Full text of Agricultural Survey : Fourth Quarter 2006
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 F E D E R A L R E S E R V E R E L E A S E B A N K O F D A L L A S Agricultural Credit Conditions at Survey Banks in the Eleventh District Demand for Loans Sixty-seven percent of bankers report steady demand for loans. Quarterly Survey of Agricultural Credit Conditions in the Eleventh Federal Reserve District Percent 100 80 Fourth Quarter 2006 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. Eleventh District agricultural lenders report moderate improvement in conditions in fourth quarter 2006. Although loan repayment and fund availability increased slightly, indicating better liquidity, some bankers expressed caution over the future cash flow situation of dryland farmers in the district. On the production side, while good rains in December helped allay drought conditions in many regions, additional moisture was needed in some others. Dryland crop production was well below 2005 levels, and rising feed prices, along with lower cattle prices, continued to hurt ranchers. Some bankers anticipate that the high price of corn resulting from increased demand for ethanol could lead to credit problems for cow/calf operators and dairy farmers next year. By contrast, farmers are optimistic that higher grain and corn prices will yield better farm income in 2007. Here are additional details from the survey: • Bankers indicate that 1031 tax-deferred land exchanges and renewed interest in recreational use and energy sources such as natural gas and wind have continued to push up the price of farmland. The price of dryland, irrigated land and ranchland rose 2.5 percent, 2.4 percent and 3 percent, respectively, in the fourth quarter. • Lackluster crop yields, coupled with higher production costs, have lowered farmers’ cash flow, contributing to bankers’ expectations of an increase in loan volume. Twenty percent of bankers anticipate making more non-real estate farm loans during the next three months, compared with 15 percent a year ago. In addition, 23 percent of bankers foresee greater demand for operating loans, up from 19 percent in fourth quarter 2005. • Lack of good-quality wheat pastures for grazing and rising supplemental feed costs have lowered the demand for feeder cattle loans. As a result, 26 percent of respondents expect to make fewer feeder cattle loans over the next three months, up from 21 percent expressing a similar sentiment last quarter. 60 40 20 0 Q1:'00 Q1:'01 Q1:'02 Less Q1:'03 Q1:'04 Same Q1:'05 Q1:'06 Greater Funds Available for Additional Lending Funds available for lending have increased, say 22 percent of respondents. Percent 100 80 60 40 20 0 Q1:'00 Q1:'01 Q1:'02 Less Q1:'03 Same Q1:'04 Q1:'05 Q1:'06 Greater Rate of Loan Repayment Eight percent of respondents say the incidence of loan repayment increased in the fourth quarter. Percent 100 80 60 40 20 0 Q1:'00 Q1:'01 Q1:'02 Less Q1:'03 Same Q1:'04 Q1:'05 Greater Q1:'06 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 Despite reports of lackluster crop yields, 81 percent of bankers indicate no change in renewals or extensions. Percent 100 Loan–Deposit Ratios at Survey Banks Average actual and desired ratios 80 70 60 65 60 40 55 50 20 45 Actual ratio 0 Q1:'00 Q1:'01 Q1:'02 Less Q1:'03 Q1:'04 Same Q1:'05 40 Q1:'06 Desired ratio Greater 2005:4 2006:1 2006:2 2006:3 2006:4 35 Amount of Collateral Ninety-four percent of bankers report that collateral requirements remain the same. Percent 100 80 Distribution of Loan-to-Deposit Ratios Banks Reporting (Percent) 60 2006 Ratio 40 Less than 41% 41% to 50% 51% to 60% 61% to 70% More than 70% 20 0 Q1:'00 Q1:'01 Q1:'02 Less Q1:'03 Q1:'04 Same Q1:'05 Q1:'06 Jan. 1 20 15 21 14 30 2007 Apr. 1 Jul. 1 Oct. 1 Jan. 1 25 11 21 15 28 16 14 27 13 30 18 9 22 18 33 18 15 16 17 33 Interest Rate—Fixed Greater Average Rate (Percent) Total Agricultural Loans at Eleventh District Banks Loan volume rises for the second consecutive quarter. Millions of dollars (seasonally adjusted) 2006 Feeder cattle Other farm operating Intermediate term Long-term farm real estate 6,400 6,200 2007 Jan. 1 Apr. 1 Jul. 1 Oct. 1 Jan. 1 8.86 8.85 8.72 8.11 8.96 9.15 8.84 8.19 9.37 9.57 9.19 8.12 9.61 9.68 9.36 8.53 9.45 9.61 9.31 8.71 6,000 Interest Rate—Variable 5,800 5,600 Average Rate (Percent) 5,400 2006 5,200 Feeder cattle Other farm operating Intermediate term Long-term farm real estate 5,000 4,800 4,600 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 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. 2007 Jan. 1 Apr. 1 Jul. 1 Oct. 1 Jan. 1 8.26 8.37 8.20 7.79 8.53 8.84 8.62 7.96 9.10 9.32 9.18 8.66 9.47 9.55 9.48 8.73 9.46 9.59 9.41 9.20 S T A T I S T I C A L Rural Real Estate Values R E L E A S E CROPLAND—DRYLAND January 1, 2007 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. Region 2 Eleventh Federal Reserve District 1 3 12 N E W 2 M E X I C O L O U I S I A N A 5 13 6 7 8 8 9 10 11 12 13 998 2.5 15.7 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 116 19 14 7 11 12 17 5 17 8 n.r. 1,012 362 404 450 535 880 1,647 1,115 2,040 1,088 n.r. 2.6 0.9 –2.4 5.8 –1.5 2.2 2.9 –4.9 4.8 7.4 n.r. 17.0 8.7 –6.1 13.2 4.7 13.0 8.3 22.3 27.6 4.0 n.r. 5 1,150 11.4 51.2 4 5 905 349 0.5 1.7 1.2 3.8 CROPLAND—IRRIGATED Region 9 DISTRICT 10 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 125 T E X A S 11 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 Central Texas Coastal Texas South Texas Trans-Pecos and Edwards Plateau Southern New Mexico Northern Louisiana Percent Changes3 in Values from Previous Previous Quarter Year DISTRICT Northern Louisiana Southern New Mexico 4 Average Banks1 Value2 Fourth Quarter 2006 Northern Louisiana Southern New Mexico Average Banks1 Value2 Fourth Quarter 2006 Percent Changes3 in Values from Previous Previous Quarter Year 81 1,139 2.4 14.4 70 17 14 6 7 3 n.r. 3 10 4 n.r. 1,049 755 828 769 690 1,658 n.r. 1,556 2,513 1,215 n.r. 2.0 1.2 –1.0 4.3 –4.6 1.0 n.r. 3.7 1.5 3.9 n.r. 14.9 9.5 2.5 19.3 –8.1 19.5 n.r. 52.0 16.0 1.3 n.r. 4 1,971 9.3 17.5 4 7 1,160 2,020 2.7 4.2 6.0 16.2 RANCHLAND Eleventh District Real Land Values The average price of ranchland surpassed that of dryland in the fourth quarter of 2006. 2000 dollars per acre 1,000 Irrigated 900 800 Dryland 700 600 Ranchland 500 400 300 200 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 Region Average Banks1 Value2 Fourth Quarter 2006 Percent Changes3 in Values from Previous Previous Quarter Year DISTRICT 145 1,007 3.0 31.6 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 133 19 12 8 10 13 19 12 20 7 n.r. 1,272 286 303 380 552 1,180 1,817 1,433 2,713 1,139 n.r. 3.1 2.8 6.3 4.0 –0.5 3.4 4.9 4.1 3.5 6.9 n.r. 34.1 7.8 30.2 21.0 10.6 20.5 13.5 18.2 29.1 20.4 n.r. 11 1,290 3.2 36.4 4 8 752 250 0.9 1.7 –7.6 –5.4 Northern Louisiana Southern New Mexico S T A T I S T I C A L Fourth Quarter Comments District bankers were asked for any additional comments concerning agricultural land values or credit conditions. These comments have been edited. Region 1—Northern High Plains The outcome for farming in 2007 looks more favorable than it did in 2006, based on increased grain prices. We need moisture as the dryland wheat crop is beginning to struggle. Land cash rents have increased due to higher commodity prices. Overall, farm results for 2006 were much better than projected earlier in the year. Cotton production was well above projected yields. 2007 prospects look promising because of significant increases in grain prices, which are being driven to a large extent by the use of corn to produce ethanol. Banks have already started contracting the 2007 grain crop. Region 2—Southern High Plains Drought conditions took out 90 percent of our dryland crops, which will impact loans for 2007. With the 2006 crop year over, most of the irrigated farmers will pay out while the dryland farmers are facing a carryover of their 2006 crop year debt. A disaster payment is needed for the dryland farmers. Prospects for the 2007 crop year appear better with the recent rains and snow. Escalating corn prices are having a negative impact on feeder cattle and dairy customers, which could result in some credit issues for the year. Region 3—Northern Low Plains We received good rains last week, which should cause the wheat to react and provide grazing for cattle. Rangeland is being sold for recreational purposes. It is then sometimes leased for grazing. No ranchland is being sold to agricultural operators because the prices are too high to raise cattle successfully. Region 4—Southern Low Plains Dryland cotton production was very poor. Most of our borrowers had to take crop insurance. Wind farm growth in our area has increased land values greatly due to current R E L E A S E growth and speculation of future growth. This has limited the availability of real estate for sale in this four-county area. Some land owners are listing their land for sale but retaining “wind rights.” This has limited the availability of recreational as well as agricultural production land. We are seeing increased values of smaller farm-acreage sales for weekend farmers. High fuel prices and dry weather are affecting some operations. The 2006 cotton harvest is winding down. Last year’s crops produced 72,000 bales on 52,000 acres; this year’s crop produced 15,000 bales on 52,000 acres. The dryland wheat crop needs moisture. Region 5—Cross Timbers The drought has caused a severe hay shortage. High-priced hay, now coupled with skyrocketing grain prices, will put a great burden on dairy and beef cattle producers. The wheat crops need rain. Cattle prices are lower, but they are still good. Stock ponds are low. The higher wheat prices have more people looking to cut wheat rather than graze it out. This has lowered our dollar volume on cattle loans. We have had 100+ days with no moisture. There is very limited wheat pasture, and stock tanks are one-third or less capacity. Region 6—North Central Texas Drought conditions continue to linger; thus, winter grazing is less than normal. It is very important that we see replenishing rains prior to the March planting dates. Hay prices have been high, but the fall moisture has helped as the fall cuttings were nearly as good as the spring’s. Gas and diesel prices have been holding steady, and hopefully they won’t rise much. The key is going to be rainfall; how much and when it falls will tell us what the cow market will do and what the hay situation will look like. 1031 tax-deferred real estate exchanges keep pushing land prices up. Land prices west of Interstate 35 are so high that land on the east side is more attractive. At least grain prices are up, but we need more water. We need rain for stocker operations. The price outlook for corn is positive. Farmers are planning on [planting] more corn for 2007. Prices for land continue to increase in Williamson and surrounding counties due to development and new roads. Drought conditions and declining cattle prices have caused a number of the local producers to not purchase or contract for gain calves this year. Hay is in extremely short supply. Rising grain prices are causing concern also in the cattle market. The futures price on corn is the only bright spot on the horizon. Several large tracts of land have sold recently to investors for recreation and development. Region 8—Central Texas Hay is still in short supply; most round bales are getting $70–$80 delivered price. Several producers are considering selling out after the first of the year if conditions don’t improve. Pasture conditions are terrible; winter oats and rye are suffering. Real estate sales are stable, although the number of listings is decreasing. Land values continue to rise due to demand for recreational purposes. 1031 taxdeferred land exchanges are becoming more common, which is helping to fuel higher prices. Region 9—Coastal Texas Land values are increasing from investors buying property for long-term gains, rather than for agricultural purposes. Metropolitan growth close to our area is the primary cause of the jump in land values. Region 11—Trans-Pecos and Edwards Plateau Most range real estate loans are for 20 years with three- or five-year adjustable rates. Few land sales are being made to ranchers; most are to professionals from out of the area. We need rain. 2006 was a devastating year for the Edwards Plateau in terms of rainfall. Cattle, sheep and goat prices trended down somewhat at year-end but were still fairly good. Ranchland continues to be taken out of pro duction as real estate is being purchased for recreational use. Region 12—Southern New Mexico Fall moisture was very good. Land prices have really started to go up due to ranchland acquisition by nonagricultural buyers for speculation and building subdivisions. Investors are continuing to buy grassland in the area. Region 13—Northern Louisiana This past growing season went from extremely dry to extremely wet. Up to 15 inches of rainfall put some harvested cotton modules 1 to 3 feet under water. A good number of sweet potatoes began to rot in the field, with harvesters unable to get the crop out. This year, too much water at one time seemed to cause more problems than too little water did earlier.