Full text of Agricultural Survey : First Quarter 2008

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S T A T I S T I C A L
F

R E L E A S E
B

Agricultural Credit Conditions at
Survey Banks in the Eleventh District
Demand for Loans
Twenty-eight percent of bankers report lower
demand for loans.

Quarterly Survey of Agricultural
Credit Conditions in the
Eleventh Federal Reserve District

Percent
100

First Quarter 2008

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
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 Laila Assanie,
(214) 922-5191.

The first quarter 2008 survey suggested
cautious optimism in the Eleventh District agricultural community. Respondents from several
regions indicated that dry conditions adversely
affected planted crops and hampered pasture
growth. Rising fuel, feed and fertilizer costs
strained operating margins. Some bankers reported a rise in 2008 lines of credit and in
demand for operating loans because of these
cost increases. The farm bill impasse is causing
uncertainty among agricultural stakeholders, and
volatility in commodity prices is making it difficult for producers to forward price their 2008
production. Among positives, respondents noted
that lower interest rates are helping offset some
of the increased financial strain. Additionally,
bankers in the Plains and North Central Texas
regions reported that favorable crop yields and
high commodity prices boosted 2007 farm revenues, which has improved loan repayment rates
and reduced overall loan demand.
Additional highlights from the survey:
• Higher grain prices have substantially
increased feed costs, reducing the number of
calves being put on feedlots and lowering demand for feeder-cattle loans. Twenty-nine percent of respondents anticipate making fewer
feeder cattle loans in the next three months, up
from 16.4 percent last quarter.
• Farmland values have continued to rise,
albeit at a slowing pace. While demand for
farmland for investment and recreational use
continues to drive up prices, some respondents
say that demand for agricultural real estate has
softened and farmland is taking longer to sell.
Twenty-six percent of respondents anticipate
making fewer farm real estate loans, up from
15.4 percent a year ago.
• High steel prices and increased input
costs are deterring producers from investing in
new farm equipment. Consequently, 17.9 percent of respondents expect to make fewer farm
machinery loans over the next three months
compared with 5.2 percent last quarter.
A1

0
1Q:02

1Q:03

1Q:04
Less

1Q:05
Same

1Q:06

1Q:07

1Q:08

Greater

Funds Available for Additional Lending
Funds available for lending have increased, say
31 percent of respondents.
Percent
100

0
1Q:02

1Q:03

1Q:04
Less

1Q:05
Same

1Q:06

1Q:07

1Q:08

Greater

Rate of Loan Repayment
Twenty-two percent of bankers cite higher loan
repayment rates.
Percent
100

0
1Q:02

1Q:03

1Q:04
Less

1Q:05
Same

1Q:06
Greater

1Q:07

1Q:08

S T A T I S T I C A L
F

R E L E A S E
B

Agricultural Credit Conditions at Survey Banks in the Eleventh District
Renewals or Extensions of Loans
Twenty-four percent of reporters state that loan
renewal and extension requests have declined.
Percent

Loan-to-Deposit Ratios at Survey Banks

100

Average actual and desired ratios
80

Percent
75
70
65
60

55
50
45
40

Actual ratio
0
1Q:02

1Q:03

1Q:04

1Q:05

Less

Same

1Q:06

1Q:08

1Q:07

Desired ratio

Greater

2007:1

2007:2

2007:3

2007:4

2008:1

Amount of Collateral
Ninety-two percent of bankers indicate no
change in collateral levels.
Percent
100

Distribution of Loan-to-Deposit Ratios

Banks Reporting (Percent)
60

2007

Less than 41%
41% to 50%
51% to 60%
61% to 70%
More than 70%

0
1Q:02

1Q:03

1Q:04

1Q:05

Less

Same

1Q:06

1Q:08

1Q:07

Greater

Total Agricultural Loans
Agricultural loan volumes continued to rise at Eleventh
District banks.
Millions of dollars (seasonally adjusted)
7,300
6,800

Jul. 1

Oct. 1

Jan. 1

Apr. 1

22
11
20
21
26

17
12
13
28
30

17
14
17
23
30

18
12
17
28
25

24
12
18
22
24

Interest Rate—Fixed
Average Rate (Percent)
2007

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

2008

Apr. 1

Jul. 1

Oct. 1

Jan. 1

Apr. 1

9.44
9.68
9.27
8.55

9.39
9.54
9.13
8.52

9.35
9.55
9.24
8.49

8.91
9.05
8.66
7.92

7.78
7.96
7.74
7.24

Interest Rate—Variable

6,300

Average Rate (Percent)

5,800

2007

5,300

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

4,800
4,300
3,800

2008

Apr. 1

’97

’98

’99

’00

’01

’02

’03

’04

’05

’06

’07

2008

Apr. 1

Jul. 1

Oct. 1

Jan. 1

Apr. 1

9.35
9.63
9.37
8.85

9.42
9.57
9.14
8.66

9.22
9.41
9.23
8.61

8.67
8.73
8.48
7.93

7.20
7.41
7.32
6.66

S T A T I S T I C A L
F

Rural Real Estate Values

R E L E A S E

B A N K
O F
D A
CROPLAND—DRYLAND

April 1, 2008
1

Number of banks reporting land values.
Prices are dollars per acre, not adjusted for inflation.
3
Not adjusted for inflation.
4
Increase in the percent change from 2007 to 2008
reflects new reporters in 2008.
n.a.—Not published due to insufficient responses but
included in totals for Texas and district.

Region

1
3
N E W

M E X I C O

L O U I S I A N A

Region

1
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

8
9
10
11
12
13

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

Percent Change3
in Value from
Previous
Previous
Quarter
Year

Average
Banks1
Value2
First Quarter 2008

21.1
20.2
13.2
15.1
25.8
21.4
4
35.9
26.6
29.5
18.2
24.0
–11.7
8.1
17.7
32.1

Percent Change3
in Value from
Previous
Previous
Quarter
Year

DISTRICT
98
1,350
3.2

TEXAS
85
1,273
3.9
Northern High Plains
19
1,074
5.7
Southern High Plains
15
956
4.1
Northern Low Plains
6
897
3.4
Southern Low Plains
8
989
7.7
Cross Timbers
7
2,057
2.1
North Central Texas
n.a.
n.a.
n.a.
East Texas
3
1,703
– 9.0
Central Texas
12
2,780
2.6
Coastal Texas
4
1,654
2.3
South Texas
3
1,512
1.2
Trans-Pecos and
Edwards Plateau
6
2,101
5.2

Southern New Mexico
8
1,995
–1.4
Northern Louisiana
5
1,679
4.7

CROPLAND—IRRIGATED

T E X A S

DISTRICT
141
1,252
2.0

TEXAS
129
1,252
1.7
Northern High Plains
22
424
3.9
Southern High Plains
15
477
2.7
Northern Low Plains
8
538
6.9
Southern Low Plains
11
693
3.4
Cross Timbers
13
1,230
8.8
North Central Texas
16
2,112
–3.1
East Texas
9
1,625
6.0
Central Texas
17
2,335
0.3
Coastal Texas
7
1,496
7.0
South Texas
3
1,413
– 0.7
Trans-Pecos and
Edwards Plateau
8
1,141
– 0.5

Southern New Mexico
6
380
7.0
Northern Louisiana
6
1,358
4.8

Eleventh Federal Reserve District

Average
Banks1
Value2
First Quarter 2008

14.0
15.2
29.0
13.7
13.9
4
34.0
23.1
n.a.
–6.5
11.9
23.5
–14.0
20.1
2.7
31.7

RANCHLAND

Eleventh District Real Land Values
Farmland values edged up in fi rst quarter 2008.

Region

2000 dollars per acre
1,200

Irrigated
1,000
800

Dryland

Ranchland

600
400
200
0
’98

’99

’00

’01

’02

’03

’04

’05

’06

’07

’08

Average
Banks1
Value2
First Quarter 2008

Percent Change3
in Value from
Previous
Previous
Quarter
Year

DISTRICT
147
1,153
2.1

TEXAS
136
1,452
2.2
Northern High Plains
21
348
3.0
Southern High Plains
9
350
– 0.3
Northern Low Plains
8
621
15.4
Southern Low Plains
11
652
– 4.3
Cross Timbers
13
1,680
4.2
North Central Texas
18
2,281
1.2
East Texas
16
2,037
– 0.6
Central Texas
19
3,176
0.5
Coastal Texas
6
1,475
10.0
South Texas
3
1,842
10.0
Trans-Pecos and
Edwards Plateau
12
1,373
–1.6

Southern New Mexico
7
300
1.1
Northern Louisiana
4
886
– 3.7

10.8
11.1
17.0
17.4
4
61.4
7.1
30.8
23.8
21.7
17.7
4
34.2
– 5.9
5.7
6.2
14.4

S T A T I S T I C A L
F

First Quarter
2008 Comments
District bankers were asked for additional
comments concerning agricultural land values
and credit conditions. These comments have
been edited.

Region 1 — Northern High Plains
We’re well into our second straight quarter of extremely dry conditions. Input costs
(fuel and fertilizer) have climbed drastically.
Forward pricing of commodities has been extremely difficult because of the volatility in the
futures market.
While sales of water rights have bolstered
land values at present, the future value of surface rights (for agricultural purposes) is uncertain.
The past four years have yielded the
most successful crop production in the history
for our area. Producers’ balance sheets are
healthy. However, with the ongoing droughtlike conditions and rising input and crude oil
costs, our customers are in for a wild ride.
Operating without a farm bill makes it even
more risky. Producers cannot forward price
their upcoming production because of the current market conditions in commodity prices.
Banks have cut off funds to middlemen, merchants and processors, affecting their ability to
hedge the upcoming crop year’s production.
The unpredictable weather and cash flows
could erase the previous four years’ gains.
Land values continue to increase due to
grain prices and investors entering the market.

Region 2 — Southern High Plains
We need rain; wheat is stressed, and we
need moisture for planting cotton. A farm program would certainly be beneficial.
The 2007 cotton crop has finally been
ginned and funds received to pay loans. Most
farmers have sufficient funds to start the 2008
crop year, resulting in lower loan demand for
the first quarter. A good rain is needed before
the 2008 crop year can begin in earnest.
Most customers are requesting increases
in 2008 crop lines due to the high cost of
fuel, fertilizer and seed. Prices for the 2007
cotton crop have been good. Customers are
concerned by the lack of a farm bill and the
continuing rise in expenses.

Region 3 — Northern Low Plains
Deflationary concerns have reduced the
demand for real estate of all types. Increasing
input costs and the lack of any farm bill have

R E L E A S E
B

farmers searching for the right combination of
crops for a profitable year in 2008. Time is expiring on passage of a farm bill. Farmers need
to make decisions for the 2008 crops.
High wheat prices have essentially
stopped feeder cattle from being put on wheat
pasture. This has decreased cattle loan demand. Rain is needed to make a wheat crop.
Increases in input costs will increase requests
for farm operating loans. Land price increases
seem to be slowing. Most rural real estate buyers are recreational users.

Region 7 — East Texas
Most crops have been turned to small
grain to take advantage of the ethanol prices.
I expect prices to hold, but production costs
will increase because of energy costs. This has
hurt support enterprises such as equipment
dealers. We should have adequate moisture
for planting and anticipate having good crop
yields this year.

Region 8 — Central Texas

Region 4 — Southern Low Plains
The lack of stability in the farm program
requires a tight cash flow.
We could not have scripted a better 2007
for agriculture. Better than average crop yields
are necessary for 2008 because of increased
energy, fuel and fertilizer prices. Steel price
increases have affected the price of new machinery.

Region 5 — Cross Timbers
We have seen some slowing of land price
escalation. Farm real estate requires a slightly
longer period to sell.
Recent rain and snow started growth in
the pastures. However, moisture is still needed.

Region 6 — North Central Texas
Inflated fertilizer and fuel prices are causing farmers to run short of operating capital.
Gas and diesel prices are going to be a
problem. We will have to see how the 2008
presidential election pans out.
Input and diesel costs are hard to fathom.
Both crop yields and prices had better be
good at harvest time.
We have ample moisture, and 90 percent of corn and milo have been planted. A
big percentage is already up and doing well.
Cotton planting will begin within the next
week. Most are planting more grain than cotton; it is estimated that there will be around
20,000 acres of cotton planted in Williamson
County. The negative is the additional cost of
production: fuel, fertilizer, chemicals. One positive note is that interest costs are going down.
Hopefully, favorable weather conditions will
produce average to above average crop yields.
A large number of producers will continue to
forward contract grain.
Input costs for farmers and ranchers have
escalated recently, putting pressure on operating margins. Feed, fertilizer and fuel prices
have increased dramatically. There is a very
limited agricultural real estate market in our
area.

Demand for real estate is softening, resulting in lower values. Dry weather patterns
and high fuel, feed and fertilizer costs are putting some marginal agricultural operations in a
cash-flow crunch.
We need more rain. The winter oats
and rye grass are doing fair. Hay feeding has
picked up in most areas. Most ranchers are
worried about the high cost of diesel and fertilizer. Cattle prices have remained steady at
area sale barns, with breakevens on fat cattle
being pushed higher due to high grain costs.
Land prices remain good, though there is a
lack of listings of good rural properties.
Commodity prices, as well as seed, fertilizer and fuel costs, are way up. We are seeing the highest costs per acre that we’ve ever
seen. Good used equipment is selling briskly.
However, farmers are optimistic.
The price of fuel, fertilizer and feed will
cut deeply into profits, hindering farm/ranch
expansion opportunities. Lower interest rates
will mitigate this situation some. On a positive
note, we have had good rains to date.

Region 11 —Trans-Pecos and
Edwards Plateau
It has been very dry since last fall. The
few ranches that sold at year-end went to
nonagricultural producers. Oil and gas leases
are coming into the area.

Region 12 — Southern New Mexico
Conditions in most of New Mexico are
very dry. The snow melt looks good for moisture. Farm prices are very good. Livestock
prices are going down daily. Dairy remains
stable.
Land values in our area have increased
due to high corn and wheat prices.

Full text of Agricultural Survey : First Quarter 2008

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