad Nordholm said in a statement. "We are proud to play a vital role as a source of secondary market credit and liquidity for America's farmers and ranchers and the local financial institutions and rural utilities that serve them, and we know our role is especially important in times of uncertainty. We remain confident in our ability to navigate the evolving market conditions thanks to our strong and resilient business model."
However, despite its strong capital base, Nordholm admitted that they see "some upward pressure" on funding costs for long-term issuances.
"We have been proactive in bolstering our liquidity position given the increased uncertainty in financial markets and are well above our regulatory requirements," Nordholm said. "We have increased amounts held in our short-term liquidity investment portfolio and are holding cash of approximately $1 billion, which is in excess of what we usually maintain. As another proactive measure to preserve capital and liquidity, we have indefinitely suspended repurchases under our $10 million."
