Golden State Farm Credit serves a diverse territory and diverse mix of commodities in its loan portfolio. It has a strong credit quality and 99.4% of its loan portfolio is collectible and of the highest quality.
Golden State Farm Credit serves a diverse territory and extends across a diverse agricultural region
of Butte, Fresno, Glenn, Kings, Shasta, Tehama, Trinity, and Tulare counties in California.
They have extensive agricultural experience and knowledge of the market. Their loan portfolio includes a diverse mix of commodities such as rice, livestock, irrigated field crops, grapes, almonds, walnuts, dairy, and other orchards.
They have the ability to adjust the loan pricing due to a versatile loan portfolio, which allows them to have a strong interest rate distributed over their cost of funds.
The company is under the farm credit system. Thus, they have access to funds via the sale of bonds and notes in the national money market.
Its total loan portfolio was at $1.52 billion in 2108 which is a 2.6% increase from 2017 and a 10.1% increase from 2016's portfolio.
The company mentioned that only 0.24% of its loan portfolio is high risks. Uniform Classification System (UCS) backed it up noting that 99.4% of its portfolio is collectible and of the highest quality. This shows that the company has a strong overall credit quality.
More than 50% of their portfolio is made up of a commodity with annual marketing but an extended production cycle. This creates an
additional risk factor for their portfolio.
Though CoBank reduces credit risk because of FCA regulations, the growth of the company is limited by CoBank’s financial condition and results of operations. The company mentioned that it is "materially affected" by CoBank and under the Farm Credit Act and it is only obligated to borrow from CoBank unless CoBank approves Golden State Farm Credit to borrow from other institutions.
Among competitors in California, Golden State Farm Credit's total loan volume of $1.52 billion is slightly better than Fresno Madera Farm Credit but lags behind Yosemite Farm Credit ($3 billion), Farm Credit West ($10.1 billion), American AG Credit ($10.2 billion), and Northwest Farm Credit Services ($11.3 billion).
The main goal of the Sustainable Groundwater Management Act (SGMA) is to manage groundwater resources all over California inasustainableway. This will have a big impact on Golden State Farm Credit's overall long term sustainability as it currently supports farmers whose major concern is water availability.
Farm Bill was signed into law last December 2018 whose main goal is to boost the farming industry by implementing federal farm and food programs, including commodity price support payments, farm credit, conservation programs, research, rural development, and foreign and domestic food programs. Though its impact is not yet certain, this law will help the industry as a whole including the farm credit industry.
Water availability is a major concern in the line of work of Golden State Farm Credit's clients. Groundwater has depleted in many areas of the state and can take years to recover.
The largest commodity on Golden State Farm Credit's portfolio is Dairy with 18.79% share. The dairy industry continues to experience price volatility which results in stress and uncertainty in the company's dairy portfolio.
California is prone to fire risk such as the campfire which burned over 150,000 acres and destroyed over 18,000 structures in Butte County. Though only a few of their borrowers were affected and had a negligible impact on their portfolio, it is a continuous risk on farmlands and the community Golden State Farm Credit serves.
Golden State Farm Credit - Target Demographic
Our research found that Golden State Farm Credit doesn't just have one specific target demographic. Rather, the company's target demographic includes a few different groups of customers, all of which are directly involved with agriculture production or harvesting in California.
1. Overall Target Demographics
Golden State Farm Credit casts a wide net with respect to its target demographic, which it described in general terms as "people involved in any aspect of agriculture" in select counties in California.
A factor that likely affects Golden State Farm Credit's description of its target demographic in those general terms is its statement that the company "specialize[s] in financing California’s agriculture" which appears to speak to the company's wide-ranging offerings for customers.
With regard to location, the Californian counties that the company services, which thus comprise its target demographic, are Glenn, Shasta, Kings, Butte, Tehama, Fresno, Tulare, and Trinity.
Golden State Farm Credit's distribution of loans across those counties varies, thus illustrating the geographic locations of its target demographics. The following are the percentages of loans distributed by Golden State Farm Credit (listed in parentheses) by Californian county in 2018: Fresno (20.88%), Tulare (18.88%), Kings (16.03%), Tehame (11.73%), Butte (10.76%), Glenn (8.8%), Shasta (2.41%), and Trinity (0.01%).
The reason those percentages total 89.5% and not 100% is because Golden State Farm Credit buys some loan participations in areas that are outside of its territory, which are listed within an "Other" county group that totals 10.5%.
Though Golden State Farm Credit sometimes describes its target demographic in general terms, the company also specifies that target demographic as consisting of ranchers, farmers, and harvesters or producers "of aquatic products and farm-related businesses."
2. Young, Beginning, & Small Farmers Target Demographics
"Young Farmers" are one of Golden State Farm Credit's specific target demographics.
Those young farmers are 35 years of age or younger and, in addition to farmers, also include ranchers and aquatic product harvesters or producers.
To quantify the size of the young farmer target demographic among the company's total customer base, Young farmers account for 12% of all loans dispersed by Golden State Farm Credit.
Those beginning farmers have had 10 or fewer years of ranching or farming experience and, in addition to farmers, also include ranchers and aquatic product harvesters/producers.
To quantify the size of the young farmer target demographic among the company's total customer base, beginning farmers account for 20% of all loans dispersed by Golden State Farm Credit.
"Small Farmers" are another specific target market for Golden State Farm Credit.
Those small farmers usually have under $250,000 "in annual gross sales of agricultural or aquatic products" and, in addition to farmers, also include ranchers and aquatic product harvesters or producers.
To quantify the size of the young farmer target demographic among the company's total customer base, small farmers account for 26% of all loans dispersed by Golden State Farm Credit.
We determined that young, beginning, and small farmers are specific target demographics for Golden State Farm Credit based on the following statement from the company: "[W]e are committed to providing sound and dependable credit and related services to
young, beginning and small (YBS) farmers and ranchers."
Your Research Team Applied the Following Strategy:
We began our research by looking for information about Golden State Farm Credit's target demographic on the company's website. We found some of that information on its home page, products and services page, and a web page pertaining to its offerings for small, young, and beginning farmers. In addition to the information we compiled from those web pages, we also reviewed Golden State Farm Credit's 2018 Annual Report in its entirety. That report contained valuable insights about the company's target demographics, along with supporting details. After collecting the information from those sources, we then analyzed that target demographic and organized it accordingly.
"Our territory served extends across a diverse agricultural region of Butte, Fresno, Glenn, Kings, Shasta, Tehama, Trinity and Tulare counties in California."
"Over 50% of the association’s portfolio is made up of a commodity with annual marketing but an extended production cycle. This creates an additional risk factor for our portfolio, as well as a barrier for new startups to enter the market. The extended marketing cycle is caused by the cooperative marketing structure utilized heavily with permanent plantings."
""The Sustainable Groundwater Management Act (SGMA) legislation will have farreaching effects for most of California. The goal of SGMA is primarily to manage the groundwater resources throughout
California in a way that is sustainable over the long-term."
"The Association is materially affected by CoBank’s financial condition and results of operations.
"Under the Farm Credit Act, the Association is obligated to borrow only from CoBank, unless CoBank gives approval to borrow elsewhere. Other than the funding relationship with the Bank, and our advanced conditional payments, the Association has no other uninsured or insured debt. See Note 2 for additional information. CoBank, consistent with FCA regulations, has established limitations on the Association’s ability to borrow funds based on specified factors or formulas relating primarily to credit quality and financial condition. At December 31, 2018, the Association’s notes payable was within the specified limitations."