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Ag r i c u lt u r a l S u rv e y

Quarterly Survey of Agricultural Credit Conditions in the Eleventh Federal Reserve District
Demand for Loans
Loan demand fell this quarter partly as a result of the dry spell.

The fourth quarter survey indicated that the ongoing dry spell
and sagging commodity prices intensified challenges for the Eleventh
District agricultural community. The livestock industry appeared to
be the hardest hit. Bankers said that some ranchers were unable to
break even because poor pasture conditions and short hay supplies
markedly increased supplemental feeding costs, forcing some cattle
producers to cull their herds at a time when cattle prices have plummeted.

Index
100
80
60
40
20
0
–20
–40
–60
–80
–100

Federal Reserve Bank of Dallas
Fourth Quarter 2008

1998 1999

2000

2001 2002

2003 2004

2005

2006

2007 2008

Funds Available for Additional Lending

Below-average crop yields and low commodity prices made it
difficult for some farmers to recoup high input costs. Overall prospects for production were bleak, and a few bankers noted that without a drop in feed, fertilizer and irrigation costs or improvement in
moisture conditions, producers would face a tough 2009.
Consistent with overall weakness, a higher percentage of bankers reported falling loan demand, waning loan repayment rates, and
rising requests for loan renewals and extensions compared with last
quarter. Respondents exhibited some reticence when asked about
expanding the volume of loans to farmers and ranchers. Only 56
percent of bankers desired such an increase, down from 72 percent
a year earlier. Although there are still funds available for lending, the
amount of collateral required has increased.

Funds availability has improved slightly this quarter.
Index
100
80
60
40
20
0
–20

Farm Lending Trends and Forecasts

–40
–60

What changes occurred in non-real estate farm loans at your bank in the past three
months compared with a year earlier?

–80
–100

1998 1999

2000

2001 2002

2003 2004

2005

2006

2007 2008

Rate of Loan Repayment
Bankers report that dry weather, low prices and below-average crop
yields have reduced loan repayment rates.

Demand for loans
Availability of funds
Rate of loan repayment
Loan renewals or extensions
Collateral required

2008:Q4
Index
–21.93
15.09
–26.19
17.06
19.46

Greater
16.86
20.40
3.02
23.56
19.46

Same
44.35
74.30
67.76
69.94
80.54

Less
38.79
5.31
29.21
6.50
0

Index
100

How do you expect the volume of farm loans made by your bank during the next three
months to compare with the volume of loans made during the same months a year ago?

80
60
40
20
0
–20
–40
–60
–80
–100

1998 1999

2000

2001 2002

2003 2004

2005

2006

2007 2008

Survey responses are used to calculate an index for each question by subtracting the percentage reporting a decrease from the
percentage reporting an increase. When all respondents report
increased activity, an index will register 100. An index will register
–100 when all respondents report a decrease. An index will be zero
when the number of respondents reporting an increase or decrease
is equal.

Non-real estate farm loans
Feeder cattle loans
Dairy loans
Crop storage loans
Operating loans
Farm machinery loans
Farm real estate loans

2008:Q4
Index
–28.03
–42.32
–12.99
–17.56
3.14
–30.75
–41.20

Greater
9.84
4.72
5.50
5.86
25.50
9.56
2.40

Same
52.29
48.24
73.62
70.72
52.14
50.12
54.00

Less
37.87
47.04
20.88
23.42
22.36
40.31
43.60

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 Public Affairs Department, Federal Reserve Bank of Dallas, P.O. Box 655906, Dallas,
TX 75265–5906, or by calling 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.

Loan-to-Deposit Ratios at Survey Banks
Average actual and desired ratios

Renewals or Extensions of Loans
Consistent with the fall in loan repayment rates, loan renewals and
extensions have increased.
Index

Percent
75

Desired Ratio

Actual Ratio

70
65
60

100

55

80

50

60

45

40

40

20

35

0

2007:Q4

2008:Q2

2008:Q1

2008:Q4

2008:Q3

–20
–40

Distribution of Loan-to-Deposit Ratios

–60

Banks Reporting (percent)

–80
–100

1998 1999

2000

2001 2002

2003 2004

2005

2006

2008

2007 2008

Jan.1

Apr. 1

Jul. 1

Oct. 1

Jan. 1

18
12
17
28
25

24
12
18
22
24

24
10
15
18
32

16
12
15
25
33

21
12
20
19
29

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

Amount of Collateral
The collateral index has risen noticeably in 2008.
Index

Interest Rates

100
80

Fixed

60

Average Rate (percent)

40

2008

20
0
–20

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

–40
–60
–80
–100

1998 1999

2000

2001 2002

2003 2004

2005

2006

2007 2008

Anticipated Trend in Farm Land Values
Only 3 percent of respondents expect farmland values to increase over
the next three months.
Index

2009

Jan. 1

Apr. 1

Jul. 1

Oct.1

Jan. 1

8.91
9.05
8.66
7.92

7.78
7.96
7.74
7.24

7.52
7.81
7.63
7.20

7.42
7.56
7.49
6.87

6.86
6.90
7.23
6.77

8.67
8.73
8.48
7.93

7.20
7.41
7.32
6.66

6.96
7.09
6.91
6.54

6.78
6.91
6.99
6.63

6.29
6.40
6.57
6.24

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

Total Agricultural Loans

100

Agricultural loan volumes expanded slightly during third quarter 2008.

80
60

Millions of dollars (seasonally adjusted)

40

7,400

20

7,000

0
–20

6,600

–40

6,200

–60

5,800

–80
–100

2009

5,400
1998 1999

2000

2001 2002

2003 2004

2005

2006

2007 2008

5,000
4,600
4,200
3,800

2

Ag r i c u lt u r a l S u rv e y

|

1998

Fourth Quarter 2008

1999

|

2000

2001

2002

2003

2004

2005

2006

2007

Federal Reserve Bank of Dallas

2008

Rural Real Estate Values—December 2008
Cropland—Dryland

Eleventh Federal Reserve District
1

District
3

12
N E W

2

M E X I C O

4

L O U I S I A N A

5

13

6
11

7

T E X A S

8

9

10

1
2
3
4
5
6
7
8
9
10
11
12
13

2000 dollars per acre
80
70

Irrigated

60
50
40

Dryland

30
20
Ranchland

10
2000

Previous
Quarter
0.4

Previous
Year
7.4

122
18
17
10
11
11
14
6
17
8
n.a.
9
6
5

1,327
454
495
580
810
1,236
2,265
1,593
2,644
1,495
n.a.
1,119
480
1,326

0
–0.1
–0.1
2.3
–3.2
–2.9
–1.1
2.4
0.4
–4.6
n.a.
1.9
11.7
5.0

7.8
11.4
6.8
15.2
20.9
9.4
3.9
3.9
13.6
7.0
n.a.
–2.4
34.94
2.3

99

1,423

2.2

8.7

88
17
17
8
11
5
n.a.
n.a.
12
6
n.a.
8
7
4

1,313
1,084
1,008
1,014
1,255
2,224
n.a.
n.a.
2,938
1,532
n.a.
2,026
2,392
1,731

–0.1
0.8
–3.5
2.8
–3.2
–1.5
n.a.
n.a.
–3.7
–6.8
n.a.
2.8
16.6
2.7

7.2
6.7
9.7
16.9
36.74
10.4
n.a.
n.a.
8.4
–5.2
n.a.
1.4
18.2
7.9

District

136

1,118

–2.3

–1.1

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
Southern New Mexico
Northern Louisiana

127
17
13
9
11
12
16
7
19
7
n.a.
14
6
3

1,419
375
475
599
863
1,822
2,356
1,684
3,337
1,323
n.a.
1,230
254
932

–1.8
2.0
5.6
2.8
–0.7
–0.8
–0.5
–3.7
–2.0
–1.4
n.a.
–5.8
–9.9
–3.4

–0.1
10.8
35.44
11.3
26.6
13.0
4.6
–17.8
5.6
–1.3
n.a.
–11.9
–14.4
1.3

District

Irrigated land cash rents continue to decline.

1998 1999

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
Southern New Mexico
Northern Louisiana

Percent Change3
in Value from

Cropland—Irrigated

Cash Rent Values

0

Average
Value2
Banks1
Fourth Quarter 2008
133
1,319

2001 2002

2003 2004

2005

2006

2007 2008

1
2
3
4
5
6
7
8
9
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
Southern New Mexico
Northern Louisiana

Ranchland
Real Land Values

1
2
3
4
5
6
7
8
9
10
11
12
13

Irrigated land values continued to rise in the fourth quarter, while
dryland values were flat and ranchland prices fell.
2000 dollars per acre
1,200

Irrigated

1,000
800
Dryland
600
Ranchland
400
200
0

1

1998 1999

2000

2001 2002

2003 2004

2005

2006

Ag r i c u lt u r a l S u rv e y

2007 2008

|

Number of banks reporting land values.
Prices are dollars per acre, not adjusted for inflation.
3
Not adjusted for inflation.
4
Increase in the percent change from 2007 to 2008 reflects new reporters
in 2008.
n.a.—Not published due to insufficient responses but
included in totals for Texas and district.
2

Fourth Quarter 2008

|

Federal Reserve Bank of Dallas

3

Quarterly 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
Corn yields were good, but the high
cost of irrigation and declining prices
make profitability small or nonexistent.
Row crop producers had an excellent
2008. We are in need of moisture. The
wheat pasture cattle are doing well.

Region 2—Southern High Plains
The harvest season is wrapping up,
with 90 percent of the cotton crop harvested. Yields reported are average to
slightly less than the three-year average.
Unfavorable weather during the finishing stages of the cotton crop led to lower
yields.
The 2008 crop yields were down. It is
extremely dry. The prognosis is not too
good.
Drought conditions have increased
supplemental livestock feeding and are
hampering the wheat crop. All the uncertainty in the agricultural section is making
cash flow projections for 2009 difficult.

Region 3—Northern Low Plains
Our cotton harvest is completed. We
need rain for the winter wheat.
Bond yields make it unattractive to
extend agricultural credit based on the
associated risk.

Region 5—Cross Timbers
The livestock loan repayment rate is
slower because of the downward trend
in sales price. Cattle are being grazed to
higher weights.
We have had very dry conditions in
the general area since August. There is
little or no winter grazing available from
wheat or oats. The real estate market is
very slow now.
It has been 90 days since we had
moisture. The wheat came up, but it is
now dying because of the drought. Cattle
prices are causing ranchers to break
even, at best, with losses increasing.

Region 6—North Central Texas
The only good news we have had in
the past six months is that fuel prices are

4

Ag r i c u lt u r a l S u rv e y

coming down. Everything seems to depend on how long this recession will last.
Lower input costs or higher grain
prices are needed. The need for rain is
getting critical. Hay supplies are running
out, causing prices to go up.
It is very dry in Central Texas. Many
ranchers are running out of water, and
their winter grazing is limited. It will
not be profitable for them to feed much
longer. Cattle prices are extremely depressed. Although the price of oil has decreased significantly, fertilizer prices are
still extremely high. With current prices,
the future is not very bright for our row
crop farmers.
The area is in need of rainfall. Feed
costs remain high. Cattle prices are
weaker.
Local cattle prices are declining as a
result of seasonal demand and the faltering economy. We are unsure how prices
will fare in the spring, when demand for
cattle peaks.

Region 7—East Texas
Agriculture in East Texas continues to
show signs of weakening because prices
don’t compare with production costs.
Less land is dedicated to crop production
or livestock. Land prices will not allow
for expansion as the cost cannot be supported by the production income.

Region 8—Central Texas
Our biggest concern is the ongoing
drought, which is causing water shortages, little hay and no grass. The only
bright spot is that grain prices have come
down. Cattle prices continue to fall. Cattle
liquidation will continue to increase if we
do not get winter rains soon.
2008 was the most expensive year
ever for crop inputs. Operations lost
money. Rice was very profitable. Corn
and cotton crops were break-even at
best. Costs are falling for fertilizer and
fuel. Hay costs are high. It has been dry
for the past seven months. We need rain.
It seems that the ag community is at a
standstill. Cattle prices are down, we have
extreme drought conditions, farm equipment dealers have stagnant inventories
and ag real estate is not selling.
The speculative hedge fund position,
primarily in cotton in March, has put
many cotton merchants out of business,
impacting all commodity financing in this
area.

|

Fourth Quarter 2008

|

Region 9—Coastal Texas
Operating and equipment loans were
paid off from production income in the
2008 crop year. Farmers are still operating
on their own money and are putting off
land preparation due to the dry weather,
increased fertilizer costs and the reduced
crop forecast for 2009.

Region 11—Trans-Pecos and Edwards
Plateau
Real estate sales have slowed, but that
is caused by a lack of land for sale. There
are still plenty of new agricultural buyers
available. Grass is holding, but we could
use some moisture.
A large variation in irrigated farmland
values exists due to transferable water
rights in the Edwards Aquifer.
Land prices have not dropped, but
there have not been any real estate sales
either.
Livestock prices continue to come
down, while feed prices remain high.
Terribly dry conditions have most
Edwards Plateau ranchers culling their
herds and getting rid of older, weaker
animals. The prospect of heavier-thannormal supplemental feeding has some
operators facing 2009 very warily. Out
here in rural West Texas, banks still have
money to lend, and customers are committed to paying it back. Hard times and
drought are really nothing new to many
of these ag customers. They just need
some rain and decent cattle, sheep and
goat prices.
Late rains had helped pasture conditions, but continued drought and high
feed costs will likely cause decreases
in herd sizes. Area ranchers have been
relying on oil or gas income to counter
losses sustained in the livestock industry,
but as prices continue to fall, chances for
expansion in herd sizes are decreasing.
Predation is also a concern that is driving
some ranchers out of the ranch business.

Region 12—Southern New Mexico
Lower livestock (cattle) prices are
having a significant impact on producers. Ranch real estate values continue to
increase, influenced primarily by nonagricultural and foreign investors.

Federal Reserve Bank of Dallas