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S T A T I S T I C A L
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Agricultural Credit Conditions at
Survey Banks in the Eleventh District
Demand for Loans
Twenty-two percent of bankers cite slower
demand for loans.

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

Percent
100

80

Fourth Quarter 2007

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 saw continued
optimism in the Eleventh District agricultural
sector. Above-average rainfall and favorable
growing conditions in the fall significantly improved crop yields in most parts of the district.
A near-record cotton crop coupled with high
agricultural commodity prices boosted farm incomes in 2007. Bankers reported that this boom
was not only enabling producers to pay off their
debts but also encouraging them to invest in
new farm equipment.
While the overall mood in the district’s agricultural community was positive, many respondents cited concerns that rising production costs
were squeezing margins, growth of the wheat
crop was poor, and the impasse on the farm bill
had left them estimating the 2008 production
payment structure.
Here are additional highlights from the survey:
• Farmland values continue to increase,
albeit at a slower pace. Bankers said the sale of
agricultural land for recreational use continues
to drive up prices. Dryland, irrigated land and
ranchland values rose 4.8 percent, 3.7 percent
and 2.5 percent, respectively.
• Excellent crop yields and high prices
have bolstered Eleventh District farm incomes,
decreasing demand for loans, improving loan
repayment rates and increasing cash deposits.
Nineteen percent of bankers reported higher
loan repayment rates, up from 8.3 percent in
fourth quarter 2006. Twenty-two percent of
respondents cited slow demand for loans, compared with 13.9 percent a year ago.
• Farmers are using profits from the recent
favorable harvest to purchase new farm machinery. Twenty-one percent of bankers expect
greater demand for farm machinery loans in the
next three months, up from 9.2 percent a year
earlier.
• Interest rates for most agricultural loans
declined for the third consecutive quarter.

60

40

20

0
1Q01

1Q02

1Q03
Less

1Q05

Same

1Q06

1Q07

Greater

Funds Available for Additional Lending
Funds availability remains steady, say 77 percent
of respondents.
Percent
100

80

60

40

20

0
1Q01

1Q02

1Q03
Less

1Q04

1Q05
Same

1Q06

1Q07

Greater

Rate of Loan Repayment
Nineteen percent of bankers indicate higher loan
repayment rates.
Percent
100

80

60

40

20

0
1Q01

1Q02

1Q03
Less

A1

1Q04

1Q04
Same

1Q05

1Q06
Greater

1Q07

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Agricultural Credit Conditions at Survey Banks in the Eleventh District
Renewals or Extensions of Loans
Thirteen percent of respondents report fewer
requests for loan renewals and extensions.
Percent

Loan-to-Deposit Ratios at Survey Banks

100

Average actual and desired ratios
80

Percent
75
70
65
60

60

40

55
50
45
40

20

Actual ratio
0
1Q01

1Q02

1Q03

1Q04

Less

1Q05

Same

1Q06

1Q07

Desired ratio

Greater

2006:4

2007:1

2007:2

2007:3

2007:4

35

Amount of Collateral
Collateral levels remain unchanged, say 92
percent of respondents.
Percent
100

Distribution of Loan-to-Deposit Ratios				

80

Banks Reporting (Percent)
60

2007
		

40

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

20

0
1Q01

1Q02

1Q03

1Q04

Less

1Q05

Same

1Q06

1Q07

Apr. 1

Jul. 1

Oct. 1

Jan. 1

18
15
16
17
33

22
11
20
21
26

17
12
13
28
30

17
14
17
23
30

18
12
17
27
26

Interest Rate—Fixed				

Greater

Average Rate (Percent)

Total Agricultural Loans
Agricultural loan volumes continue to rise in the
Eleventh District.

2007
		

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

Millions of dollars (seasonally adjusted)
7,300
6,800

2008

Jan. 1

Apr. 1

Jul. 1

Oct. 1

Jan. 1

9.45
9.61
9.31
8.71

9.44
9.68
9.27
8.55

9.39
9.54
9.13
8.52

9.35
9.55
9.24
8.49

8.91
9.02
8.64
8.03

Interest Rate—Variable				

6,300

Average Rate (Percent)

5,800

2007

5,300

		

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

4,800
4,300
3,800

2008

Jan. 1

’97

’98

’99

’00

’01

’02

’03

’04

’05

’06

’07

A2

2008

Jan. 1

Apr. 1

Jul. 1

Oct. 1

Jan. 1

9.46
9.59
9.41
9.20

9.35
9.63
9.37
8.85

9.42
9.57
9.14
8.66

9.22
9.41
9.23
8.61

8.80
8.86
8.62
8.13

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Rural Real Estate Values

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B A N K
O F
D A
CROPLAND­—DRYLAND				

January 1, 2008
1

Number of banks reporting land values.
Prices are dollars per acre, not adjusted for inflation.
3
Not adjusted for inflation.
n.a.—Not published due to insufficient responses but
included in totals for Texas and district.

Region

2

1
3
N E W

2

M E X I C O

4

L O U I S I A N A

5

13

6

7

Region

8

9

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

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Percent Change3
in Value from
Previous
Previous
Quarter
Year

Average
Banks1
Value2
Fourth Quarter 2007

21.8
20.9
8.8
8.9
14.8
14.4
15.0
44.3
27.9
20.7
10.9
n.a.
8.9
16.6
33.6

Percent Change3
in Value from
Previous
Previous
Quarter
Year

DISTRICT
84
1,324
3.7
				
TEXAS
73
1,208
3.2
Northern High Plains
15
1,001
6.1
Southern High Plains
16
902
2.8
Northern Low Plains
7
848
2.3
Southern Low Plains
8
857
3.2
Cross Timbers
4
1,992
6.5
North Central Texas
n.a.
n.a.
n.a.
East Texas
3
2,095
2.5
Central Texas
8
2,733
4.3
Coastal Texas
4
1,634
4.7
South Texas
n.a.
n.a.
n.a.
Trans-Pecos and				
Edwards Plateau
6
1,970
10.5
				
Southern New Mexico
7
2,346
4.9
Northern Louisiana
4
1,666
9.4

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CROPLAND­—IRRIGATED				

T E X A S

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DISTRICT
124
1,224
4.8
				
TEXAS
114
1,225
4.4
Northern High Plains
17
398
1.4
Southern High Plains
16
450
2.0
Northern Low Plains
8
485
4.4
Southern Low Plains
10
640
2.2
Cross Timbers
12
1,037
4.5
North Central Texas
15
2,335
10.6
East Texas
7
1,537
6.7
Central Texas
14
2,375
5.4
Coastal Texas
6
1,244
– 2.4
South Texas
n.a.
n.a.
n.a.
Trans-Pecos and				
Edwards Plateau
7
1,133
4.2
				
Southern New Mexico
5
366
3.6
Northern Louisiana
5
1,313
9.9

Eleventh Federal Reserve District

12

Average
Banks1
Value2
Fourth Quarter 2007

L

16.7
13.2
27.5
7.2
9.7
19.1
16.3
n.a.
28.3
11.5
31.4
n.a.
10.0
31.1
43.6

RANCHLAND				
Eleventh District Real Land Values
Increases in farmland values continue to be driven
largely by recreational use.
2000 dollars per acre
1,200

Irrigated

1,000

Dryland

800

Ranchland

600
400
200
0
’97

’98

’99

’00

’01

’02

’03

’04

’05

’06

’07

Region

Average
Banks1
Value2
Fourth Quarter 2007

Percent Change3
in Value from
Previous
Previous
Quarter
Year

DISTRICT
134
1,139
2.5
				
TEXAS
124
1,434
2.8
Northern High Plains
17
330
3.6
Southern High Plains
11
352
4.9
Northern Low Plains
8
470
6.6
Southern Low Plains
10
666
– 2.3
Cross Timbers
13
1,535
3.0
North Central Texas
17
2,278
8.5
East Texas
13
2,111
4.6
Central Texas
16
3,257
6.7
Coastal Texas
6
1,165
1.6
South Texas
n.a.
n.a.
n.a.
Trans-Pecos and				
Edwards Plateau
11
1,474
5.5
				
Southern New Mexico
7
297
– 1.0
Northern Louisiana
3
944
0.7

3

13.6
13.5
13.9
21.8
24.9
14.5
27.0
26.4
39.3
22.2
5.8
n.a.
16.0
14.7
30.6

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Fourth Quarter
2007 Comments
District bankers were asked for additional
comments concerning agricultural land values
and credit conditions. These comments have
been edited.

Region 1—Northern High Plains
Extremely dry conditions have negatively impacted crop and grazing conditions.
Commodity prices are at an all-time
high. Producers are retiring debt and replacing worn-out equipment. High feeder cattle
prices are making profits almost nonexistent.
Moisture levels are poor; the outlook for another good wheat crop is not good. Overall,
however, the 2008 economic outlook for
both farmers and ranchers is fairly good.

Region 2—Southern High Plains
The cotton harvest is 85 percent complete, and it has been very good.
Favorable late summer and fall weather
conditions resulted in an excellent cotton
crop. Most of the cotton has been harvested.
Ginning will take one to three months due to
the crop size. Even though the crop income
will be substantial, net income for many
farmers will be marginal due to increased
production costs.
We had another bumper cotton crop.
Crop grades are very good. The weather has
been good for the harvest.

Region 3—Northern Low Plains
Consumer confidence continues to decline due to decreased buying power.
This has been a record crop for both dry
and irrigated cotton. Recent rains should help
wheat and winter grazing.
The excellent cotton crop has improved
our farmers’ bottom lines for 2007. Borrowers are looking at capital purchases like new
tractors and sprinkler systems.
Stocker loans have decreased due to
high wheat prices. Calf prices have dropped
for the same reason, hurting the cow/calf operator. We need rain to make a spring wheat
crop.

Region 4—Southern Low Plains
Even though the price of cotton is not as
high as producers would like, excellent yields
have made up for the shortfall. Hence,
loan demand for the first quarter of 2008 is

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expected to be much lower. Cattle prices are
lower but still strong.
We are harvesting a record cotton crop,
and the prices are excellent.
We need the passage of a new farm bill
now!
Land is priced above its production
value. Recreation usage has eliminated producers’ ability to acquire land for income
production.
Milo crop production, as well as its
price, was above average, allowing our farmers to minimize their operating loan requests
for completing their cotton crop. The cotton
crop is going to range from 1.5 to 4.25 bales
per acre. Farmers are going to be depositors
as well as borrowers.
Land values have greatly increased in
the last few years due to increased interest in
land for recreational use.

Region 5—Cross Timbers
Land prices are still very high, but fewer
sales are being made.
We received only 1½ inches of moisture in the past 90 days. The wheat crop is
up, but wheat grazing is not taking place.
Ranchers are anticipating a seed crop instead of grazing.

Region 6—North Central Texas
The seemingly infinite supply of metropolitan area money that has caused land
prices to skyrocket may be coming to an end.
There are a great number of for-sale signs
visible.
Hay is plentiful and cheap and will
probably stay that way unless we have a
harsh winter. Cattle prices should stay high
because there is still a shortage of beef cows.
Farmers’ big concern is the price of fuel, gas
and diesel.
2007 was a record year, with a bumper
crop and record prices for commodities.
Farmers are buying and updating equipment, even having to wait for equipment
due to demand from all over the country.
Requests for operating lines are increasing
as much as 30 percent due to increased
production costs. If commodity prices
should fall, producers may suffer. Some
farmers are contracting 2008 corn for $4
a bushel, but with increased production
costs, the profit will not be that great if the
yield is average.
Heavy rains have severely reduced corn
yields. Land values are increasing sharply.
A new power plant is under construction
nearby. Continued increases in production
costs are making it hard to show a profit in
dryland farming. Many long-term farmers are
going to be forced out of business.

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Crop production costs will increase by
20 to 30 percent.

Region 8—Central Texas
The rural land market is slowing down
with fewer listings, and buyers are being selective, especially with more expensive properties.
Cattle prices are still below summer levels. Hay
is being fed by most producers, and cattle are
still in good shape. The winter oats and rye
grass are doing better with the recent rains.
Commodity prices are up, but operating costs are up also. Corn yields were good.
Cotton and rice yields were below the threeyear averages as a result of the wettest July
ever. Calf prices are down, but good cow/calf
operators are still profiting.
Land values continue to escalate as recreational land use increases. The soil moisture levels are good. Cattle prices are dampened by rising fertilizer costs.
Farmers need to pay land rent and prepare their cropland. We have no farm bill to
base our projections on.

Region 9—Coastal Texas
Rising input costs continue to cut into
profitability. The pending farm bill has put
Gulf Coast farmers and lenders in a position
to guess at payment structure for 2008 production and beyond. Proposed adjusted gross
income limits could change crop share leases
in the future.

Region 11 —Trans-Pecos and
Edwards Plateau
There have been very few real estate
sales for agricultural production. Sales are
mostly to out-of-area investors for hunting,
investment, etc. We have had good moisture,
and the pastures are holding up well.
Livestock prices remain strong, but expenses are up as well. Recreational use of
rangeland continues to keep rural land prices
strong. Much ranching land has been taken
out of production, but strong demand continues for the scenic ranchland of the Texas Hill
Country.

Region 12— Southern New Mexico
Nonagricultural investors continue to
purchase land. There is no correlation between market value and economic value.

Region 13—Northern Louisiana
Farmland values continue to rise. This
increase is driven by the desire to have recreational land, taking more land out of cultivation. The tree population is increasing.