EFTA01384976.pdf

Farmland Wires vs. Interest Rates $2.800 $2.600 52.400 $2,200 Dollars (S) Per Mn 52.000 $1.800 81.600 $1.400 61200 51.000 $800 Ot 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 -USDA Farmland Value (Intlalion-Adjusted) U.S. 10-Year Treasury Bond Note: 11w GDP chain-type price index is used to convert NASS current-dollar statistics to 2009=100 equivalents (Bureau of Economic Analysis, Department of Commerce). Farm real estate includes land and buildings. Source: U.S. Bureau of Labor Statistics; USDA; Bloomberg. A confluence of events in the mid-1980s, including the Savings and Loan crisis, led to a turbulent time in U.S. agriculture often referred to as a "farm crisis" whereby there was a (i) swift decline in farm income, (ii) reduced export demand resulting from a foreign grain sale embargo and (iii) decreased real estate values. In addition, the 1981 Farm Bill was implemented, which increased price supports for grain in the U.S., which in-turn led U.S. crop exports to become more expensive. The agricultural shock of that time endured during a period characterized by higher debt levels, high interest rates and a government imposed grain-sale embargo to the Soviet Union. Reduced income impaired the farmers' ability to service debt on historically high leverage levels, supply of credit declined and the environment and circumstances led to a wave of farm bank failures. lbday's current conditions differ from those in the mid-l980 as interest rates arc historically low and leverage levels are moderate and well below those experienced during the 1980s. 153 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. R 6(e) DB-SDNY-0085716 CONFIDENTIAL SDNY_GM_00231900 EFTA01384976