Uncertainty and Volatility in Global and Domestic MarketsRobert B. EngelPresident & Chief Executive Officer

December 6, 2010

2

Bulls vs. Bears

Strong growth inemerging economies(China, India, Brazil)

Weaker growth inmature economies

(U.S., Europe, Japan)

3

Global Demographics

Neutral to negative Negative

Positive

4

China Growth

City of Shenzhen, China

U.S. GDP

U.S. GDP Growth – 2005 to Present

1Q05

2Q05

3Q05

4Q05

1Q06

2Q06

3Q06

4Q06

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

GDP growth has been positive but ane-mic since 3Q09

Source: U.S. Bureau of Economic Analysis

6

Consumer Headwinds

Unemployment

Weakness in labor income

Weakness in consumer balance sheets Equity values Home prices

Households are stillde-leveraging

7

Business/Investment Headwinds

Unused capacity Manufacturing Employment

Slow demand

Increased productivity

Limited credit availability for small businesses

8

Government Headwinds

Tax receipts are down well below pre-recession levels

State and local governments must cut spending and/or reduce tax rates

State & local spending is 2X federal spending

9

Headwinds – Politics at Play

Legislative and regulatory uncertainty

Full consequences of major new legislation are still unknown Health care reform Financial regulatory reform

10

Fundamental Issues – Competitiveness

Serious challenges to U.S. economy from countries that previously supported our standard of living

U.S. competitiveness bolstered our economy High-paying jobs Wealth for shareholders Drove a higher standard of living

11

Fundamental Issues – Consumer Response

U.S. consumers responded by borrowing to maintain a standard of living they felt entitled to

Borrowing went from 80% of income to 160%

You can’t borrow your way to prosperity!

12

Fundamental Issues – Policy Response

Fed lowered rates 7 years ago to keep growth going

Too many houses vs. efficient plants, factories & infrastructure

Policy response doesn’t address the underlying issue of competitiveness

Debt shifted from private sector to public sector

Little impact from stimulus

Supply of money vs. velocity of money

Health care and the growing entitlement burden

13

Fundamental Issues – Banking System

Excess capacity

Banks took on more leverage and risk to drive share price

Current policies don’t address this problem

Low interest rates are subsidizing bank earnings and encouraging an oversized system

14

Fundamental Issues – A Diminished Fed

Fed no longer viewed as a powerful institution

Role is to maintain employment and moderate inflation 9.6% unemployment and

signs of deflation

Decreased ability to influence investor confidence

15

Fundamental Issues – Leadership

Leaders have not been willing to address the deficit and demonstrate financial discipline

Politically motivated decisions

Delaying the day of reckoning

16

Implications for CoBank and Farm Credit

Elevated political risks & continued debates about GSE status

Access to funding remains robust

Building organizational capacity to deal with volatility and uncertainty

Earnings build capital and fund patronage

Both CoBank and the FCS remain financially strong

17

American Agribusiness:A Sustainable Competitive Advantage

Global population will reach 9 billion people by 2050

Limited land available for increased production

U.S. remains the world leader in terms of food quality, efficiency,safety and nutritional value

Demand for high-quality agricultural products will continue to increase

18

American Agribusiness:A Sustainable Competitive Advantage

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