The Farm Credit Administration board received a quarterly report on the Farm Credit System and a semiannual report on FCA's examination activities.

According to the report, the operating environment remains challenging for many agricultural sectors. Farm debt levels remain high while net cash farm income is declining. Interest rates, while still low, have begun to increase.

Also, with USDA forecasting record or near-record corn, soybean, and wheat production, crop prices are expected to remain weak.

These factors continue to put downward pressure on Midwest farmland values. High production levels are also weighing on pricing and profit margins in the protein and dairy sectors. Overall, the System is safe and financially sound, and System institutions are well-positioned for the challenging risk environment facing agriculture.

For the first nine months of 2016, the System reported modest loan growth, favorable earnings, and higher capital levels. The System's portfolio loan quality remains favorable, but credit risk measures show increasing stress.