Full text of Agricultural Survey : First Quarter 1999

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STATISTICAL

F E D E R A L

R E S E R V E

RELEASE
BANK

DALLAS

Agricultural Credit Conditions at
Survey Banks in the Eleventh District

Quarterly Survey of
·cultural
Credit Conditions in the
Eleventh Federal Reserve District

Demand for Loans
Twenty-seven percent of responding banks
report a decrease in loan demand.
Percent
100

First Quarter 1999

Quarterly S111vey of
Agricultural Credit
Conditions is compiled from
a survey of Eleventh District
agricultural bankers. This
publication is prepared by
the Federal Reserve Bank
of Dallas and is available
without charge by writing
to the Research Department,
Federal Reserve Bank of
Dallas, P.O. Box 655906,
Dallas, TX 75265-5906,
or by telephoning
(214) 922-5254. It is
available on the web at
<www.dallasfed.org>.

For questions regarding
information in the release,
contact Sheila Dolmas,
(214) 922-5191.

The First Quarter Survey of Agricultural
Credit Conditions showed very little improvement in agricultural lending conditions. Bankers
continued to report a lower rate of loan repayment and more loan renewals and extensions,
but also noted a slight improvement in cattleoperation costs with recent rains. (See page 4
for bankers' comments.) In the Southern High
Plains, a banker commented, "Due to the
drought and low commodity prices, carryovers
this year have been on the increase. We will sec
more farm sales in our area tl1an we have seen
in many years, which will cause machinery and
real estate prices to fall . Without exceptional
yields, an unexpected commodity price increase
or government intervention, operating loans will
not pay out again next year, further compounding this agriculture problem." The Southern
High Plains and a few oilier areas have already
seen slight land price declines, but overall,
Eleventh District land values rose over the past
six months.
Here are additional details from the survey:
• Over half the responding bankers in the
Northern and Soutl1ern High Plains, Southern
Low Plains, Coastal Texas, New Mexico and
Louisiana report first-quarter declines in the
loan-repayment rate, compared wiili the same
period a year earlier.
• The average number of farm and ranch
borrowers per responding bank, which fell from
a high of 142 in the iliird quarter of 1997 to 85
last quarter, increased slightly to 93.
• Continuing a year-long trend, 35 percent of responding bankers report increased
collateral requirements in me first quarter,
compared with a year earlier.

0
01 :'93

0 1:'94

01 :'95

Less

01 :'96

•Same

01 :'97

01 :'98

01 :'99

• Greater

Funds Available for Additional Lending
Seventy-three percent of respondents report
no change in the availability of funds for lending.
Percent
100

0
m~

Less

•Same

• Greater

Rate of Loan Repayment
The rate of loan repayment decreases for
49 percent of first-quarter respondents.
Percent
100

0
01:'93

01:'94

01:'95

Less

01:'96

•Same

01:'97

01:'98

01:'99

• 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 Eleventh District
Renewals or Extensions of Loans
Fifty-three percent of respondents report
increases in loan renewals or extensions.
Percent
100

Loan-Deposit Ratios at Survey Banks

Average actual and desired ratios
60

Percent
~~~~~~~~~~~~~~~~

55
20

50
45

01 :'93

01 :'94

01 :'95

Less

01 :'96

• Same

01 :'97

01 :'98

01 :'99

Actual Ratio

• Greater

Amount of Collateral
Thirty-five percent of responden ts report an
increase in collateral requirements.

35
Desired Ratio

1998:1

1998:2

1998:3

1998:4

1999:1

Percent
100

DISTRIBUTION OF LOAN-DEPOSIT RATIOS

Banks Reporting (Percent)
60

Ratio

Apr. 1

1998
Jul. 1

Oct. 1

33
16
22
21
9

27
16
25
21
13

24
22
18
20
16

1999
Apr. 1
Jan. 1

Less than 41%
41%to 50%
51% to 60%
61% to 7<.Y%
More than 7<.Y%

0
01 :'93

01 :'94

01 :'95

Less

01 :'96

• Same

01 :'97

01 :'98

26
16
27
20
11

27
19
26
13
16

01 :'99

INTEREST RATES-FIXED

• Greater

Total Agricultural Loans at
Eleventh District Banks
Lending continues to decline in fourth quarter 1998.
Millions of dollars (seasonally adjusted)

Average Rate (Percent)
Ratio

Feeder cattle
Other farm operating
Intermediate term
Long-term farm real estate

5,200
5,000

Apr. 1

1998
Jul . 1

Oct. 1

1999
Jan. 1
Apr. 1

10.47
10.52
10.44
9.66

10.41
10.52
10.15
9.56

10.31
10.37
10.23
9.63

9.94
10.08
9.88
9.29

9.91
9.99
9.74
9.17

4 ,800

INTEREST RATES-VARIABLE
4,600

Average Rate (Percent)

4,400

Ratio

4,200
4 ,000

'86

'87

'88

'89

'90

'91

'92

'93

'94

'95

'96

'97

Note: Starting in May 1998, data previously reported by NationsBank of
Texas in the Eleventh District are reported by NationsBank, NC,
in the Fifth District.

'98

Feeder cattle
Other farm operating
Intermediate term
Long-term farm real estate

Apr. 1

19 98
J ul. 1

Oct. 1

10.45
10.52
10.42
9.79

10.39
10.53
10.28
9.80

10.21
10.31
10.24
9.68

1999
Apr. 1
Jan. 1

9.78
9.92
9.73
9.19

9.75
9.94
9.73
9.15

STATISTICAL

RELEASE

CROPLAND-DRYLAND

Rural Real Estate values
April 1, 1999

Region
1

Number of banks reporting land values.
Prices are dollars per acre, not adjusted for inflation.
3 Not adjusted for inflation.
n.r.-Not reported due to insufficient responses.
2

NOTE: Regional land values based on a small
number of reporting banks should be used
with caution.
All figures are preliminary.

Beventh Federal Reserve District

DISTRICT

124

597

2.3

5.5

TEXAS
Northern High Plains
Southern High Plains
Northern Low Plains
Southern Low Plains
Cross Tunbers
North Central Texas
East Texas
Central Texas
Coastal Texas
South Texas
Trans-Pecos and
Edwards Plateau

116
15
18
7
12
6
19
7
9
5
7

599
303
335
313
392
549
921
639
1,164
785
471

3.0
5.1
-1.4
1.1
-3.1
3.7
0.0
14.8
4.6
6.2
-0.4

6.6
11.7
0.2
-0.7
-5.5
-2.4
4.7
11.8
28.6
-2.1
5.3

525

-4.3

-3.0

Northern Louisiana
Southern New Mexico

5
n.r.

614
n.r.

-3.4
n.r.

-6.3
n.r.

MEXICO

Region

DISTRICT

2
3
4
5
6
7

Northern High Plains
Southern High Plains
Northern Low Plains
Southern Low Plains
Cross Timbers
North Central Texas
East Texas

Percent Changes3
in Values from
Previous Previous
Quarter
Year

CROPLAND-IRRIGATED

12
NEW

Average
Value2
Banks'
First-Quarter 1999

10
11
12
13

Coastal Texas
South Texas
Trans-Pecos and Edwards Plateau
Southern New Mexico
Northern Louisiana

Average
Value2
Banks'
First-Quarter 1999

Percent Changes3
in Values from
Previous Previous
Quarter
Year

804

1.0

8.1

70
15
18
4
7
4
n.r.
n.r.
n.r.
n.r.
6

718
560
662
417
671
788
n.r.
n.r.
n.r.
n.r.
716

1.0
2.1
2.1
0.4
-0.7
5.8
n.r.
n.r.
n.r.
n.r.
2.4

7.2
-2.6
0.1
-10.7
2.1
2.7
n.r.
n.r.
n.r.
n.r.
10.9

915

-31.1

2.0

5
7

793
1,650

-4.0
1.7

-10.3
16.2

RANCHLAND

Region

Real Eleventh District Land Values
Land values increase in the first quarter of 1999.
1992 dollars per acre
1,600
1,400

'"\

1,200
1,000

___;

800
600

Dryland

400
200
0

,,.

Ranchland

'82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99

Average
Value2
Banks'
First-Quarter 1999

Percent Changes3
in Values from
Previous Previous
Quarter
Year

DISTRICT

127

416

3.1

25.5

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

115
14
15
7
11
6
20
9
8
4
7

464
195
131
169
275
465
825
690
1,296
523
474

2.5
7.5
-2.8
2.3
3.0
1.3
-0.7
7.2
8.3
-7.2
0.9

11.2
24.0
-5.5
12.6
16.l
-2.6
6.3
-4.6
57.3
-17.4
9.0

399

1.7

7.6

5
7

484
275

7.5
6.3

14.6
237.2

Northern Louisiana
Southern New Mexico

STATISTICAL

First-Quarter
Comments

RELEASE

federal and otl1er crop insurance, to manage
production. Land prices in our area may be a
little softer because of depressed commodity
prices.

Region 2-Southern High Plains

District bankers were asked for any
additional comments concerning agricultural
land values or credit conditions. These
comments have been edited.

Region I-Northern High Plains
Those who have said that the cure for
low prices is lower prices have certainly
gotten their wish. It is doing away with the
estate tax problem, too.
We are anticipating a larger number of
farmers to quit this year.
Operations are increasing in size to justify
large capital expenditures for replacing irrigation and farm equipment. Operating expenses
are being monitored more closely, especially
for operators with large debt loads. Dryland
and limited irrigation operations must have
above-average yields to offset weak commodity prices. Operators with high debt loads
must reduce debt and cut living expenses to
survive until commodity prices improve.
The 1999 seed milo average contracts
have been cut drastically. This will result in
increased corn acreage. Soybean acreage has
been on the increase, and water requirements
for soybeans are less than for corn. Some
operators are looking for alternative crops.
Sugar beets are no longer an alternative with
the closing of the Panhandle's only processer.
Snow and rain have been above normal,
and wheat yield prospects look good. Wheat
prices will likely remain depressed because of
large domestic supplies and reduced exports.
Wheat pasture cattle gains have been
excellent, and profit prospects are much better
than last year. Fed cattle prices will likely not
improve, reflecting only breakeven or small
profits throughout 1999.
We are experiencing a crisis in the agricultural sector with the decline in commodity
prices and , as a result, a substantial increase in
carryover debt on our farm operating lines. It
is difficult to sustain cash flow at existing
projected prices.
Cattle operators are beginning to show
some profits after a couple years of depressed
prices. We are encouraging our farm customers to use risk management tools, such as

Some direct borrowers who had losses in
1998 had to use farmland to refinance their
carryover debt, which makes their 1999 cash
flow tight. Some FSA borrowers were forced
to apply for FSA emergency loans to refinance
their carryover. Almost all farmers who
collected crop insurance in 1998 were also
eligible for disaster payments.
If the emergency loan money does not
come through in a timely manner and the
disaster payment is not funded at a high
percent of eligibility, many FSA farmers will
be forced into bankruptcy. Some direct
borrowers were forced to sell tractors and
cotton strippers and then lease them back.
Loan paydowns and government
payments (advance payments of production
flexibility contracts) in January have kept firstquarter agricultural loans outstanding below
normal. Also, pessimistic forecasts of low
commodity prices and unpredictable moisture
have kept producers from spending scarce
resources early.

insurance as possible to protect their investment. Ag-related businesses are feeling the
stress of less income; no one is spending any
extra.
Farmers and ranchers are getting
politically involved, expressing concern about
tl1eir future . They are also concerned about
NAFTA's impact on the producer and production cost differences from one country to
another.

Region 7-East Texas
,_

The needed moisture has arrived. Beef
cattle prices are firm, feed prices are low and
winter pastures are excellent. However, the
basic formula price of milk plummeted from
$16.27 to $10.27. The price is off 41 percent
since the all-time high of $17 .34 in December
1998.
Wheat in the field is looking strong. We
are continuing to restructure carryover debt
from 1998 operating loans.

Region 8-Central Texas
Beneficial rains have brought new hope
to the agricu ltural community. Demand for
replacement heifers, fertilizer and seed has
risen. Peanut allotments are being sold or
leased to West Texas producers.

Region 4 -Southern Low Plains

Rain has improved wheat prospects.
Producers couldn't find enough cattle to graze
out the projected acreage.
Because of marginal cash flow, farmers
are having to rely more on FSA credit than in
previous years. Farmers without outside
income sources are nonexistent. Many farm
operations are riding on the FSA disaster
program for survival and continuation.

Region 5-Cross Timbers
Land values have increased due to
recreational purchases. The land's production
value is well below its recreational value.
Finally, after all the montl1s of drought,
we received 5 inches of rain in March.
Pastures are looking good.

Region IO-South Texas
Recreational hunting ranches are in high
demand from out-of-area buyers.
The year started with no rain. Some parts
now have received considerable rain during
the past 30 days. Crop prospects are improved, and cattle prices have responded
moderately. More rain is needed for prospects
to improve. The depressed oil business is
affecting the economy and land prices.
Drought fears and low commodity prices
persist.
Ranchland prices continue to strengthen
-the thicker the brush, the higher the price.
The market is driven by recreational use,
primarily the potential of ranchland to grow
big white-tailed deer.

Region 6-North Central Texas

Region 11-Trans-Pecos and
Edwards Plateau

Recent rains have really changed the
area's outlook. Sixty percent of corn is planted
and looks good. Farmers are still very
concerned about prices. It's not a breakeven
situation, and projections are not good.
Most producers have taken as much

Extreme dry conditions are once again a
nightmare for dryland farmers and ranchers.
Rain over most of the area improved the
chances of operations not losing as much
money. Market prices are too low. Operations
still need outside income to survive.

Full text of Agricultural Survey : First Quarter 1999

FRASER