He points to the company's low 0.01 percent default rate and the fact that the firm "lost zero" during last year's drought - the most extensive in at least 25 years - as evidence of the resilience of the sector.
RUN-UP IN PRICES
The widespread concerns that farmland is a bubble ready to pop comes from an unprecedented run-up in prices. Between 2003 and 2013, the average acre of farmland in the U.S. jumped 213 percent in non-inflation adjusted dollars, according to research by Brent Gloy, an agricultural economist at Purdue University, an average annual increase of 12 percent.
By comparison, prices rose 127 percent in real terms between 1971 and 1981, a rally that ended in the late 1980s farm crisis when land prices tumbled 40 percent. That steep decline brought down several community banks and led Congress to create Farmer Mac.
"If prices don't start to slow down soon, that would be a major red flag," said Gloy.
Farmer Mac has responded by tightening its lending standards and the portfolio's loan-to-value ratio has fallen to 60 percent from 70 percent, Buzby said.
That has helped the 90-day delinquencies rate in its farm and ranch portfolio fall to 0.69 percent of loans in the second quarter of 2013, compared with a 1.30 percent delinquency rate in the same quarter of 2010. Freddie Mac, by comparison, reported that 2.79 percent of its loans were seriously delinquent at the end of 2012. Over the same time, Farmer Mac's core capital rose to $564 million from $461 million.
The company has also tightened its own standards for its liquidity portfolio, said Buzby, who became chief executive of the company in 2012. The prior management team was using the portfolio to boost earnings, he said. When its large position in Lehman tanked, the company was forced to sell $65 million in preferred shares to its lenders as part of a rescue plan.
Most of the portfolio is now invested in low-yielding U.S. Treasuries, Buzby said, meaning that the company is losing money on its capital after inflation. Like other government-sponsored enterprises, the company has the implicit backing of the U.S. government, but does not offer the same level of security as a Treasury bond.
To be sure, the company remains highly leveraged, like other government-sponsored enterprises. The company has a leverage rate of approximately 25 to 1. While that has fallen from a peak of 45 to 1 before the 2008 crisis, it remains higher than regional banks, which typically have leverage rates of 12 to 1.