Full text of Agricultural Survey : Fourth Quarter 2012

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Fourth Quarter 2012

DALLASFED

Agricultural
Survey

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

Survey
Highlights

B

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

ankers responding to the fourth-quar-

Percent reporting Q4:

2012:Q3

2012:Q4

pGreater

Same

qLess

Demand for loans

–6.5

–12.0

19.3

49.3

31.3

Availability of funds

27.6

33.6

35.6

62.4

2.0

were strong, but ranchers faced increased feed

Rate of loan repayment

15.7

12.0

21.3

69.3

9.3

costs resulting from the drought. Even though

Loan renewals or extensions

–13.1

–11.4

6.0

76.5

17.5

ter survey continued to stress the need
for rain as most of the Eleventh District

remains in drought conditions. Cattle prices

the harvest this year was better than it was last
year, without more rain, respondents expect a
poor winter wheat crop. A new farm bill may

Index
50

impact crop insurance and lending and there-

40

fore may delay the spring planting.

30

Agricultural land value changes were
mixed. Irrigated land values increased again,
gaining roughly 5 percent above third quarter
levels. The value of ranchland fell slightly, while
dryland remained largely unchanged. However, all cropland rose year over year. The majority
of respondents continue to expect values to
hold steady over the next three months.
The number of bankers who reported
increased incomes for farmers and ranchers
in the fourth quarter was equal to those who

Availability of funds

Rate of loan repayment

20
10
0
–10

Loan renewals or extensions

–20
–30
Demand for loans

–40
–50

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

reported decreased incomes; however, almost
half the respondents reported no change
in farm incomes in the past three months.

What changes occurred in the volume of farm loans made by your bank in the past three months
compared with a year earlier?
Index*

Although the credit standards index rose very
slightly, the great majority of bankers reported
no change to credit standards compared with a
year ago.
Demand for agricultural loans continued
to decline in the fourth quarter, as did loan
renewals and extensions. Once again, feeder
cattle loans, followed by dairy loans, showed

Percent reporting Q4:

2012:Q3

2012:Q4

pGreater

Same

qLess

–0.7

–12.8

16.9

53.4

29.7

Feeder cattle loans

–17.3

–17.2

14.1

54.7

31.3

Dairy loans

–13.5

–16.0

0.9

82.1

17.0

Crop storage loans

–10.1

–12.6

6.3

74.8

18.9

2.7

–4.9

19.4

56.3

24.3

Non-real-estate farm loans

Operating loans

the largest drops in volume compared with a

Farm machinery loans

–11.9

–15.0

10.9

63.3

25.9

year ago. Loan repayment rates continued to

Farm real estate loans

–8.6

–11.0

15.2

58.6

26.2

rise, although at a slower pace than in the past
two quarters.

*Survey responses are used to calculate an index for each item by subtracting the percentage of bankers
reporting greater from the percentage reporting less. Positive index readings generally indicate an increase
while negative index readings generally indicate a decrease.

} Quarterly Comments
District bankers were asked for additional comments concerning
agricultural land values and credit conditions. These comments
have been edited for publication.
Region 1 • Northern High Plains

XXSome dryland wheat sprouted, but drought conditions
will likely yield another failed crop. Irrigated wheat is
requiring higher than average irrigation costs to maintain
crops. Overall, excitement for the drought ending this fall
was brief, and we are left with a dry soil profile that very
well may be worse than this time last year.
XXHigh commodity prices coupled with low bank CD rates
and an uncertain stock market are making agricultural
land an attractive investment alternative. This is driving up
farmland values. Corn farmers had a good revenue year.
Cow/calf producers, stocker operators and feedlots are all
struggling to make a profit. The Renewable Fuel Standard
mandate has been good for corn farmers, but it is crippling the cattle industry.
XXWe still need moisture.
XXThe drought has continuing effects. Grass for pasture
is minimal. We need rain to replenish subsoil moisture.
Cattlemen have said they cannot maintain herds without
rain in the spring.
XXBorrowers are diligently searching for an alternative to
the traditional cotton crop due to the high input costs and
low price forecast for next year.
Region 2 • Southern High Plains

XXRain and a farm bill would be helpful. Drought has
hurt us again, but we are thankful for the Supplemental
Revenue Assistance Payments program.
XXHigh corn, milo and cattle prices helped offset the
low price of cotton. The dryland cotton crop suffered
again this year because of the drought. Average yields
for irrigated crops were down 20 to 25 percent in 2012
from past average yields, as a result of continued drought
conditions and decline of irrigation water. Our area
primarily produces cotton, and both cotton prices and
yields were off again this year. Most farmers will suffer
operating losses again this year. Federal crop insurance
and the USDA disaster program, Supplemental Revenue
Assistance Payments, will help most farmers with debt
repayment, but loss of additional equity in most farmers’
financial statements is expected for the second year in
a row.
XXIt appears that we will have some borrowers that will
be looking at operating carryover for 2012. It will not be
a problem to collateralize the loan, but cash flow will be
a huge problem. Cash flow will be the biggest problem
for 2013 with government payments going away, cotton
prices being depressed, dry weather setting in again for
the third year, and the possibility of producers trying to
switch to alternative crops.

XXCotton growers are wrapping up another poor year
on the South Plains. Dryland growers who were able to
abandon their crops and collect insurance have done well
because the insurance price at planting time was high.
Irrigated growers will lose money because yields were off
due to drought and prices have plummeted to well below
the all-in cost of production. It is extremely dry and the
market outlook for 2013 is not good with excess cotton
worldwide. We expect growers to switch a fair amount of
production next year into grains.
Region 3 • Northern Low Plains

XXDrought conditions continue to stress producers and
their ability to generate income. If the weather pattern
continues, we will experience a third year of severe
drought conditions, with quickly dwindling irrigation.
XXWe need rain. The wheat has stopped growing and the
feeder cattle are being shipped to the feedlot. Our hopes
for a good wheat crop are fading, but even though the
cotton crop was small, it was better than last year’s.

Region 4 • Southern Low Plains

XXCotton harvest is ending, and while we harvested
more than was insured, the quality is not very good. We
continue to be dry with no indication of moisture.
XXWith no farm bill and the decrease in crop insurance
from 2011 to 2012, the 2013 farm operating loan season
will be delayed until late February or March 2013. Cash
flow is expected to be tight.
Region 5 • Cross Timbers

XXLike many parts of the country, we are extremely dry.
In October, we received some good moisture, making
many calf operators optimistic about early grazing. Since
the middle of October, we have received no moisture, and
calves on wheat pastures are beginning to be sent to the
feedlot.
XXIt is very dry now. Grain fields need rain badly.
XXWe have had no moisture since early September. Lakes
and stock tanks continue to go dry. Winter wheat that
came up is dying.
Region 6 • North Central Texas

XXDry conditions continue to hamper fall planting of small
grains. Fields that have grain suffer from a lack of rainfall,
and pasture conditions deteriorate daily with high temperatures and winds. Native pastures are in poor condition.
Many ponds are dry. Feeding cattle on protein and hay has
started. Hay is again costing a premium. Some rural real
estate is trading, but mainly for recreational purposes.

Agricultural Survey • Fourth Quarter 2012 • Federal Reserve Bank of Dallas

12
N E W

M E X I C O

Regions of the Eleventh
Federal Reserve District

XXAll loans, including farm and ranch loans, are down.
Based on our customers’ comments, this is due to uncertainty in the U.S. economy.
XXWe need rain badly.
XXWe had good yields and prices this year. Cattle prices
were good.
Region 7 • East Texas

XXFarmland rent values may change if farmers’ direct
payments are eliminated. In the immediate area, a railroad
company is in the process of acquiring 1,100 acres of
prime row crop land for a switching station. They offered
approximately twice the current land value, and these
sales will skew land values for several years. Credit standards for feeder loans have tightened due to cattle costs.
XXLack of rain is a concern going into winter. Cattle prices
stay strong, but input costs are higher as well. Some
ranchers are beginning to restock after last year’s drought.
Region 8 • Central Texas

XXOur area is coming off a dry year that resulted in poor
crop yields and reduced livestock production. In October
and November, there were some scattered areas of helpful rain. Currently in December, the ground is very dry and
outlook is dim. Farmers may not be able to plant cotton
and corn on time.
XXConsistent and abundant rain is greatly needed at this
time. Ryegrass plantings and oats for winter grazing are
starting to fail. Ranchers are feeding hay to cattle on a
regular basis as green grass is gone and growing days
are over. Cattle prices remain strong, but we are starting
to see a slowdown in replacement cattle due to a lack
of moisture for the winter months. Planting time is only
75 days out, and farmers are concerned about lack of
moisture.
XXLarger land sales are mostly for speculative purposes
to individuals who also graze livestock or lease it. The
price of real estate in our area does not justify a profitable
ranching or farming operation.

Rural Real Estate Values—Fourth Quarter 2012
1

Banks1

3

Average
value2

Fourth quarter
2012

Percent change3
in value from
Previous Previous
quarter
year

Cropland—Dryland

2

4

5
6

11

District

L O U I S I A N A

7

13

T E X A S

8

9

114

1,440

0.6

3.9

Texas
1 Northern High Plains

101
18

1,458
664

0.8
4.6

3.4
14.6

2 Southern High Plains

13

646

4.4

10.1

3 Northern Low Plains

6

708

–3.4

–4.5

4 Southern Low Plains

6

896

–0.9

5.0

5 Cross Timbers

10

1,535

0.0

15.2

6 North Central Texas

16

2,134

1.3

–0.5

6

2,100

–9.0

0.0

8 Central Texas

11

2,832

4.8

1.4

9 Coastal Texas

4

1,513

0.0

0.0

n.a.

n.a.

n.a.

n.a.
7.3

7 East Texas

10

10 South Texas
11 Trans-Pecos and Edwards Plateau

XXWe had near record corn/grain sorghum yields with
excellent prices; cotton yields set a new record with low
prices; and cattle numbers were down with good prices.
New wells for irrigation purposes are in demand due to
lack of river water. Lack of surface water decreased rice
acreage over 85 percent.
XXFall and winter have been disappointing with dry
conditions. Winter grazing has not materialized, and early
frosts have deteriorated pastures, causing ranchers to
feed cattle on hay. Agriculture lending has been stagnant,
with most activity being renewals.

10

1,565

5.0

12 Southern New Mexico

4

338

–6.7

2.5

13 Northern Louisiana

9

1,894

–0.4

11.6

86

Cropland—Irrigated
District

Region 11 • Trans-Pecos and
Edwards Plateau

XXMost area ranches grew some grass this summer.
Stocking rates are still low because of the drought.
XXSoil in our area is starting to dry out because we have
not received any good rain since September. Producers
are reducing livestock herds before the end of the year
due to dry weather and uncertainty in the tax code.
XXFall and winter were forecast to be wetter and cooler,
but we are still in drought conditions. Many producers
have not replaced their livestock, and if it does not rain
this winter and early spring, those who did not sell out this
past year may have to next year. Even through the difficulties, livestock prices have remained strong and there is
a good market for sheep, goats and cattle at this time. If
current conditions persist, we can only hope that there is
still some livestock left after the next couple of years.
XXCattle prices remain good. We need rainfall.
Region 12 • Southern New Mexico

XXCrop insurance and commodity prices are keeping the
effects of the drought mitigated. However, moisture is
drastically needed.

2.5

10.1

71

1,966

3.4

10.7

18

1,800

5.0

19.1

2 Southern High Plains

13

1,542

7.1

4.7

3 Northern Low Plains

4

1,350

–7.7

11.6

4 Southern Low Plains

5

1,440

0.0

0.0

5 Cross Timbers

5

2,670

–1.5

–0.5

6 North Central Texas

n.a.

n.a.

n.a.

n.a.

4

2,350

–15.4

9.1

8 Central Texas

8

3,063

8.3

10.1

9 Coastal Texas

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

11 Trans-Pecos and Edwards Plateau

7

3,900

0.0

5.5

12 Southern New Mexico

6

2,200

–8.1

2.2

13 Northern Louisiana

9

2,700

5.3

13.7

129
118

1,460
1,759

0.4
0.8

0.1
0.0
6.4

7 East Texas

Region 9 • Coastal Texas

XXWe need rain.

2,049

Texas
1 Northern High Plains

10 South Texas

Ranchland
District
Texas
1 Northern High Plains

17

485

3.0

2 Southern High Plains

11

573

–1.5

6.4

3 Northern Low Plains

6

688

–4.6

–2.1

4 Southern Low Plains

6

992

–3.2

0.0

5 Cross Timbers

13

1,877

0.5

–0.5

6 North Central Texas

18

2,250

–3.0

–11.0

7 East Texas

17

2,421

–2.4

5.2

8 Central Texas

10

3,665

2.8

0.4

9 Coastal Texas

3

1,117

0.0

9.8

n.a.

n.a.

n.a.

n.a.
2.7

10 South Texas
11 Trans-Pecos and Edwards Plateau

16

1,725

2.9

12 Southern New Mexico

5

183

–14.2

0.0

13 Northern Louisiana

6

1,458

6.6

25.0

Number of banks reporting land values.
Prices are dollars per acre, not adjusted for inflation.
Not adjusted for inflation and calculated using responses only from those banks reporting in
both the past and current quarter.
n.a.—Not published due to insufficient responses but included in totals for Texas and district.

1
2
3

Agricultural Survey • Fourth Quarter 2012 • Federal Reserve Bank of Dallas

Real Land Values

Real Cash Rents

2005 dollars per acre
1,800

2005 dollars per acre per year
120
Irrigated

1,600

100

1,400
1,200

80

Dryland

1,000

60

800
600

40

400

Dryland

20

200
0

Irrigated

Ranchland

0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Long-term farm real estate

Intermediate term

Other farm operating

2002

2003

2004 2005

2006 2007

2008 2009

2010

2011 2012

Anticipated Farmland Values, Income and Credit Standards

Interest Rates by Loan Type

Feeder cattle

Ranchland

Fixed (average rate, percent)
2011:Q4

6.54

6.71

6.69

6.41

2012:Q1

6.54

6.63

6.49

6.19

Q2

6.43

6.50

6.46

6.36

Q3

6.56

6.55

6.51

6.23

Q4

6.37

6.47

6.32

6.19

What trend in farmland values do you expect in your area in the next three months?
Percent reporting

Index*
Anticipated trend in farmland
values

2012:Q3

2012:Q4

pUp

Stable

qDown

14.3

12.1

17.5

77.2

5.4

What change occurred in farm income for farmers and ranchers in your area in the past three months
compared with a year earlier?†
Farm income

12.8

0.0

27.0

46.0

27.0

What change occurred in credit standards for agricultural loans at your bank in the past three months
compared with a year earlier?†
Credit standards

2012:Q3

2012:Q4

pTightened

Same

qLoosened

6.5

8.7

10.0

88.7

1.3

Index
50
40
30

Variable (average rate, percent)
2011:Q4

6.00

6.09

6.14

5.83

2012:Q1

5.97

6.09

6.06

5.79

Q2

5.90

5.96

5.98

5.70

Q3

6.04

6.09

6.05

5.69

Q4

5.83

5.93

5.94

5.62

Credit standards †

Anticipated trend
in farmland values

20
10
0

Farm income†

–10
–20
–30
–40
–50

2010

2011

2012

*See note on bottom of page 1.
†
Added to survey in second quarter 2011.

DALLASFED

Agricultural Survey
is compiled from a survey of Eleventh District agricultural bankers. Data were collected Dec. 4–12,
and 152 bankers responded to the survey. This publication is prepared by the Federal Reserve Bank
of Dallas and is available without charge by sending an email to pubsorder@dal.frb.org or by calling
214-922-5254. It is available on the web at www.dallasfed.org/research/agsurvey.
For questions, contact Amy Jordan, 214–922–5178.
Agricultural Survey • Fourth Quarter 2012 • Federal Reserve Bank of Dallas