Full text of Agricultural Survey : Second Quarter 1992

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STATISTICAL
F

RELEASE

R E S E R V E

B A

L A S

Quarterly Survey of Agricultural
Credit Conditions in the
Eleventh Federal Reserve District
Second Quarter 1992

Agricultural Banks'
Financial Prospects
Are Improving

Agricultural Credit
Conditions at Survey Banks
in the Eleventh District
Demand for Loans
Percent

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

The Eleventh District's survey of agricultural
credit conditions indicates that the financial prospects
of agricultural banks improved in the second quarter
of 1992. This improvement is largely the result of the
expanding margin between the interest rate banks
charge and their cost of funds. Fixed and variable
interest rates declined an average of 15 basis points
in the second quarter. Over the same period, farm
banks' cost of funds continued its downward trend
and fell 40 basis points. This decline bodes well for
banks because profits should increase as the spread
between loan rates and cost of funds widens. The
District farm banks' improving financial position and
enhanced profitability should increase their willingness

without charge by writing to

100

1987

1988

Less

1989
• Same

1990

1991

1992

1991

1992

• Greater

(Continued on page 4)

the Research Department,

Availability of Funds

Federal Reserve Bank of
Dallas, Station K, Dallas,

Percent

District Land Values

100

1987 dollars per acre

Texas 75222, or by

1,000
80

telephon ing (214) 922-5254.

900
800

·.
·•····...

··•...

For questions regarding

700

information in the release,

600

contact Kelly Whealan,

500

(214) 922- 5175, or Kevin

400

Yeats, (214) 922-5167.

300

·.
••·••··•·••··••·•·•••••·•

'• .... ,,

Irrigated

.. ·......... ······························..... .

..... ._,,
'•

..................................
Ranchland ----------------------------

1985

1986

1987

1988

1989

1990

1991

1992

0
1986

1987

1988

Less

1989
• Same

1990
• Greater

STATISTICAL

RELEASE

Agricultural Credit Conditions at Survey Banks
in the Eleventh District
Rate of Loan Repayment
Percent
100

Loan-Deposit Ratios at Survey Banks

Average Actual and Desired Ratios

Percent

~~~~~~~~~~~~~-60

50
20

45
19B7

19BB

Less

19B9

• Same

1990

1991

1992

• Greater

Actual Ratio

•

Desired Ratio •

35
1991 :2

1991 :3

1991 :4

1992:1

1992:2

Renewals or Extensions of Loans
Percent
100

DISTRIBUTION OF LOAN-DEPOSIT RATIOS

Banks Reporting (Percent)

Ratio

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

1991
Jul. 1
Oct. 1

44
22
22
9
3

43
23
17
10
8

Jan. 1

1992
Apr. 1

Jul. 1

47
21
16
10
6

51
20
15
8
6

49
21
21
8
2

0
19B6

19B7

19BB

Less

19B9

• same

1990

1991

1992

INTEREST RATES-FIXED

• Greater

Average Rate (Percent)

Amount of Collateral

Loan Type

1991
Jul. 1
Oct. 1

Jan. 1

1992
Apr. 1

Jul. 1

11.79
11.86
11.99
11.74

10.56
10.64
10.77
10.70

10.40
10.29
10.55
10.36

10.15
10.20
10.38
10.40

Percent

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

100

11.47
11.57
11.57
11.48

INTEREST RATES-VARIABLE
Average Rate (Percent)

Loan Type

0
19B6

19B7

1988

Less

19B9

• same

1990

• Greater

1991

1992

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

1991
Jul. 1
Oct. 1

Jan. 1

1992
Apr. 1

Jul. 1

11.43
11.56
11.52
11.23

9.88
10.30
9.94
9.76

9.71
9.88
9.83
9.54

9.63
9.70
9.65
9.35

10.91
11.15
11.12
10.89

STATISTICAL

Rural Real Estate Values

RELEASE

CRDPLAND-DRYLAND

July 1, 1992
Region

Number of banks reporting.
Dollars per acre.
n.r.-No response or not enough responses.

NOTE: Regional land values based on a small
number of reporting banks should be used
with caution.
All figures are preliminary.

Seventh Federal Reserve District

Average
Banks'
Value2
Second Quarter 1992

Percent Changes
in Values from
Previous Previous
Quarter
Year

DISTRICT

183

528

-.1

-3.1

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

169
19
20
9
17
17
25
13
22
7
8

522
260
334
306
418
431
660
630
915
722
527

-.4
.9
-2.5
4.0
.4
.6
-1.6
2.0
1.8
-2.0
-2.0

-3.9
-1.7
-4.2
.3
-6.9
-5.4
-5.2
-1.4
6.9
-8.5
-12.8

510

-7.4

-12.3

9
5

643
226

2.5
4.7

4.7
6.2

Northern Louisiana
Southern New Mexico

CROPLAND-IRRIGATED

Region

12
HEW

2
3
4
5
6
7

MEXI CO

Northern High Plains
Southern High Plains
Northern Low Plains
Southern Low Plains
Cross Timbers
North Central Texas
East Texas

8 Central Texas

Average
Banks'
Value2
Second Quarter 1992

Percent Changes
in Values from
Previous Previous
Quarter
Year

DISTRICT

109

636

-.2

-8.8

93
18
20
7
7
6
n.r.
5
10
n.r.
8

579
465
543
448
663
654
n.r.
832
1215
n.r.
807

-3.5
.4
-1.8
6.2
1.9
-.5
n.r.
-4.5
1.7
n.r.
-3.8

-12.3
-9.7
-7.1
0
2.5
-2.2
n.r.
-19.9
3.6
n.r.
-16.4

734

-12.0

-13.4

8
8

817
1134

1.2
19.9

-1.2
11.1

9 Coastal Texas
10
11
12
13

South Texas
Trans-Pecos and Edwards Plateau
Southern New Mexico
Northern Louisiana

Northern Louisiana
Southern New Mexico

RANCHLAND

Region

Average
Banks'
Value 2
Second Quarter 1992

Percent Changes
in Values from
Previous Previous
Quarter
Year

DISTRICT

195

301

1.6

181
18
15
10
17
18
26
20
22
7
7

361
154
129
146
233
316
561
641
802
497
445

0
1.8
-5.0
-.3
- .7
-3.3
-1.2
.6
1.0
-1.7
2.4

-.1
2.1
-9.6
-12.0
2.0
-4.4
-4.0
-.4
.4
-2.l
-2.1

306

-.5

4.6

5
9

448
127

2.3
16.9

19.4
4.1

Northern Louisiana
Southern New Mexico

STATISTICAL

Second-Quarter
Comments
District bankers were asked for any additional
comments concerning agricultural land values
or credit conditions. Because of space
constraints, these comments were edited.

RELEASE

Region 3-Northem Low Plains

Region 8-Central Texas

Moisture conditions are extremely good.
However, this moisture has made planting
cotton difficult. About 90 percent of our area's
cotton was replanted from June 10 to June 20,
which is a little later than desired.
The May 1 planting of peanuts is doing
well.

Demand for cattle loans has increased as
ranchers are increasing their herds this
summer. The demand for operating loans also
has increased because extensive rainfall has
not allowed ranchers to load their cattle and
get them to the market. Cattle prices may go
down once we have dryer conditions.

Region 5-Cross Tunbers

Region 9-Coastal Texas

Excess rainfall has delayed the planting of
the peanut crop and has caused problems in
dairy production. Pastures and forage crops
are in very good condition.

Things are so strange. This year we have
had too much rain, and it caused some farmers
to replant cotton up to three times. However,
most grain looks pretty good. Overall, we are
expecting some farmers to experience lessthan-average yields, which will result in carryover Joans to the bank.

Region I-Northern High Plains

Late June's hail storms destroyed some
wheat, corn and milo crops. The extent of
damage to sugar beets is still undetermined.
The wheat and milo that were not destroyed
seem better than average. Just another chapter
in the book of Risk and Financing of Farming.
The feeder cattle market is better than it
was 30 days ago. Markets for heavier cattle
are not as good but hopefully will improve by
fall.
Region 2-Southem High Plains

Most of our farm customers were forced
to replant their crops in June because of
adverse weather.

Financial Prospects Improving
(Continued from page 1)

to extend credit to credit-worthy borrowers.
Extending credit will be more profitable
than purchasing investment securities
because returns on securities have decreased more than the return on loans in
the past quarter.
Survey responses indicate that recent
interest rate decreases have not necessarily
increased the total demand for loans. The
percentage of agricultural bankers reporting
a second-quarter decrease in loan demand
has increased since the Dallas Fed's firstquarter survey.
Agricultural banks' loan-to-deposit ratios
have been falling slowly, and bankers indicate that these ratios are lower than desired.
The volume of agricultural loans has been

Region 6---North Central Texas

Current regulatory conditions have
prompted small rural and agricultural banks to
reevaluate credit terms for farmers. Available
credit for farmers is decreasing because of the
regulators' inflexibility. It is rapidly approaching the point where it will be more advantageous for us to invest in government and
municipal securities rather than worrying
about agricultural loans. Soon the small farmer
won't have anywhere to turn for help.

shrinking since the third quarter of 1991.
Agricultural bankers indicate that they
would prefer to increase the volume of loans
available to credit-worthy farmers and
ranchers. This development suggests that
either loan demand has decreased or that
recent loan applications do not meet the
bank's credit standards.
Respondents are optimistic about existing loans, and they expect the performance
of agricultural loans to improve over the next
quarter. Most respondents expect the rate
of loan repayment to increase. In addition,
the level of loan extensions is expected to
decrease.
Land values continue to crawl downward,
although the rate of decrease is subsiding.
Dryland and irrigated land values declined
slightly during the second quarter of 1992.
In some areas, ranchland values showed

Region 11-Trans-Pecos and Edwards Plateau

Dryland crop prospects are the best in
several years, although some spring wheat and
oats were lost due to excessive rainfall.
Irrigated farmland values are very uncertain
because the outcome of the Edwards Aquifer
controversy is uncertain.

some signs of recovery from past declines;
values turned up 1.7 percent in the second
quarter of 1992. Despite these changes,
most respondents expect farmland values to
remain stable over the third quarter of 1992.
District agricultural conditions
improved slightly in the second quarter of
1992, which enhanced agricultural
borrowers' ability to service their debt.
Producers report good crop development,
with particularly good peach, orange and
vegetable production. For the past month,
livestock prices have remained stableabove what is roughly considered breakeven prices-but are below 1991 prices.
Most commodity prices declined as cropyield estimates increased. Severe weather
conditions earlier in the year delayed some
production, which raised the costs and
credit needs of farmers in selected areas.

Full text of Agricultural Survey : Second Quarter 1992

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