Full text of Agricultural Survey : Fourth Quarter 1992

View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

STATISTICAL

B A N K

R E S E R V E

F E D E R A L

RELEASE
0

Quarterly Survey of Agricultural
Credit Conditions in the
Eleventh Federal Reserve District
Fourth Quarter 1992

Agricultural Credit
Conditions at Survey Banks
in the Eleventh District

Agricultural
Lending Weak

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,

Reduced demand and increased regulation have
slowed the growth of agricultural lending in the
Eleventh District. Agricultural lending by agricultural
banks, which had been growing at a 4-percent annual
rate, grew only 0.4 percent in the third quarter of
1992. Fourth quarter agricultural survey results
provide further evidence of a drop in agricultural
lending. Demand for bank financing declined in the
High Plains, and in several other regions, bankers
report that increased regulation has discouraged
lending.
Demand for loans declined because of good crop
production in some areas and government compensation for devastated crops in others. Bankers report
that some producers harvested a good crop that
provided adequate income to meet operating
expenses and debt repayment. In other regions,
severe weather destroyed crops, allowing producers
(Continued on page 4)

Federal Reserve Bank of
Dallas, Station K, Dallas,

Demand for Loans
Percent
100

1987

1988
Less

1989
• Same

1990

1991

1992

• Greater

Availability of Funds
Percent

District Land Values

100

1987 dollars per acre

Texas 75222, or by tele1,000

phoning (214) 922-5254.

80
900
60

800

For questions regarding

700

information in the release,

600

contact Kelly Whealan,

500

(214) 922-5175, or Kevin

400

Yeats, (214) 922-5167.

300

....

''
''

....

-- - -- --....

Ranchland

200
1985

1986

1987

1988

1989

1990

----1991

1992

1987

1988

1989

Less

• Same

1990

1991

• Greater

1992

STATISTICAL

RELEASE

Agricultural Credit Conditions at Survey Banks
in the Eleventh District
Rate of Loan Repayment
Percent
100

Loan-Deposit Ratios at Survey Banks

Average Actual and Desired Ratios

Percent

~~~~~~~~~~~~~~~~~

50
20

45
0
19B6

19B7

19BB

Less

19B9

•Same

1990

1991

1992

• Greater

•

Actual Ratio

•

Desired Ratio

40
35

1991 :4

1992:1

1992:2

1992:3

1992:4

Renewals or Extensions of Loans
Percent
100

DISTRIBUTION OF LOAN-DEPOSIT RATIOS

Banks Reporting (Percent)

Ratio

Jan. 1

1992
Apr. 1
Jul. 1

Oct. 1

1993
Jan. 1

46
23
17
10
5

50
24
17
6
3

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

0
19B6

19B7

19BB

19B9

1990

1991

47
21
16
10
6

51
20
15
8
6

49
21
21
8
2

1992

INTEREST RATES-FIXED
Less

•Same

• Greater

Average Rate (Percent)

Amount of Collateral

Loan Type

Jan. 1

1992
Apr. 1
Jul. 1

Oct. 1

1993
Jan. 1

10.56
10.64
10.77
10.70

10.40
10.29
10.55
10.36

9.79
9.88
9.99
10.01

9.71
9.77
9.99
9.89

Percent

Feeder cattle
Other farm operating
Intermediate tem1
Long-term farm real estate

100

INTEREST RATES-VARIABLE

Average Rate (Percent)

Loan Type

0
19B6

10.15
10.2
10.38
10.40

19B7

19BB

Less

19B9

•Same

1990

1991

• Greater

1992

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

Jan. 1
9.88
10.03
9.94
9.76

1992
Apr. 1
Jul. 1
9.71
9.88
9.83
9.54

9.63
9.77
9.65
9.35

Oct. 1

1993
Jan. 1

9.03
9.28
9.27
9.11

9.16
9.25
9.21
9.10

STATISTICAL

Rural Real Estate Values

RELEASE

CROPLAND-ORYLANO

January 1, 1993
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.

Average
Banks'
Value 2
Fourth-Quarter 1992

P ercent Changes
in Values from
Previou s Previous
Quarter
Year

DISTRICT

179

525

-.2

-1.9

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

166
23
22
13
12
14
28
7
17
10
11

519
253
346
292
415
439
669
617
848
726
556

-.2
-.5
1.7
-2.1
-2.0
-.2
1.3
-.9
-3.l
-.3
2.7

-2.4
-2.0
- .8
.8
-2.2
.3
-2.4
-3.0
- 2.7
-4.1
0

542

2.6

-7.3

Northern Louisiana
Southern New Mexico

10
n.r.

631
n.r.

-.9
n.r.

2.6
n.r.

Eleventh Federal Reserve District
CROPLAND-IRRIGATED
Region

12
NEW

2
3
4

5
6
7

MEXICO

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

Average
Value2
Banks'
Fourth-Quarter 1992

P ercent Changes
in Values from
Previou s Previous
Quarter
Year

DISTRICT

116

690

3.2

4.7

100
22
22
6
6
5
4
n.r.
10
4
11

629
480
553
398
604
704
635
n.r.
1202
943
903

3.7
.5
2.1
-6.6
-2.0
2.5
-21.1
n.r.
-.4
15.3
7.4

-.1
.3
-2.9
.9
-3.0
3.9
-31.5
n.r.
3.3
10.1
3.8

756

3.0

-16.6

Northern Louisiana
Southern New Mexico

10
6

826
1247

.1
1.7

2.6
38.8

RANCHLAND
Region

Average
Value 2
Banks'
Fourth-Quarter1 992

Percent Changes
in Values from
Previou s Previou s
Year
Quarter

DISTRICT

186

283

-2.8

-3.7

175
21
18
13
12
16
30
12
17
9
11

348
154
135
173
230
344
573
601
740
456
409

-1.5
-.6
1.9
5.9
-.2
3.7
1.7
-1.9
-3.2
-2.0
-.8

-3.8
3.7
-6.4
12.1
-2.4
-1.3
-.4
-7.7
-6.3
-13.2
-6.0

294

-3.9

-2.6

6
5

366
93

-4.5
-14.6

-15.8
-2.l

Northern Louisiana
Southern New Mexico

Fourth-Quarter
Comments
District bankers were asked for any additional
comments concerning agricultural land values
or credit conditions. Because of space constraints, these comments were edited.
Region I-Northern High Plains
The optimistic outlook for the cattle
market has been moderated somewhat as
weather conditions and low weight gains take
their toll. Feedlot cattle have been hit hard due
to bad weather. Cattle weight is low, and the
cost of future weight gain has increased.
The corn crop is above average and the
milo crop average, but September's dry
weather caused a below average wheat crop.
Most crop prices are fair but far below what
they need to be for farmers to make a good
profit. Farmers will probably enter into more
futures contracts in 1993.
Region 2-Southem High Plains
Our farm loan customers had a more
profitable 1992 than 1991, and repayment of
farm operating loans was much higher last
year than the previous one. Our farm credit
lines are performing well because of income
from crop insurance, disaster payments and
good yields on milo.
Last year most farmers paid off their
operating loans and almost all of their 1991
carryover debt by the end of June or the
beginning of July with Multi-Peril Crop
Insurance payments. At that time, farmers had
a crop in the field that was mostly clear of
debt. The crop yields were excellent with low
input costs. Corn yields were the best in
history, and many farmers said 1992 was their
best year since 1973. Most farmers will have
large tax liabilities in 1993.
It is amazing that farmers can have a
disaster and an election in the same year and
still have a decent crop! Times like these have
proven you can make a lot more money during
a disaster year. Some farmers have exclaimed,
"ain't it awful," but the good ones would
quietly tell you, "I would love to do this again."
The effects of a good year can be noticed
in our area. Last summer, one small-town
Chevrolet dealer sold more pickups than he
had in the past 15 years. Better-than-average
performance of the farm sector our county
could raise land prices.

Region 3-Northem Low Plains
The cotton crop is above average.
Harvesting is being delayed by wet weather
and snow. The county should average close to
a bale per acre, provided the cotton doesn't fall
out of the burr.
Region 6-North Central Texas
Lower-than-normal crop yields and prices
made 1992 a break-even year at best. Several
large local producers have been unable to get
financing for 1993 operations, and small
producers and family farmers may be
squeezed out of business. For small agricultural banks to continue to service their farm
customers, regulators need to show more
common sense and flexibility. Bankers and
farmers must unite to bring our legislators in
contact with reality.
We're hoping 1993 won't be a repeat of
1992. Many farmers are reaching the end of
the road. Low prices and yields have hurt
farmers' positions. If 1993 is not a good year,
many may not get financing. Some younger
farmers are getting frustrated and desire a
career change.

tions systems, as some examiners have
suggested.
Region 9-Coastal Texas
We utilize the FmHA Guarantee Program
extensively but not without problems. The
system is slow and it takes too long to get
FmHA commitments. Our extensions of credit
would increase if we knew we could tum
around these operating loans in a reasonable
amount of time, like 15 to 30 days. We have
the available funds, but the amount of risk
associated with agricultural credits poses a
real problem for our institution.
Region 10--South Texas

This past crop year was better than we
have had in the last few years. Production was
up; however, depressed market prices for
cotton and grain reduced overall farm income.
Some areas were hit by devastating rains at
critical times. Producers were able to repay
operating loans, but fell short in meeting all
equipment and real estate payments.
Some bright spots in 1992 were the sugar
cane crop, citrus production and the livestock
market.

Region 7-East Texas

Region 12-New Mexico
,.~

Cattle conditions are good. Pastures are
ample and market prices steady to strong.
Crop carryovers have caused many to
borrow against equipment or other assets to
secure carryover debt. We need a good freeze
and a drier spring than last year (to reduce
insect pressure) to improve the '93 outlook.
Our county's FmHA services are virtually
nonexistent. We have experienced difficulty in
contacting officials, long delays and unfulfilled
commitments, which have left a deficiency in
local credit availability for agriculture.
Row crop farming such as cotton and
grain sorghum has almost disappeared in our
county. Vegetable and nursery growers seem
to be having a better year. Most of our
agriculture financing is for beef cattle.
Region 8-Central Texas
Credit and collateral regulations have
forced banks to reduce lending activity. The
new regulations on loan-to-value ratios for real
estate loans, combined with the new certified
appraisers and 14-point reviews, will limit rural
residents' ability to obtain credit.
Small rural banks will be unable to
compete with the big Texas banks if they are
forced to comply and maintain equal opera-

The lack of available wheat pasture
reduced demand for stocker cattle loans,
although this has been offset somewhat by
increased demand for feeder cattle loans.
Feedlot cattle losses were caused by the
recent winter weather, but will be covered by
insurance.

Lending Weak
(Continued from page 1)
to pay off their debt with funds from crop
insurance or government disaster-relief
programs.
Bankers report that they have adequate
funds to lend and would like to increase
their loan-to-deposit ratio. They say that
increased regulation has raised the cost of
issuing loans and has limited the ability of
borrowers to obtain credit.
Agricultural banks report increased
profits in 1992. Over the past year, interest
rates have declined nearly 80 basis points
for most types of fixed rate loans and 70
basis points for variable rate loans. Concurrently, banks' cost of funds fell 150 basis
points.
-Kevin Yeats

Full text of Agricultural Survey : Fourth Quarter 1992

FRASER