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STATISTICAL

F E D E R A L

R E S E R V E

RELEASE
B A

N

K

0

F

D

A

L

L

A

S

Agricultural Credit Conditions at
Survey Banks in the Beventh District

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

Demand for Loans
Thirty percent of responding banks
report an increase in the demand for loans.
Percent
100

80

Fourth Quarter 1998
60

Quarterly Suroey of
Agricultural Credit
Conditions is compiled from
a survey of Eleventh District
agricultural bankers. This
publication is pre pared by
the Federal Reserve Bank
of Dallas and is available
witho ut charge by writing
to

the Research Department,

Federal Reserve Bank of
Dallas, P.O. Box 655906,
Dallas, TX 75265-5906,
o r by telephoning
(214) 922-5254.

For questions regarding
information in the release,
contact Sheila Dolinas,
(21 4) 922-5191.

The Fourth Quarter Survey of Agricultural
Credit Conditions shows continued weakness in
the last part of 1998. Bankers report that agricultural producers continue to have difficulty
repaying loans due to last summer's drought
and low commodity prices. As farmers and
ranchers leave the business, the number of
borrowers is declining further, as is total agricultural lending in the Eleventh District. "Poor price
prospects for 1998-99 also have many worried,"
says one respondent. The weak financia l
condition of producers and uncertainty about
the coming year have led some bankers to
increase collateral requirements and more
closely scrutinize loan applications. (See page 4
for bankers' comments.)
Here are additional details from the survey:
• Over half of responding bankers report
declines in the loan repayment rate and increases in loan renewals or extensions compared with a year earlier.
• The average number of farm and ranch
borrowers per responding bank has been falling
for over a year, from a high of 142 borrowers in
the third quarter of 1997 to 86 borrowers in the
fourth quarter of 1998.
• Thirty-one percent of responding
bankers report increased collateral requirements
in the fourth quarter compared with year-earlier
requirements. Reports of increased collateral
requirements have risen steadily over the past
three quarters.
• Land values inched up about 1 percent
in the fourth quarter, but only ranchland values
ended 1998 above their year-earlier values. For
the year, irrigated land values fell 1.8 percent,
dryland values fell 0.6 percent and ranchland
values rose 8.8 percent.
• Banks' average cost of funds fell 20 basis
points in the fourth quarter. The typical interest
rates charged on most types of variable rate
loans fell by about 44 basis points, while typical
fixed rates declined about 34 basis points.

40

20

0
01:'92

01 :'93

01:'94

01 :'95

Less

• Same

01 :'96

01 :'97

01 :'98

• Greater

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

80

60

40

20

0
ill~

ill~

ill~

Less

ill~

Same

ill~

ill~

ill~

• Greater

Rate of Loan Repayment
The rate of loan repayment decreases for
52 percent of fourth-quarter respondents,
unchanged from the third quarter.
Percent
100

80

60

40

20

0
ill~

ill~

ill~

Less

ill~

• Same

ill~

ill~

• Greater

ill~

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

80

Average actual and desired ratios
Percent

60

-~~~~~~~~~~~~~~

55

60

40

55
20

0
0 1:'92

50

0 1:'93

01 :'94

Less

0 1:'95

01:'96

• Same

0 1:'97

01:'98

• Greater

Amount of Collateral
Thirty-one percent of survey respondents
report an increase in collateral requirements.

II
II

45

Actual Ratio

40
35

Desired Ratio

1997:4

1998:1

1998:2

1998:3

1998:4

Percent
100

DISTRIBUTION OF LOAN-DEPOSIT RATIOS

80

Banks Reporting (Percent)
60

Ratio
40

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

20

0
01:'92

01 :'93

01 :'94

01 :'95

Less

• Same

01:'96

0 1:'97

01 :'9B

Jan. 1

30
16
26
20
9

1998
Apr. 1
J ul. 1

33
16
22
21
9

27
16
25
21
13

Oct. 1

1999
Jan . 1

24
22
18
20
16

24
17
28
21
10

INTEREST RATES-FIXED

• Greater

Total Agricultural Loans at
Eleventh District Banks
Lending continues to decline in third quarter 1998.
Millions of dollars (seasonally adjusted)
5 ,200
5,000

Average Rate (Percent)
Ratio

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

Jan. 1

1998
Apr. 1
Jul. 1

Oct. 1

1999
J an. 1

10.50
10.60
10.36
9.72

10.47
10.52
10.44
9.66

10.31
10.37
10.23
9.63

9.96
10.10
9.90
9.24

10.41
10.52
10.15
9.56

4,BOO

INTEREST RATES-VARIABLE
4,600

Average Rate (Percent)
4,400
4,200
4,000
3,BOO +----r-.---,-----r~--r---,----.--,---.---r-..-'B6 'B7 'BB 'B9 '90 '91 '92 '93 '94 '95 '96 '97 '9B

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.

Ratio

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

J an. 1

1998
Apr. 1
J ul. 1

Oct. 1

1999
Jan. 1

10.45
10.54
10.33
9.85

10.45
10.52
10.42
9.79

10.21
10.31
10.24
9.68

9.80
9.94
9.74
9.19

10.39
10.53
10.28
9.80

STATISTICAL

RELEASE

CROPLAND-DRVLAND

Rll'al Real Estate Values
January 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.

Eleventh Federal Reserve District

Average
Value2
Banks'
Fourth-Quarter 1998

Percent Changes3
in Values from
Previous Previous
Quarter
Year

DISTRICT

113

569

1.0

- 0.6

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

108
12
17
7
14
9
18
n.r.
12
3
5

565
284
347
312
415
515
869
n.r.
1,120
709
474

1.2
1.7
3.4
0.7
0.9
- 0.3
0.5
n.r.
8.4
-1.8
0.5

- 0.6
3.1
1.1
0.4
- 0.7
-6.0
-0.6
n.r.
29.6
- 14.6
- 1.4

9

538

-0.9

- 2.2

Northern Louisiana
Southern New Mexico

3
n.r.

645
n.r.

-1.3
n.r.

- 3.0
n.r.

CROPLAND-IRRIGATED

12
N E W MEXICO

Region

DISTRICT

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

10
11
12
13

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

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

Northern Louisiana
Southern New Mexico

Average
Value2
Banks'
Fourth-Quarter 1998

Percent Changes3
in Values from
Previous Previous
Quarter
Year

74

735

0.7

-1.8

68
12
16
5
10
4
n.r.
n.r.
6
n.r.
4

713
576
650
407
667
753
n.r.
n.r.
1,739
n.r.
688

4.2
5.6
0.5
-7.9
3.6
1.6
n.r.
n.r.
5.1
n.r.
2.5

3.2
- 4.4
- 0.7
-4.0
- 0.2
- 0.1
n.r.
n.r.
8.4
n.r.
- 7.2

8

1,264

0.7

43.5

3
3

830
920

-2.0
- 18.9

- 8.7
-27.1

RANCHLAND

Region

Real Eleventh District Land Values
Land values increase slightly
in the fourth quarter of 1998.
1992 dollars per acre
1,600
1,400
1,200
1,000
800
600
400
200
0

- - '-,
/"

'-

/

'-

-- - __________
Dryland

,.

Ranch land

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

Average
Value 2
Banks'
Fourth-Quarter 1998

Percent Changes 3
in Values from
Previous Previous
Quarter
Year

DISTRICT

120

365

1.3

8.8

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

113
12
13
7
13
10
19
6
13
3
5

447
178
138
167
257
448
778
620
1,151
552
460

1.7
5.7
0.4
4.1
1.3
0.9
1.5
-4.6
15.0
-10.1
- 2.3

6.6
10.1
-0.5
10.2
10.8
- 5.7
- 0.4
-16.7
32.6
- 9.8
5.5

12

403

0.9

9.7

Northern Louisiana
Southern New Mexico

n.r.
5

n.r.
126

n.r.
- 2.8

n.r.
40.8

STATISTICAL

the same. This makes it hard to achieve a
positive cash flow.
If government disaster aid is not paid
until May 1999, farmers, ranchers and
bankers will be at odds with each other.
Farmers and ranchers need this money to
pay off their 1998 loans and equipment
payments before the bank can renew thei r
operating lines for 1999.

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

RELEASE

Region 5-Cross limbers
1 ~

We have dry, very poor w heat grazing
conditions.

Region I-Northern High Plains
Region 6-North Central Texas
They say good judgment comes from
experience, and a lot of that experience
comes from bad judgment. I guess 1998
will be an experience I won't soon fo rget.

Region 2 - Southem High Plains
Many farmers are drawing their entire
1999 production flex ibility contract money
to pay out 1998 operating loans, equipment and land payments, which will lower
their cash flow ability for 1999 and probably decrease the size of loans they can
qualify for in 1999. Some irrigated cropland with extremely good water is selling
above average price. A few producers are
converting to d rip irrigation for cotton
production.

,_

Region 4-Southem Low Plains

Because of drought, most of our
dryland farmers did not have to spend a
lot of money in 1998. With insurance and
government payments, ma ny of our
farmers have more money in their accounts than they have ever had. Irrigated
land farmers may have some ca rryovers
because prices are low and they had to
use a lot of water. Cattle producers were
hurt because they had to liquidate stock.
Refinancing for farmers and ranchers
will be difficult with or wit110uc the
government disaster aid. Commodity prices
and rainfall are more critical co us in 1999
tha n ever before. If an insurance program
is not revamped for farms or even developed for ranchers, financing for agricultural producers will be a thing of the past.
The cost of production continues co
increase, and the commodity price remains

·1997-98 was a lean year for local
producers. Drought cond itions severely
limited yields . Poor yields and depressed
prices have been the reasons given by a
number of producers for quitting farming.
Poor price outlooks for 1998--99 also have
many worried. The only encouraging news
is the prospect of significantly higher cattle
prices in 1999.

Region 7 -East Texas
Carryover debt will be the norm with
a majority of our agricultural customers.
We will be very selective about whom we
choose to do business with in 1999.
Dairy industry market conditions are
excellent. Milk-to-feed ratio is over 4.0.
This is the first time in over 10 years that
the ratio has been above 3.0. Winter
pastures are in fair to good condition.
However, because of the drought, hay is in
short supply. Beef prices are moderate.
The poultry industry is the same as usual,
and birds being placed in contract grower
farms appear satisfactory.

Region 8-Central Texas
Losses from the flooding are still being
calculated. In itial estimates indicate over
15,000 dead cows and ca lves . Assistance
from FEMA, FSA and SBA is slow and
requires extensive paperwork . Our bank
initiated a d isaster loan program (5.5 percent, 7-year term) to replace livestock and
machinery and repair flood damage. Hopefully regulators will allow some latitude
with these farm and ranch credits in the
fu ture as these customers attempt to
rebuild.

Region 11-Trans-Pecos and Edwards
Plateau
We plan to scrutinize agricultural loan
applications extremely closely because
agricultural commodity prices are the
weakest in years. Only the very strong
applicants will be successful in obtaining
financ ing from commercial banks. Most
others will obtain financ ing from the
various government agency lenders.
Agricultura l credits continue under
pressure due to low markets. Producers
need to feed under current conditions.
Outside income is allowing operations to
remain in business, since ranching has
become unprofitable.

Region 12-Southem New Mexico
I am very concerned for ra nching as
we have known it. Continued low ma rgins
and increased production costs will force
more small producers out of business.

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