Full text of Agricultural Survey : Fourth Quarter 2005

View original document

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

S T A T I S T I C A L R E L E A S E
F

Agricultural Credit Conditions at
Survey Banks in the Eleventh District
Demand for Loans
Demand for loans decreased, say 14 percent
of bankers.

Quarterly Sur vey of Agricultural
Credit Conditions in the
Eleventh Federal Reser ve District

Percent
100

Fourth Quarter 2005

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 Fourth Quarter Survey indicated concern
in the agricultural community as extreme drought
continued to grip the Eleventh District. Bankers
reported that drought conditions have been hard
on both District livestock and crop producers.
Poor pasture conditions, along with short hay
supplies, significantly increased supplemental
feeding costs and forced some cattle producers
to cull their herds. Meanwhile, sparse subsoil
moisture discouraged farmers from prepping land
for the 2006 crop. Other concerns are that sagging
commodity prices and high input costs could considerably reduce profits. Overall, prospects for
the 2006 production season are bleak. On a positive note, a record cotton crop was harvested for
the second consecutive year. Revenues from the
bumper crop are helping cotton farmers pay
down their debt as well as invest in farm equipment.
Here are additional details from the survey:
• Respondents expect the volume of feeder
cattle loans to increase in the next three months.
Nineteen percent of bankers anticipate greater
loan volume, a 3.5 percent increase from a year
earlier. This is in large part due to the high price
of cattle and the increased cost of supplemental
feeding.
• Farmland values continue to rise, albeit at a
slow pace. Dryland, irrigated land and ranchland
values edged up in the fourth quarter relative to
the third quarter, increasing 0.4 percent, 1.0 percent and 3.4 percent, respectively. This is partly
because farmland available for sale is scarce.
• Cash receipts from a great cotton crop are
enabling farmers to service their debt. Twelve
percent of bankers reported improved loan repayment rates, a 4.3 percent increase from last
quarter. Moreover, 12 percent of bankers expected demand for operating loans to be lower over
coming months; this reflects a 5.2 percent increase
of bankers with lower loans over fourth quarter
2004.

20
1
0
Q1:’99

Q1:’00

Q1:’01
Less

Q1:’02

Q1:’03

Same

Q1:’04

Q1:’05

Greater

Funds Available for Additional Lending
Eighty-two percent of respondents say funds
available for lending have remained the same.
Percent
100

1
0
Q1:’99

Q1:’00

Q1:’01
Less

Q1:’02

Q1:’03

Same

Q1:’04

Q1:’05

Greater

Rate of Loan Repayment
Excellent cotton crop yields in several regions
improved loan repayment, as 12 percent
of bankers report higher repayment rates.
Percent
100

0
Q1:’99

1
Q1:’00

Q1:’01
Less

Q1:’02
Same

Q1:’03

Q1:’04
Greater

Q1:’05

S T A T I S T I C A L R E L E A S E

Agricultural Credit Conditions at Survey Banks in the Eleventh District
Renewals or Extensions of Loans
Drought conditions possibly increased requests for
renewals and extensions, as 12 percent of bankers
report greater demand.
Percent
100

Loan–Deposit Ratios at Survey Banks
Average actual and desired ratios

Percent

65
60

55
20

50
45

0
Q1:’99

Q1:’00

Q1:’01

Q1:’02

Less

Q1:’03

Same

Q1:’04

Actual Ratio

Q1:’05

40
35

Greater

Desired Ratio

Amount of Collateral
Collateral requirements remain stable, report
91 percent of bankers.

2004:4

2005:1

2005:2

2005:3

2005:4

Percent
100

DISTRIBUTION OF LOAN – DEPOSIT RATIOS

Banks Reporting (Percent)
60

2005
Ratio

2006

Jan. 1

April 1

July 1

Oct. 1

Jan. 1

19
17
18
16
30

24
12
15
21
28

23
13
19
16
29

18
16
14
15
37

20
15
21
14
30

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

0
Q1:’99

Q1:’00

Q1:’01

Q1:’02

Less

Q1:’03

Same

Q1:’04

Q1:’05

INTEREST RATE — FIXED

Greater

Average Rate (Percent)

Total Agricultural Loans at Eleventh District Banks
Agricultural lending continues to grow.

2005
Ratio

2006

Jan. 1

April 1

July 1

Oct. 1

Jan. 1

7.59
7.60
7.67
7.00

7.75
7.97
7.85
7.37

8.07
8.29
8.16
7.56

8.41
8.53
8.36
7.97

8.86
8.85
8.72
8.11

Millions of dollars (seasonally adjusted)

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

6,300

5,800

INTEREST RATE — VARIABLE

5,300

TW
Average Rate (Percent)

4,800

2005
Ratio

2006

Jan. 1

April 1

July 1

Oct. 1

Jan. 1

7.12
7.22
7.10
6.59

7.25
7.50
7.41
6.94

7.83
8.06
7.89
7.42

8.19
8.33
8.18
7.81

8.27
8.37
8.20
7.79

4,300

3,800

’96

’97

’98

’99

’00

’01

’02

’03

’04

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

’05

Note: Some of the volatility observed in agricultural loan levels is due
to the acquisition of several Eleventh District banks by banks
headquartered in other Reserve Districts.

S T A T I S T I C A L R E L E A S E

CROPLAND—DRYLAND

Rural Real Estate Values
December 31, 2005

Region

Number of banks reporting land values.
2
Prices are dollars per acre, not adjusted for inflation.
3
Not adjusted for inflation.
n.r.—Not reported due to insufficient responses.
1

Eleventh Federal Reserve District
1

Percent Changes3
in Values from
Previous Previous
Quarter
Year

DISTRICT

150

836

0.4

7.2

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

139
21
18
12
11
12
22
7
18
7
n.r.

838
328
430
408
501
772
1,452
899
1,419
1,067
n.r.

0.4
–0.3
3.7
2.5
1.5
–2.1
–1.1
1.5
– 2.7
6.4
n.r.

7.2
6.9
9.9
11.1
3.8
8.0
8.0
3.7
3.0
3.8
n.r.

732

–1.7

8.3

7
4

886
300

1.1
–1.0

7.9
8.3

Northern Louisiana
Southern New Mexico

Average
Value2
Banks1
Fourth Quarter 2005

12
N E W

M E X I C O

CROPLAND—IRRIGATED

L O U I S I A N A

13
6

T E X A S

Region

DISTRICT

10
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

Northern Louisiana
Southern New Mexico

Average
Value2
Banks1
Fourth Quarter 2005

Percent Changes3
in Values from
Previous Previous
Quarter
Year

983

1.0

13.2

86
19
17
10
7
4
n.r.
3
11
4
n.r.

909
685
798
661
741
1,316
n.r.
976
2,079
1,216
n.r.

1.7
2.4
0.9
–0.7
–0.3
–1.7
n.r.
–6.9
2.7
0.9
n.r.

12.3
14.5
6.0
9.6
0.7
4.8
n.r.
–5.6
12.4
15.4
n.r.

1,619

2.3

19.9

7
5

1,163
1,653

3.2
–3.3

15.5
17.8

RANCHLAND
Eleventh District Real Land Values
Increase in sale of farmland for recreational use
boosted dryland, irrigated land and ranchland
values in fourth quarter 2005.

Region

2000 dollars per acre
900
800
Irrigated

700

A
G

600
Dryland
500
400
300
200
’94

’95

’96

’97

’98

’99

’00

’01

’02

’03

’04

’05

Percent Changes3
in Values from
Previous Previous
Quarter
Year

DISTRICT

164

765

3.4

20.4

153
21
14
12
10
15
23
15
21
6
n.r.

939
261
234
320
486
974
1,562
1,213
2,072
950
n.r.

2.6
4.4
1.0
6.3
3.6
1.9
1.4
4.5
0.9
–0.3
n.r.

20.2
15.0
8.8
27.3
18.7
13.2
6.0
24.2
13.2
–2.6
n.r.

905

3.2

32.8

6
5

804
263

0.8
13.6

4.3
23.5

Northern Louisiana
Southern New Mexico

Ranchland

Average
Value2
Banks1
Fourth Quarter 2005

S T A T I S T I C A L R E L E A S E

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

Feeder cattle lines have been increased
due to cattle prices. Recreational land use continues to drive land prices up. Dairy buyout
will reduce dairy loan demand after the first of
the year. Fuel prices and lack of rain are major
concerns.
Strong recreational land demands have
continued to drive native pastureland and
rangeland prices up. Native pastureland with
good hunting is bringing from $500 to $800
per acre, well above its agricultural value.

Region 1 — Northern High Plains

quitting, as they are losing equity each year.
If government payments are decreased or
stopped, it is over for most farmers.
Drought conditions persist, and reports
indicate a shortage of hay available for cattle
feed. Continued dry conditions could affect
the cattle market, as producers may be forced
to liquidate herds due to lack of inexpensive
feed.
Increased input costs are severely impacting profit margins. The base commodity price
has not kept pace with input costs.

Region 4 — Southern Low Plains
Ideal moisture, growing conditions and
harvest weather resulted in excellent crops for
fall 2005. Farmers are ending a tremendous
crop year, but 2006 looks dismal with no
moisture and high energy costs.
Feeder cattle loan demand is low due to
minimal projected borrower profitability. 2006
demand for dairy loans is expected to be
higher due to new construction of facilities
relocating from California, Arizona and East
Texas. Fuel prices will strain profitability of
irrigated crops for the 2006 planting season.
Moisture conditions are poor; winter wheat is
under much stress.
Region 2 — Southern High Plains
We have had a good turnout on the cotton
and peanut crops. Better commodity prices
would help with the increases in input costs.
Potentially the largest cotton crop ever is
all but completely harvested and in modules.
Customers are anticipating paying off their
debt, with cash remaining. Excess funds will
be used to update equipment and make land
purchases.
There is strong evidence of rising land
values—especially for irrigated cropland. Land
available for purchase is scarce.
Region 3 — Northern Low Plains
Crop yields have been above average,
but increased production expenses have limited profits. Drought conditions have hampered
the cow/calf and feeder operations with no
wheat available for grazing.
The cotton harvest is almost finished; it’s
possibly the best yield this county has ever
had. We have had excellent weather to harvest
both the peanut and cotton crops. However,
rain is needed to prepare the land for 2006
crops. Wheat crops are dying due to a lack of
moisture.
The cotton harvest is almost complete;
we have another bumper crop. Prices are not
adequate to provide a reasonable margin.
Cattle prices are still good. We are in need of
moisture.

Region 7 — East Texas
We had a record cotton crop this year.
2006 doesn’t look very good without any rain
since October.
We have had good cotton crops two
years in a row. Cattle prices are high, and
there is plenty of grass to eat.
The 2005 cotton crop will be a bumper
crop; grades are yielding in the 58 cent range.
Demand for equipment and capital will be
high, but loan demand will be lower.
Oil and gas prices have had a negative
effect on agriculture in this region. Our area is
4 inches below normal annual rainfall.
2005 was awesome for cattle and cotton.
Farmers expect excess funds, which will be
needed because of the current drought and no
foreseeable precipitation. 2006 wheat and cotton crops look bleak.
The cotton harvest is nearing completion,
with expectations for a record crop. Wheat
pastures are very dry; we need moisture for
land preparation.
Region 5 — Cross Timbers
Land is being sold in smaller tracts for
more money.
Wheat grazing is poor due to a lack of
moisture. Cattle prices are still good.
We have had zero moisture in October
and November following the record rainfalls in
August and September. Wheat grazing is zero.
Pastures are short on winter grass.

Lack of moisture will delay crops, affecting the availability of commodities to be marketed. Livestock will be negatively affected as
pastures cannot provide adequate grazing or
water. Additionally, land values will be affected if crops have lower yields, reducing the
cash flow available for servicing real estate
debt. Overall, the market will be adversely
affected as cattle inventory will be liquidated.
Region 8 — Central Texas
The continued drought has started to
affect everyone. Lots of cattle are coming into
local sale barns. Water and stored hay levels
are low. There has been a recent surge in real
estate sales (nonfarm) at the end of this year.
A few rice farmers are quitting due to
operating losses. An increase in the cash rice
market in the next 120 days will result in increased acreage, while a flat or falling market
will result in a substantial drop in rice acreage
for 2006. Cattle ranchers had another good year.
There are virtually no real estate transactions involving farmers or ranchers purchasing
land for agricultural use; 95 percent of land
sales are for investment purposes, recreational
use or are being divided and sold in smaller
plots.
Low crop prices will result in losses for
the second year in a row.
Region 12 — Southern New Mexico

Region 6 — North Central Texas
It is hard to find land for sale. Hay prices
are very high, and hay is scarce due to serious
drought conditions. A rough winter and continued hay shortage should drive the cattle
market down.
Pasture conditions are poor, preventing
wheat pasture grazing. Operating expenses
have increased because of high fuel prices and
the need to purchase hay.
Agricultural credit conditions are not
good. Crop yields are down and prices are at
a low. Many older farmers are thinking about

The area is very dry. With high fuel and
fertilizer costs, profitability will slip.
Region 13 — Northern Louisiana
The recovery efforts following Hurricane
Rita are nearly complete. All things considered,
the agricultural economy in our market areas
sustained minimal impact.
Crop production loans are being paid
down or paid off at this time.

Full text of Agricultural Survey : Fourth Quarter 2005

FRASER