FEDERAL AGRICULTURAL MORTGAGE CORP

Business Outlook

Products and Portfolio

We play a vital role in serving rural America by providing secondary market liquidity, capital, and risk management tools that expand access to financing for American agriculture and rural infrastructure. Our growth trajectory is closely tied to the capital and liquidity needs of the lending institutions that serve agriculture and infrastructure businesses and the overall financial health of borrowers in these sectors.

Several factors continue to influence our business volume growth dynamics. The Farm & Ranch portfolio contains a significant share of legacy low‑rate loans which, when combined with increased rate volatility in the third quarter, are expected to keep prepayment rates at or below historical norms in the near term. Also, a tightening agricultural economy is creating the need for more liquidity and working capital for borrowers managing through this agricultural cycle contributing to strong Farm & Ranch loan purchase portfolio growth during third quarter of 2026. We anticipate this growth to persist throughout the rest of 2026. Opportunities for future business volume growth continue to include our potential role in alleviating liquidity, capital, competitiveness, and return-on-equity challenges faced by lenders. In 2026, there has been an increase in Farm & Ranch business volume from lending institutions seeking capital and liquidity relief, highlighting the value our secondary market services bring to the industry. We experienced an increase in wholesale finance volume during the first halfof 2026, driven by financings drawn from numerous AgVantage facilities, including a large issuance from a facility put in place in late 2025 with a new counterparty. Future wholesale finance growth will likely be influenced by market interest rates and credit spreads, overall economic conditions and loan growth opportunities, and the relative value of our product versus the broader market. Continued strong interest in data centers, broadband expansion, and constructing and completing renewable energy projects to bring new power capacity to market, along with the overall need for energy generation and transmission capacity for rural America, provided significant opportunities for Infrastructure Finance during third quarter of 2026. We expect these opportunities to persist for the remainder of the year and into 2027.

Operations

We anticipate ongoing increases in operating expenses over the next several years, aligned with our planned expansion of investments in technology, business infrastructure, and human capital. We have completed the initial phase of certain of these investments, including the implementation of the Farmer Mac Loan Exchange (FLX), and expect to continue investing in capabilities designed to enhance capacity and efficiency in support of market growth opportunities and long-term strategic objectives. FLX enhances business efficiency by providing a single process and information stream for loan purchases in the Farm & Ranch line of business. By investing in infrastructure and business platforms, we aim to leverage these capabilities to drive more efficiency, enhance the customer experience, and expand the services we can provide across the markets we serve. These initiatives are expected to improve product delivery, business operations, and scalability and better position us to capitalize on future market opportunities as our portfolio and earnings grow.

Another focus of our planned infrastructure investments is a continued effort to expand our servicing capabilities and to enhance the efficiency of processes associated with loan onboarding and servicing. We expect to continue to leverage technology enhancements and servicing standardization efforts to drive scalability and consistency. Our acquisition of loan servicing rights during the third quarter reflects our ability to opportunistically utilize this infrastructure and expand our servicing activities. We plan to implement technology enhancements and process re-engineering over the next several years to continue to incorporate servicing platform optimization and to provide flexibility in accessing loan portfolio information, increase standardization of data and processing, and streamline operational workflows.

Agricultural Finance Industry Outlook

Farm Incomes

The farm profitability outlook for 2026 remains varied. Following a 22% increase in total net cash farm income in 2025, the USDA’s September 2026 forecast shows U.S. farm incomes rising modestly this year relative to last year. The increase in 2026 farm incomes is due in part to surging government payments, which the USDA currently projects will reach record levels this year. The total for 2026 could eventually surpass the current USDA forecast as the USDA announced a Harvest Fuel Relief (HFR) program in October. HFR was announced as $8 billion in additional payments to agricultural producers in 2026 to help offset the impact of elevated energy prices this year. Details about the program, including timing of funds and who is eligible, have yet to be released. Beyond government payments, the projected increase in overall farm incomes obscures a bifurcation across agricultural sectors. Namely, crop producers face headwinds from volatile commodity prices and elevated input costs that have compressed margins, while livestock producers are expected to benefit again in 2026 from robust consumer and export demand, falling feed costs, and continued herd contraction. Shifts in the outlook for trade could have a meaningful impact on commodity prices and farm incomes. The current USDA forecast shows U.S. agricultural exports increasing modestly in 2026.

Global energy prices spiked in first quarter 2026 and remained volatile through third quarter 2026 due to events in the Middle East. The disruption of Middle East energy flows corresponded with an increase in fuel, fertilizer, and many agricultural commodity prices. Prices remained volatile for numerous agricultural inputs and commodities in thethird quarter 2026 as a result of the market and supply chain disruptions. Ultimately, agricultural profitability levels will likely be dependent on individual marketing and risk management plans throughout the growing season.

A divergence in commodity prices between row crops and proteins combined with elevated input costs could lead to competing and compounding impacts on loan performance and agricultural credit demand. Constraints on cash flow and additional market volatility could cause loan delinquencies to rise above historical averages, most likely in commodities experiencing negative market conditions, such as some grains and permanent crops. Cash flow constraints and heightened uncertainty can also increase demand for debt capital to reorganize balance sheets and replace lost incomes. We believe that our portfolio and market strategy is sufficiently diversified by borrower, industry, and region to maintain robust portfolio performance through the current cycle to be positioned to support any expansion of the farm mortgage market that may arise in the coming quarters.

Land Values

Farmland value growth rates slowed in 2026 but remained positive across the U.S. USDA land value survey data show a 3.4% increase in average farm real estate values from June 2025 to June 2026. Annual farm real estate value gains were highest across the Southeast (4.3%) and Southern Plains (4.2%), while values increased more modestly in the Northern Plains (3.8%), the Corn Belt (3.5%), and the Pacific States (2.8%).

Farmland transaction data show farmland sales prices moving higher in 2026. The Farmer Mac Farmland Price Index Powered by AcreValue® rose 5% in second quarter 2026 relative to the same period in 2025. Basing this index on actual farmland transactions can lead to greater volatility, as many economic factors affecting land markets are highly localized and some markets may experience greater volatility in farmland values than state or national averages indicate. Based on our robust collateral underwriting standards, we believe that our loan collateral is well-positioned to endure reasonably foreseeable volatility in farmland values that could result from external factors.

Markets and Weather

Exogenous factors facing farm and food producers can create uncertainty and market instability within the sector. Some of the external market conditions that have affected, and could continue to adversely affect, the farm and food sectors in 2026 include foreign trade and trade policy, supply chain disruptions, and weather and environmental conditions. New World Screwworm (NWS) emerged as a concern in 2026, prompting USDA to expand sterile fly production. By the third quarter, declining cases allowed a partial reopening of the U.S.-Mexico border to live cattle trade. Further containment could support continued normalization of U.S.-Mexico beef trade.

Water availability is a perennial concern for many agricultural producers. Drought conditions increased modestly in intensity and prevalence in third quarter 2026, largely across several southern, southwestern, and southeastern states. The ongoing implementation of groundwater management regulation, especially in California, continues to influence land values in many regions of the state. We work closely with water consultants and collateral valuation professionals to identify properties influenced by changing water availability. For loans in areas that commonly experience exceptional drought (primarily in California), our underwriting standards include an assessment of anticipated long-term water availability for the related property and how water availability impacts the collateral value and the borrower's liquidity position to mitigate that risk.

Agricultural Processing and Food Supply Chain

The production of food, feed, fiber, and biofuels has generally been economically viable during the past few years, but economic factors continue to evolve into 2026. Biofuels have gained demand due to low-carbon regulations in several states and incremental tax benefits for the production of renewable diesel and sustainable aviation fuel. A spike in energy prices in 2026 also likely contributed to higher margins for some biofuel producers. Ethanol profit margins, for example, were approximately twice as high through the first three quarters of 2026 relative to the same period in 2025 according to estimates from Iowa State University. However, the durability of elevated energy prices remains unclear and volatility remains elevated in both biofuel markets and the broader energy sector. A large number of planned biofuel projects and new facilities for 2026 and 2027 could provide support for raw materials such as corn and soybeans, but markets for these fuels are nascent and could evolve or erode rapidly in the coming quarters. Trade policy uncertainty, labor availability, changes to consumer demand due to health policy and pharmaceuticals (e.g., GLP-1 class drugs), and a high risk of global economic stress could pose challenges for these sectors through 2026 and into 2027. Still, consumer spending held steady throughout 2025 and into this year, providing stable conditions for value-added food, feed, fiber, and biofuel consumption. Consumer demand is expected to continue generating both tailwinds and headwinds for food processors and agribusinesses in 2026, as shifting preferences around nutrition, protein consumption, wellness, and discretionary spending continue to influence purchasing behavior and market opportunities.

Infrastructure Finance Industry Outlook

Power & Utilities

Economic conditions affecting rural power and electricity markets typically follow those in the general economy. According to data from the U.S. Energy Information Administration, sales and the revenue from the sale of electricity to customers continued climbing in 2026, with an annual increase in sales of 1.9% and an increase in revenue of 6.4%, respectively, in the last 12 months through July 2026 compared to July 2025. This increase was the result of higher commercial electricity sales combined with a sizable increase in average prices paid for electricity relative to the previous year. Electricity demand was consistently strong in 2025 and into 2026, and power producers are continuing to invest in more capacity to meet the rising demand from consumers and data centers. Continued geopolitical uncertainty in the Middle East and Eastern Europe have led to higher energy price volatility, but power producers are generally able to pass higher input costs through to retail electricity prices, as evidenced by higher retail electricity prices in 2025 and 2026. Credit demand for electric cooperatives will likely be tied to ongoing normal-course capital expenditures related to maintaining and upgrading utility infrastructure. These growth opportunities may be affected by the demand for electric power in rural areas, increased power demand from regional data centers, capital expenditures by electric cooperatives driven by regulatory or technological changes, the changing interest rate environment, increased policy initiatives to support rural connectivity, and competitive dynamics within the rural utilities cooperative finance industry. Generally, these investments are expected to continue at or above historical levels based on the replacement and modernization of existing and new infrastructure, as well as increasing demand for electricity across the spectrum of residential, commercial, and industrial customers.

Renewable Energy

Investment in renewable energy generation and deployment of energy storage technologies in the last five years deepened our relationships with existing customers through new business opportunities. According to data from the U.S. Energy Information Administration, renewable energy net generation grew by 52% in the last five years, compared to a 1% decline in non-renewable electricity net generation. The volatile cost of fossil fuel-based inputs, combined with policy initiatives and the falling costs of renewable power generation, influenced this change in generation capacity. In response to this expansion, we have hired industry-specialized staff and deployed new financing products tailored to the renewable energy sector, which represents a rapidly developing market opportunity for us.

Changes to tax policy may alter the trajectory and velocity of investments in U.S. renewable energy. H.R. 1, commonly referred to as the "One Big Beautiful Bill Act" signed into law on July 4, 2025, phases out tax credits that have been routinely used to support renewable power project investments. As these tax credits phase out, new power projects are still likely to be financed, but the marginal costs of electricity generation may be higher without subsidies. Increased political and policy uncertainty and higher cost structures could decrease the overall renewable power investment market growth velocity over the next five years. Wood Mackenzie estimates U.S. solar installations dropped 14% in 2025 relative to the total gigawatts installed in 2024. At the same time, Wood Mackenzie’s forecast for utility-scale solar deployments over the next decade inthird quarter 2026 was nearly unchanged from thethird quarter 2025 forecast. This underscores expectations for a continued robust solar energy development in the U.S., even after accounting for the tax credit phaseout, in response to rising energy demand. We expect to continue to participate in renewable energy power project finance transactions for both new projects and refinancing opportunities of existing projects.

As of September 30, 2026, we have utilized the majority of our remaining capacity to use renewable energy investment tax credits to carry back to the prior three years' federal corporate income tax liability, however, we will continue to pursue opportunities to purchase renewable energy investment tax credits to apply to the current tax year and future tax years to the extent possible. We focus on purchasing renewable energy investment tax credits for projects in rural areas or associated with agriculture, such as credits generated through the production of cleaner transportation fuels. Under H.R. 1's phase-outs of future renewable energy investment tax credits, projects eligible for renewable energy investment tax credits generally must be placed in service by December 31, 2027 unless construction began by July 4, 2026.

Broadband Infrastructure

Rural telecommunication and data connectivity has proven to be of vital economic importance in the last decade, as more households and agricultural enterprises require more data and connectivity to thrive. The expected continued rapid growth in digital technologies, including the ongoing interest and investment in artificial intelligence, advancements in cloud computing, and wireless network densification, will require significantly more computing and storage capabilities and investment in more fiber network capacity. In addition to capital projects spurred by government-backed support programs, we could see an increase in financing opportunities for other telecommunications providers in rural areas. For example, fiber line expansion, wireless broadband deployment, industry consolidation and efficiency through mergers and acquisitions, and data processing center build-outs are all increasingly important to rural economic opportunity, and the food and agriculture industries require constant connectivity. However, some types of "leapfrog" technology advances in the broadband infrastructure sector, such as low orbit satellite communication systems, could put pressure on the profitability of the providers of older digital technologies.

Changes in tax policy, trade, and immigration laws, as well as energy cost and availability, could result in significant challenges and opportunities to infrastructure borrowers. These changes could lead to delays in completing current projects and slow future investments in renewable energy and battery storage projects as well as the deployment of fiber and broadband infrastructure in rural areas. Any lack of availability or increased costs of components or technology that results from tariffs or trade restrictions also could lead to delays in completion or slow future investments in infrastructure projects. The infrastructure sector may experience varying degrees of disruption and adaptation in response to these evolving policies, and these changes could increase the volatility of sector profitability in the near-term. The potential for disruption in these sectors due to policy changes may be somewhat mitigated by the historically strong market demand for connectivity, the ongoing diversification of infrastructure providers, and continued strong investments in data centers and fiber infrastructure. New data center infrastructure requires significant demand for power, so delays in grid hookups or electricity capacity could delay some capital or infrastructure deployment.