Full text of Agricultural Survey : First Quarter 1993
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STATISTICAL F E D E R A L RELEASE B A N K R E S E R V E 0 F D A L L A S Quarterly Survey of ·cultural Credit Conditions in the Eleventh Federal Reserve District .. I Quarterly Survey of Agricultural Credit Conditions is compiled from a survey of Eleventh District agricultural bankers. This publication is prepared by the Federal Reserve Bank i>f Dallas and is available Ag Banks' Recovery Leads to Profits Agricultural Credit Conditions at Survey Banks in the Eleventh District Agricultural banks, banks that specialize in or have a substantial amount of agricultural loans, increased their profits in 1992 as a result of enhanced interest margins and improved asset quality. Quarterly reports revealed that the 498 agricultural banks in the Eleventh District earned $1.4 billion in profits in 1992, up 60 percent from the $900 million level reached in 1991. Their total nonperforming loans fell by $450 million during 1992. Profits should remain strong in 1993, given the robust interest-rate spreads between loans and deposits. According to the Dallas Fed's Quarterly Survey of Agricultural Credit Conditions, over the past year spreads widened by 29 basis points for fixed-rate loans and 49 basis points for variable rate loans. (One hundred basis points equal one percentage point.) Demand for Loans without charge by writing to . •• Percent 100 80 60 40 20 1988 1989 Less 1990 Same 1991 1992 1993 • Greater (Continued on page 4) the Research Department, Funds Available for Additional Lending Federal Reserve Bank of Dallas, P.O. Box 655906, Percent District Land Valu es 100 1987 dollars per acre Dallas, TX 75265-5906, or by 800 80 telephoning (214) 922-5254. 700 60 For questions regarding 600 information in the release, 500 40 contact Kevin Yeats, 20 400 .... (214) 922-5167, or Karen Gee, (214) 922-5178. 300 .... .... Ranchland - - - - ...... 1986 1987 1988 1989 1990 ______ 1991 1992 0 1987 ...,,. 1993 1988 1989 Less 1990 Same 1991 1992 • Greater This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) STATISTICAL RELEASE Agricultural Credit Conditions at Survey Banks in the Beventh District Rate of Loan Repayment Percent 100 Loan-Deposit Ratios at Survey Banks 80 Average Actual and Desired Ratios Percent 60 40 55 20 50 45 1988 1989 Less 1990 •Same 1991 1992 1993 • Greater • Actual Ratio • Desired Ratio 40 35 1992:1 1992:2 1992:3 1992:4 1993:1 Renewals or Extensions of Loans Percent 100 DISTRIBUTION OF LOAN-DEPOSIT RATIOS 80 Banks Reporting (Percent) 60 Ratio Apr. 1 1992 Jul. 1 Oct. 1 51 20 15 8 6 49 21 21 8 2 46 23 17 10 5 1993 Apr. 1 Jan. 1 40 Less than 41 % 41% to 50% 51% to 60% 61% to 70% More than 70% 20 0 1987 1988 1989 Less 1990 •same 1991 1992 1993 50 24 17 6 3 54 21 15 6 3 INTEREST RATES-FIXED • Greater Average Rate (Percent) Amount of Collateral Loan Type Apr. 1 1992 Jul. 1 Oct. 1 10.40 10.29 10.55 10.36 10.15 10.20 10.38 10.40 9.79 9.88 9.99 10.01 Apr. 1 1992 Jul. 1 Oct. 1 9.71 9.88 9.83 9.54 9.63 9.77 9.65 9.35 9.03 9.28 9.27 9.11 1993 Jan. 1 Apr. 1 Percent Feeder cattle Other farm operating Intermediate term Long-term farm real estate 100 80 9.71 9.77 9.99 9.89 9.53 9.66 9.67 9.48 INTEREST RATES-VARIABLE 60 Average Rate (Percent) 40 Loan Type 1993 Apr. 1 Jan. 1 20 0 1987 1988 1989 Less 1990 •same 1991 • Greater 1992 1993 Feeder cattle Other farm operating Intermediate term Long-term farm real estate 9.16 9.25 9.21 9.10 9.07 9.20 9.17 8.99 STATISTICAL Rural Real Estate Values RELEASE CROPLAND-DRYLAND April 1, 1993 Region 1 Number of banks reporting. Dollars per acre. n.r.-No response or not enough responses. 2 NOTE : Reg ional land values based on a small number of reporting banks should be used with caution. All figures are preliminary. Average Value 2 First-Quarter 199 3 Banks 1 Percent Changes in Values from Previous Previous Quarter Year DISTRICT 198 530 .7 .2 TEXAS Northern High Plains Southern High Plains Northern Low Plains Southern Low Plains Cross Timbers North Central Texas East Texas Central Texas Coastal Texas South Texas Trans-Pecos and Edwards Plateau 182 24 24 12 13 19 27 11 24 10 7 526 265 345 307 396 432 671 627 841 751 573 .9 3.3 .5 3.6 -4.6 -.6 .9 1.5 -1.l 3.0 2.2 .3 3.1 .5 4.4 -5.1 .7 .2 1.4 -6.4 2.0 6.6 11 593 4.2 7.7 Northern Louisiana Southern New Mexico 12 4 619 240 -1.4 -4.6 -1.3 11.1 Eleventh Federal Reserve District CROPLAND-IRRIGATED Region 12 NEW 1 MEXICO Northern High Plains 2 Southern High Plains 3 4 5 6 7 Northern Low Plains Southern Low Plains Cross Timbers North Central Texas East Texas Central Texas Coastal Texas South Texas Trans-Pecos and Edwards Plateau 12 Southern New Mexico 13 Northern Louisiana 8 9 10 11 Average Banks 1 Value2 First-Quarter 1993 P ercent Changes in Values from Previou s Previou s Quarter Year DISTRICT 120 681 1.1 6.9 TEXAS Northern High Plains Southern High Plains Northern Low Plains Southern Low Plains Cross Timbers North Central Texas East Texas Central Texas Coastal Texas South Texas Trans-Pecos and Edwards Plateau 105 23 24 8 5 8 n.r. 3 11 n.r. n.r. 652 491 559 426 610 638 n.r. 860 1164 n.r. n.r. 2.6 .8 1.6 4.3 .4 -4.4 n.r. -1.0 -.4 n.r. n.r. 8.7 6.1 1.0 .8 -1.7 -2.8 n.r. -1.3 -2.5 n.r. n.r. 10 782 1.9 -6.2 Northern Louisiana Southern New Mexico 10 6 835 1033 .5 -8.6 3.4 9.4 RANCHLAND Region Average Value 2 Banks 1 First-Quarter 1993 Percent Changes in Values from Previou s Previou s Quarter Year DISTRICT 202 292 1.5 -1.3 TEXAS Northern High Plains Southern High Plains Northern Low Plains Southern Low Plains Cross Timbers North Central Texas East Texas Central Texas Coastal Texas South Texas Trans-Pecos and Edwards Plateau 188 22 18 n.r. 13 19 28 17 25 9 7 363 165 140 n.r. 232 345 581 619 759 467 447 2.0 4.4 1.4 n.r. .7 .2 1.7 1.1 0 1.9 7.5 .6 9.2 2.9 n.r. -1.2 5.8 2.4 -2.8 -4.4 -7.7 2.7 18 307 .5 -.4 7 7 374 88 .1 -4.0 -14.6 -18.8 Northern Louisiana Southern New Mexico STATISTICAL First-Quarter Comments RELEASE ratio. Increased irrigational efficiency and land taken out of production by the Crop Reduction Program are two reasons agricultural land values have remained steady and shown signs of increasing. Region 5-Cross Timbers District bankers were asked for any additional comments concerning agricultural land values or credit conditions. Because of space constraints, these comments were edited. Region 1- Northem High Plains Commodity Credit Corporation payments have been greater than expected. The cattle market looks good; prices remain excellent. Moisture conditions have been excellent for wheat and fall crops. Environmental regulations could pose a threat to the feedlot industry. Cattle prices are excellent. Wheat crops will be fed to livestock instead of harvested. A milk price decrease has created a cashflow shortage for area dairy operators. Small grain crops look good because of adequate rainfall. Forage crops are being planted as weather permits. FmHA will no longer subordinate its claim on loans for livestock or farm equipment purchases. Region 8-Central Texas Since last year, farm balance sheets have become much stronger and more liquid. Asset quality has improved over last year. Most farm borrowers are in much better financial condition than during a year ago, largely because of Agricultural Stabilization and Conservation Service disaster and deficiency payments. Marginal irrigated land is productive and operationally efficient because of the low pressure pivot sprinkler systems that have proved effective. What was once a 60:40 ratio (dryland to irrigated) has now become a 40:60 a conference sponsored b;• The Federal Reserve Bank ofDallas and Southern Methodist Universi(p Region 6-North Central Texas Region 2-Southem High Plains - I Reclaiming the Future Imperatives for Banking in the 1990s Demand for farm and ranch loans is increasing. Demand for equipment loans is strong. Demand for cow/calf and heifer loans is strong. Rain in the area is good. Region 9-Coastal Texas If rice prices remain low, many farmers may be forced to shut down. Consequently, some of these farmers had loan carryovers from their crop loans. If 1993 results in more loan carryovers, banks may not consider offering this type of loan. Helping bankers take the offensive, rather than continue defensive measures, is the purpose of this conference. The agenda is designed to offer solutions for day-today problems as well as insight into how each institution can reclaim the promise of its future. Speakers Include: Alan Greenspan Chairman, Board of Governors of the Federal Reserve System Eugene A. Miller President and COO, Comerica, Inc. James). McDermott. Jr. President, Keefe, Bruyette & Woods, Inc. Merrie Spaeth President, Spaeth Communications, Inc. Date: Wednesday, May 26, 1993 Ag Banks' Recovery Leads to Profits (Continued from page 1) Respondents' experiences with credit demands during the first quarter were mixed. During the first quarter, loan demand was sluggish in the four plains regions of Texas, where about 31 percent of the bankers reported a decrease in the demand for loans and 19 percent experienced an increase. Demand was stronger in East and Central Texas, where 38 percent of respondents reported an increase and 16 percent reported a decline. (See the map on page 3.) Bankers' outlook for the demand for agricultural loans was stable overall but strong for certain types of loans. About one.fifth of the respondents expected non-realestate farm loans and operating loans to increase. Most bankers expected real estate loans to remain stable. Land values stabilized across most of the Eleventh District during the first quarter. Reported average irrigated land values increased over the past year. Dryland and ranchland values, which had been declining over the past seven years, were flat in the recent quarters. -Kevin Yeats Time: Registration 7:00 a.m. Conference Begins 8:00 a.m. Adjournment 4: 15 p.m. Place: Federal Reserve Bank of Dallas 2200 . Pearl Street Dallas, Texas 75201 Fee: $165 per person For more information call: Tara Barrett (214) 922-5251 Federal Reserve Bank of Dallas