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Fourth Quarter 2016

DALLASFED

Agricultural
Survey

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

Survey
Highlights

B

Figure 1

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 fourthquarter survey continued to report
concern for producers’ financial po-

sitions and profitability due to low commodand better than expected in some areas. Re-

Loan renewals or extensions

ports on the winter wheat crop were mixed,

Index

with some areas in good condition and

50

losses with the decline in cattle prices; this is
impacting supplementary feed, replacement
cattle and equipment purchases.
Demand for agricultural loans decreased
for a fifth consecutive quarter. Loan renewals

–30

increased year over year, while all other loan

–40

values fell 5.2 percent from last quarter. Real

18.7

56.8

24.5

1.4

3.1

8.8

85.5

5.7

–25.2

–19.8

6.4

67.5

26.2

22.8

15.1

22.2

70.6

7.1

Availability of funds*

Loan renewals
or extensions
Rate of loan repayment

–20

lower than a year ago. Operating loan volume

this quarter (Figure 2). Real irrigated land

–5.8

10

–10

Real district land values decreased

–10.9

20

at a slower pace, as loan repayment rates de-

categories’ volumes fell (Figure 1).

qLess

30

0

the volume of non-real-estate farm loans was

Same

40

and extensions continued to increase, albeit
clined for the second year in a row. Overall,

pGreater

Availability of funds*
Rate of loan repayment

others marginal. Ranchers suffered equity

2016:Q4

Demand for loans*

ity prices. Cotton yields were good in general

Percent reporting, Q4

2016:Q3

–50

Demand for loans*
2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

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

dryland values declined 4.3 percent, while
real ranchland values were down 3.3 percent.

Percent reporting, Q4

2016:Q3

2016:Q4

pGreater

Same

qLess

–2.4

–6.3

15.8

62.2

22.1

However, according to bankers who respond-

Non-real-estate farm loans

ed in both this quarter and fourth quarter

Feeder cattle loans*

–23.6

–26.0

7.8

58.4

33.8

2015, nominal district land values increased

Dairy loans*

–14.2

–10.0

1.8

86.4

11.8

–4.6

–2.0

6.0

86.0

8.0

8.8

4.0

17.6

68.8

13.6

year over year (Table 1).
The anticipated trend in farmland values
index was negative for a sixth consecutive

Crop storage loans*
Operating loans

quarter, suggesting respondents expect

Farm machinery loans*

–24.8

–30.6

3.9

61.6

34.5

farmland values to trend down in the coming

Farm real estate loans*

–27.0

–16.5

9.0

65.5

25.5

months. The credit standards index indicated

*Seasonally adjusted.

continued tightening of standards (Figure 4).

NOTE: Survey responses are used to calculate an index for each item by subtracting the percentage of
bankers reporting less from the percentage reporting greater. 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.

XXFarmers are still feeling the effects of low com-

grazing. We are seeing significant loss of equity in
cattle-based operations due to the significant drop
in cattle prices over the past year.

XXIt has been a year of challenges for any area of

Wheat producers are trying to use cattle to help
diversify their operations. Most, if not all, producers can’t pencil a profit by cutting wheat at current
prices.

Region 1 • Northern High Plains
modity prices, which are hurting loan repayment.
Ranchers seem to be recovering a little due to price
stabilization but still have a hill to climb to regain
lost equity.
ag production to be profitable. 2017 is anticipated
to be another challenging year as most crop and
livestock budgets are prepared with anticipation of
negative cash flows.

XXCotton yields were very good. Wheat pasture

looked great in early October, but lack of moisture
has only allowed us to stock the irrigated land at
this time. Most cattlemen are being very cautious
about stocker cattle purchases. Two years of beatings have taken their toll.

Region 2 • Southern High Plains

XXThe cotton crop was better than expected, both
in quality and quantity. The harvest is progressing
nicely. Cattle prices have weakened. Hopefully,
most producers will be able to pay out this time.

XXCotton production has been slightly better than

projected heading into harvest. Producers are selling cotton in the 65 to 70 cents/pound range. These
two factors should allow most producers to break
even or possibly take in a small amount of positive
net income.

XXDue to increased yields, 2016 is on track to be

productive and profitable. Not all producers enjoyed
this trend due to crop loss or just not being under a
rain when it came. Most cotton yields are tremendous. However, lenders will face the same hurdles
as last year in getting an operation to cash flow.

XXCotton yields on the South Plains are coming in

better than expected due to favorable conditions in
September and October. Fiber quality is excellent,
and prices reached 70 cents for some trading days.
Income for this sector will be up 20 percent or so
from original expectations—very much welcomed.
Cattle producers are hoping that prices have
bottomed and that the market will be less volatile.
Lots of equity has been drained from this segment,
which is hampering placements.

Region 3 • Northern Low Plains

XXThe cotton harvest is winding down. Dryland

production has been far above average in most
areas. Irrigated yields are average. Wheat conditions improved with the rain two weeks ago but
are still marginal, with most acres being used for

XXIt’s the best wheat pasture we have had in years.

12
N E W

M E X I C O

Regions of the Eleventh
Federal Reserve District

Region 4 • Southern Low Plains

XXThere’s more optimism with the new administration coming in. Hopefully, some deregulation will
occur that will help profitability.

XXDryland yields were mixed. A very rare fall

hailstorm cut yields in half. Irrigated yields were 1.5
to 2 bales. Most cotton operating loans will pay off
or be close to paying out. The lack of concern on
overall debt coverage by dealer credit continues to
be a problem. Banks have to cash flow large dealer
debt, but dealers don’t give a hoot—they are just
selling equipment. Cattle lines have stabilized.

Region 5 • Cross Timbers

XXGood rains over most of the area in the past

month or two ended a dry spell; soil moisture is
now in good shape, and most ponds and lakes are
full. Winter wheat and oats should do very well this
year. Cattle prices are still down and causing cashflow issues for many cow–calf operations. Winter
arrived late; there’s abundant supply of hay.

Region 6 • North Central Texas

XXUnreliable weather patterns are severely impacting farm operations and land sales in the area, as
potential buyers are concerned that they will not be
able to produce a crop.

XXCrop and cattle prices are not good. Off-and-on
rain is hurting cotton and the gins.

XXCattle prices are killing our farmers. Cattle had
helped soften the blow the past two years due to
our flood/drought situations.

XXWith the rains the past two years and lower

commodity prices, 2016 is the second carryover
year for a lot of the farmers.

XXThe cattle market has declined substantially.

Many producers are retaining their weaned calves
until next year.

Region 7 • East Texas

XXMost farmers are still undecided about 2017.

Those who have decided look to plant almost all

Agricultural Survey • Fourth Quarter 2016 • Federal Reserve Bank of Dallas

cotton. Cattlemen are in hunkered-down mode,
tightening their belts and hoping for a light winter to
hold feed costs down.

Region 8 • Central Texas

XXBeneficial rains in November and December

provided needed subsoil moisture. Cattle prices are
down, affecting purchases of supplementary feed
and equipment.

Region 9 • Coastal Texas

XXRecent rains put some good moisture in the

ground that will definitely help crops and pastures
get a good start into next year. Rains were mixed
from area to area. Land preparation for spring
started with some wheat planting being considered.
Wheat acreage will be down this year. More traditional crop mixes will be planted in grain, corn and
cotton in 2017.The cotton market seems optimistic,
with some potential this coming year. Cattle prices
have rebounded some but can be shored up by an
upswing in the markets. Prices will be good indicators in the marketing of cattle in the next three
to nine months. Some producers will hold back
replacements and look at possibly improving herds.

XXAll ag-related credit has decreased cash flow

due to lower commodity prices. In particular, cotton
producers in this area experienced the biggest
decrease in cash flow due to added expenses at the
gins. Producers with concentrations in cotton will
not be able to pay off annual operating lines.

Region 11 • Trans-Pecos and
Edwards Plateau

XXA decreased alfalfa market will cause a number
of accounts to come up short, despite excellent
yields. A few producers are planning on feeding
alfalfa to feeder cattle to minimize losses.

XXCattle prices have come off significantly from
early in the year and particularly since last year.

Table 1

Rural Real Estate Values—Fourth Quarter 2016

1

Banks1

3

Average
value2

Percent change
in value from
previous year3

Cropland—Dryland
District*

2

4

L O U I S I A N A

5
6

11

7

T E X A S

8

9

10

13

104

1,818

3.2

Texas*
1 Northern High Plains

92
11

1,845
873

2.6
1.3

2 Southern High Plains

10

683

1.6

3 Northern Low Plains*

8

810

–3.9

4 Southern Low Plains*

8

1,148

–0.8

5 Cross Timbers

7

1,821

–2.6

18

2,719

7.6

7 East Texas*

5

2,687

2.9

8 Central Texas

10

3,650

1.8

9 Coastal Texas

6

2,508

1.6

10 South Texas

3

2,317

3.5

11 Trans-Pecos and Edwards Plateau

6

1,750

1.4

12 Southern New Mexico

5
7

360
2,429

10.4
14.7

6 North Central Texas

13 Northern Louisiana

Cropland—Irrigated
Although we experienced good rainfall all year long,
there is apprehension among most of our livestock
producers that with prices where they are, we could
be looking at a difficult year if it turns out dry. As
always is the case in south central Texas, rainfall
will be the key going forward. Fortunately, going
into the early winter months, range conditions are
overall very good.

XXRecent rains have pastures and grain fields

in good condition. Livestock prices are slightly
stronger.

XXPasture conditions are optimal at present, with

good moisture received recently on already very
good grazing conditions. Minimal supplemental
feeding has been required, but it will increase after
the recent freeze. Cattle, sheep and goat prices remain good, though down from last year. High-quality
female replacement values remain good to very
good. Predators are increasing with control being
much more challenging.

Region 12 • Southern New Mexico

XXAn increase in commodity prices would be
welcomed.

XXLivestock markets continue to be volatile.

Yearling and finishing operations have difficulty
hedging a profit. Cow–calf receipts are 60 percent
of last year’s gross sales. All livestock operations
are experiencing problems maintaining a profitable
margin. Crop producers are having a difficult time
planning for 2017 as all production reflects negative
returns based on the present depressed commodity
prices. Dry weather is concerning, and moisture is
needed on the winter wheat in this area. All wheat
is established but is in need of moisture at this time.

XXOur irrigation water is rapidly depleting. Dryland
and grazing land depend on rain.

District*

78

2,398

2.8

Texas*
1 Northern High Plains

64

2,169

0.3

11

2,007

–4.8

2 Southern High Plains

9

1,628

5.1

3 Northern Low Plains*

5

1,758

–5.4

4 Southern Low Plains

7

1,429

–2.7

5 Cross Timbers

3

2,817

9.7

6 North Central Texas

5

3,070

2.3

7 East Texas

3

2,567

0.0

8 Central Texas

7

3,714

1.1

9 Coastal Texas

4

2,813

–1.3

10 South Texas

4

3,188

5.1

11 Trans-Pecos and Edwards Plateau

6

2,883

10.2

12 Southern New Mexico

7

3,421

14.2

13 Northern Louisiana

7

3,614

9.1

111
99

1,695
2,014

2.8
2.7

Ranchland
District*
Texas*
1 Northern High Plains

11

582

–4.1

2 Southern High Plains

7

700

–3.5

3 Northern Low Plains

8

931

6.7

4 Southern Low Plains*

9

1,196

–2.4

7
17

2,057
2,747

–3.3
6.5

7 East Texas

9

2,744

0.0

8 Central Texas

9

4,622

9.2

9 Coastal Texas

5

2,630

6.4

3

2,550

–1.9

5 Cross Timbers
6 North Central Texas

10 South Texas
11 Trans-Pecos and Edwards Plateau

14

1,681

2.6

12 Southern New Mexico

6

326

4.2

13 Northern Louisiana

6

1,825

3.5

*Seasonally adjusted.
1
Number of banks reporting land values.
2
Prices are dollars per acre, not adjusted for inflation.
3
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.

Agricultural Survey • Fourth Quarter 2016 • Federal Reserve Bank of Dallas

Figure 3

Figure 2

Real Cash Rents

Real Land Values
2015 dollars per acre
2,600
Irrigated
2,400
2,200
2,000
1,800
Ranchland
1,600
1,400
1,200
Dryland
1,000
800
600
400
200
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

2015 dollars per acre per year
140

50

120

Irrigated
Dryland

40

100
80

30

60

20

40

Ranchland

10
0

20
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

NOTE: All values have been seasonally adjusted.

NOTE: All values have been seasonally adjusted.

Table 2

2015 dollars per acre per year
60

Figure 4
Anticipated Farmland Values and Credit Standards

Interest Rates by Loan Type
Long-term farm real estate

Intermediate term

Other farm operating

Feeder cattle

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

Fixed (average rate, percent)

Index
Anticipated trend in farmland
values*

Percent reporting, Q4

2016:Q3

2016:Q4

pUp

Stable

qDown

–14.5

–5.6

4.2

86.0

9.8

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

2016:Q3

2016:Q4

pTightened

Same

qLoosened

27.2

16.5

18.9

78.7

2.4

Index
50

2015:Q4

6.04

6.08

5.93

5.67

2016:Q1

6.07

6.11

6.09

5.81

Q2

6.08

6.19

6.07

5.82

20

Q3

5.98

6.07

5.96

5.72

10

Q4

5.98

6.11

6.03

5.72

40
30
Credit standards †

0
–10

Anticipated trend
in farmland values*

–20

Variable (average rate, percent)
2015:Q4

5.70

5.73

5.69

5.31

2016:Q1

5.72

5.74

5.78

5.38

Q2

5.73

5.80

5.68

5.32

Q3

5.60

5.63

5.64

5.36

Q4

5.65

5.65

5.63

5.29

DALLASFED

–30
–40
–50

2011

2012

2013

2014

2015

2016

*Seasonally adjusted.
†Added to survey in second quarter 2011.
NOTE: Survey responses are used to calculate an index for each item by subtracting the percentage of
bankers reporting less from the percentage reporting greater. Positive index readings generally indicate an
increase, while negative index readings generally indicate a decrease.

Agricultural Survey
is compiled from a survey of Eleventh District agricultural bankers, and data have been seasonally
adjusted as necessary. Data were collected Dec. 6–14, and 133 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 214-922-5270. It is available on the web at
www.dallasfed.org/research/surveys/agsurvey.aspx.
For questions, contact Amy Jordan, 214–922–5178.
Agricultural Survey • Fourth Quarter 2016 • Federal Reserve Bank of Dallas