Full text of Agricultural Survey : Fourth Quarter 1990

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STATISTICAL

F E D E R A L

R E S E R V E

RELEASE
B A

O F

Quarterly Survey of
·cultural
Credit Conditions in the
Eleventh Federal Reserve District
Fourth Quarter 1990

Weak Land
Values Continue

Agricultural Credit
Conditions at Survey Banks
in the Beventh District

Eleventh District land values continued to
weaken in the fourth quarter of 1990. While most
bankers (79 percent) felt that land prices would
remain stable at least through the first quarter of
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

1991, more than one-fourth of the respondents in
North Central Texas, East Texas and Central Texas
felt that land values would decline.
Three-fourths of the banks surveyed felt that the

Demand for Loans
Percent
100 -

80 -

demand for loans would not fall, and nearly all banks
predicted no decline in the availability of funds. Most
banks st.ated that they had not refused any farm
loans because of a shortage of funds. Thus, signs of a
credit crunch among agricultural lenders were not
evident in the results of this survey.
Banks in South Texas expected the strongest loan

1986

1967
Less

1989

1988
Same

•

1990

Greater

demand. In that region, no respondents expected
(Continued on page 4)

the Research Department,

Availability of Funds

Federal Reserve Bank of
Dallas, Station K, Dallas,

Percent

District Land Values

100 -

1982 Dollars Per Acre

Texas 75222, or by

1,100

telephoning (214) 220-5127.

1,000

900

For questions regarding

········"·,
• ••• Irrigated Land

····....

800

·,

700

information in the release,

600

contact Fiona Sigalla,

, ___ ... , __

500

(214) 220-5129, or Kevin

400

Yeats, (214) 220-5116.

300

200

___ , '

Ranchland '',._.

.... ---- ..

... .........

1986

--------

1987

1989

1988

-1-~~~~~~--~--~_,.~~~-.---'~

Less

Same

•

Greater

1990

STATISTICAL

RELEASE

fAeriCu1tural Credit Conditions at Survey Banks
j in the Eleventh District
Rate of Loan Repayment
Percent
100 -

Loan-Deposit Ratios at Survey Banks

80 -

Average Actual and Desired Ratios

Percent

~~~~~~~~~~~~~~~~~~60

60 -

55
50
45
Actual Ratio
1986

1987

Less

1988

• Same

1989

1990

Desired Ratio •

• Greater

1989:4

1990:1

1990:2

1990:3

1990:4

Renewals or Extensions of Loans
Percent
100 -

DISTRIBUTION OF LOAN-DEPOSIT RATIOS

Banks Reporting (Percent)

Ratio

Jan. 1

1990
Apr. 1
Jul. 1

Oct. 1

1991
Jan. 1

I 40

Less than 41%
41% to 50%
51% to 60'!6
61%to 70%
More than 70%

31
22
20
17
9

36
21
25
12
6

40
24
20

37
24
24

37
23
21

0
1986

1987

Less

1988

Same

1989

1990

INTEREST RATES-flXED

• Greater

Average Rate (Percent)

Amount of Collateral

Loan fype

Jan . 1

1990
Apr. 1
Jul. 1

Oct 1

1991
Jan. 1

12.58
12.67
12.70
12.46

12.69
12.69
12.79
12.54

Percent

Feeder cattle
Other fann operating
Intermediate-term
Long-term farm reaJ estate

12.85
12.93
12.93
12.67

12.71
12.82
12.86
12.58

12.72
12.79
12.83
12.44

INTEREST HATES-VARIABLE
Average Rate (Perce nt)
Loan fype

1986

1987

Less

1988

1989

• Same

• Greater

1990

Feeder cattle
Other farm operating
Intermed iate-term
Long-term farm real estate

Jan. 1

12.76
12.84
12.90
12.63

1990
Apr. 1
Jul. 1

12.52
12.60
12.60
12.38

12.51
12.60
12.59
12.28

Oct. 1

1991
Jan. 1

12.49
12.55
12.59
12.37

12.46
12.53
12.56
12.25

Rural Real Estate Values

CROPLAND-DRYLAND

January 1, 1991
Region

Number of banks reporting .
Dollars per acre.
n.r.-No response or not enough responses.

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

Eleventh Federal Reserve District

Average
Banks'
Value 2
Fourth Quarter 1990

Percent Changes
in Values from
Previous Previous
Quarter
Year

DISTRICT

196

540

-1 .7

-3.2

TEXAS
No1thern 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

181
22
22
12
9
14
27
13
25
10
15

535
248
356
325
476
421
651
657
841
730
702

-2.1
.8
.8
1.2
0
-5.5
-.3
-6.0
-3.2
1.3

-4.3
-5.4
4.2
2.3
13.0
-10.1
-5.5
-4.6
-12.0
-11.3
12.5

539

-.9

-12.8

Northern Louisiana
Southern New Mexico

10
5

634
226

2.3
-1.1

10.l
5.1

1.1

CROPLAND-IRRIGATED
Region

12
NEW

M EXICO

Northern High Plains
Southern High Plains
3 Northern Low Plains
4 Southern Low Plains
5 Cross Timbers
6 North Central Texas
7 East Texas
2

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

9
10
11
12
13

Average
Banks'
Value 2
Fourth Quarter 1990

Percent Changes
in Values from
P rei'iouSPreviou s
Quarter
Year

DISTRICT

121

657

-.7

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
20
20
6
5
4
4
4
14
6
13

636
486
566
438
636
667
881
804
636
1,087

-.4
-.2
-1 .8
-5.2
-.6
- 1.8
-11.8
21.8
-6.l
-5.3
4.7

-1.6
.6
2.8
-2.6
1.7
-5.8
-21.4
-18.3
-8.5
-23.8
9.3

912

-1.3

-6.l

9
7

848
792

1.2
2.3

5.1
5.0

Northern Louisiana
Southern New Mexico

1,116

RANCHLAND
Region

Average
Banks'
Value 2
Fourth Quarter 1990

Percent Changes
in Values from
P revious Previous
Quarter
Year

DISTRICT

194

292

-2.l

-6.5

182
21
12
11
9
17
26
18
26
9
15

366
144
123
177
219
345
582
672
748
482
493

-2.3
.4
-5.0
-2.4
-2.4
-4.0
-4.l
2.8
-6.1
-5.3
-3.3

-7.3
-4.l
-8.l
.1
-1.7
-12.4
-3.7
-1.1
-9.1
-23.0
4.0

300

-12.3

5
7

373
79

.5
.2

2.0
6.2

Northern Louisiana
Southern New Mexico

STATISTICAL

RELEASE

---i

Fourth-Quarter
Comments

making applications because appraisals will
cost more.
Sophisticated financial data requirements
and borrowing qualification restrictions of the
Farmers Home Administration (FmHA),
Federal Land Bank and upstream banks limit
our access for guaranteed loans and participa·
What follows are comments from survey
tions. Our old customers do not maintain these
data. We are sponsoring a financial records
respondents about land values and credit conditions in the Eleventh District These remarks
seminar to provide our area farmers and
reflect the opinions of individual bankers, not
ranchers with at least some guidance toward
the Federal Reserve Bank of Dallas. Comments I producing required information.
were edited to fit available space.
~
Region 6-North Central Texas
Region I-Northern High Plains
The only good thing for farmers in this
Several problems-drought, low prices
area is the price of cattle. Most farmers broke
and higher costs-are causing a slowdown in
even if they had enough acres in cotton to
agricultural loans and could force more farmers
overcome losses in other crops. We are
continuing to concentrate on FmHA guaranout of farming. The 1991 outlook is not
optimistic, based on the proposed new farm
i teed loans to reduce 1isk to the bank. Oil
program. With reduced government payments,
activity has increased real estate values in ilie
county by 10 to 30 percent in the past six
farmers will have difficulty maintaining a
positive cash flow while servicing existing debt.
months. Even though the economy seems to
be in a recovery, some examiners continue to
Demand for loans is down because high
cattle prices and dry pasture conditions have
operate with a worst-case point of view.
Available credit sources continue to dry
led to less restocking of pasture cattle. Feedlot
cattle continue to be profitable.
up. Larger urban or suburban banks with the
legal lending limit capacity do not seem to
Region 3-Northem Low Plains
want ag loans. Government regulations and
credit examiner criticisms are making even
The cotton crop is the best in county
smaller count:Jy banks leery of ag loans. If
commercial banks do not receive some relief
history and made up for losses in 1989, which
in the area of ag finance, the average farmer
was probably tl1e worst year in history. Loans
are at a seasonal low.
and rancher will soon be driven out of business.
As long as Chapter 12 bankruptcies are
Local farmers had a terrible year. Weailier
prevalent, we will not take any new agricultural was the main factor. Regulatory opinions and
customers.
unfair bankruptcy laws, along with poor yields,
have caused us to carefully reconsider our
Region 4-Southem Low Plains
position on ag loans. Without drastic improvement in all three areas, we will see a major
reduction in ag credit. FmHA guaranteed loans
Cattle producers are having a good year,
may be one solution, however.
and the forecast remains positive into 1991.
Cotton is producing one of the best crops
Region 8--Central Texas
within the past 10 years.

I:l
1

Region 5--Cross Timbers

The cotton crop should make a good
profit. The dairy industry is in flux. If milk
prices continue to drop, land values will also
fall in our area. Winter grain is the best this
area has had in years. However, several
operators' financial conditions do not support
cattle purchase loans.
Banks only want to make small loans
because of examination guidelines for loans
over $100,000. New requirements for appraisals on real estate (and potentially on chattels)
will cause borrowers to think twice before

Large increases in Federal Deposit
Insurance Corp. (FDIC) premiums will have
to be passed on to consumers, costing loan
customers at least an additional one-half to
1 percent. Horizontal oil and gas well drilling has
commenced in ilie northwest part of our area.
Region 9-Coastal Texas

Following world market prices, the value
of the crops is minimal, but costs are climbing
and deficiency payments are dropping. Banks
must seek hedges of risk, mainly FmHA
guarantees, or drop many farmers and risk

lenders' liability. The result will be fewer basic
farms and fewer young farmers. Farmers need
to add packaging and marketing to ilieir
businesses to reap more of the profits from
food prices.
Funds are available for loans, but
requirements are greater, which, combined
with continued drought, has forced some
producers out of business. This winter is the
third consecutive one with drought conditions.
If 1991 becomes another below-average crop
year, we may all be looking for other ways to
earn a living.
Region 10-South Texas

Most ag loans have been paid off as a
result of exceptionally high peanut prices and,
in some cases, substantial oil revenue.

Region 12-New Mexico

Cattle prices remain good and are helping
to support land values. The effects of the 1990
farm bill increase uncertainty at this time.

Weak Land Values-(Continuedfrom page 1J
slower demand for credit, while 47 percent of
the banks in the Cross Timbers region
expected slower demand.
Most bankers responded that 1991 loan
renewals would be about the same as those
in 1990, and two-thirds of the respondents
expected the same rate of loan repayment,
indicating that lenders expected borrowers
to service their debt fully.

For Free

ECONOMIC DATA
and Information,

dial our new, easy-to-use
computerized bulletin board.
Dial (214) 220-5168
to link your modem-equipped
personal computer.
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• No parity
• 8 data bits
• 1 stop bit
• 2400, 1200 or 300 Baud
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Full text of Agricultural Survey : Fourth Quarter 1990

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