Full text of Agricultural Survey : Second Quarter 1996

View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

STATISTICAL

F E D E R A L

R E S E R V E

RELEASE
B A N

Agricultural Credit Conditions at
Survey Banks in the Beventh District

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

Demand for Loans
Twenty-six percent of respondents
report a decline in loan demand.
Percent
100

Second Quarter 1996

The second-quarter Survey of Agricultural
Credit Conditions indicates increasing stress on
the Eleventh District agricultural community.
Agricultural bankers report weak land values,
continued declines in the rate of loan repayment and increases in renewals and extensions.
Compared with the first quarter, a greater percentage of agricultural bankers report that they
have increased their collateral requirements.
Quarterly Suroey of
Agricultural Credit
Conditions is compiled from
a survey of Eleventh District
agricultural bankers. This

Here are additional details from the survey:
• Land values continue to decline, and
33 percent of responding bankers expect
farmland values to drop even more in the
third quarter.

0
1990

1991

1992
Less

1993
•Same

1994

1995

1996

• Greater

Funds Available for Additional Lending
Seventy -seven percent of respondents report
no change in availability of funds for lending.
Perce nt
100

publication is prepared by
the Federal Reserve Bank
of Dallas and is available
without charge by writing
to the Research Department,

• Nearly 60 percent of responding bankers
report a decrease in the rate of loan
repayment. In the Southern High Plains,
Southern Low Plains, and Trans-Pecos
and Edwards Plateau regions, over 70
percent of bankers report a drop in the
loan repayment rate.

Federal Reserve Bank of
Dallas, P.O. Box 655906,
Dallas, TX 75265-5906,
or by telephoning
(214) 922-5254.

For questions regarding
information in the release,
contact Michelle Burchfiel,
(214) 922-5178.

• Sixty percent of responding bankers
report an increase in renewals or extensions, nearly three times the number who
reported an increase a year ago.
• Sixty percent of responding bankers
expect the volume of feeder cattle loans
to decline during the third quarter, while
40 percent expect the volume of farm
machinery and non-real-estate farm Joans
to decline.

0
1990

1991

1992
Less

1993
Same

1994

1995

1996

• Greater

Rate of Loan Repayment
The rate of loan repayment decreases for
59 percent of second-quarter respondents.
Percent
100

0
1990

1991

1992
Less

1993
•Same

1994
• Greater

1995

1996

STATISTICAL

RELEASE

Agricultural Credit Conditions at Survey Banks in the Eleventh District
Renewals or Extensions of Loans
Sixty percent of respondents report
an increase in renewals or extensions.
Percent
100

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

Percent

55
40

50
20

0
1990

1991

1992

Less

1993

•Same

1994

1995

Actual Ratio

Desired Ratio

1996

• Greater

35
1995:2

1995:3

1995:4

1996:1

1996:2

Amount of Collateral
Nearly 40 percent of survey respondents
report an increase in collateral requirements.
Percent
100

DISTRIBUTION OF LOAN-DEPOSIT RATIOS
80

Banks Reporting (Percent)
60

Ratio

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

0
1990

1991

1992

Less

1993

• Same

1994

1995

1996

1995
Jul. 1
Oct. 1

39
17
18
15

Millions of dollars {seasonally adjusted)
4,400

4,200

1996
Apr. l

34
23
14
21
9

37
24
20
14
5

Jul. 1

29
24
15
22

INTEREST RATES-FIXED

• Greater

Total Agricultural Loans at
Eleventh District Agricultural Banks
Lending continued to decline slightly in first-quarter
1996, after strong growth throughout most of 1995.

31
22
18
14
14

Jan. 1

Average Rate (Percent)
Ratio

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

199 5
Jul. 1
Oct. 1

Jan. 1

1996
Apr. 1

Jul. 1

11.04
11.10
11.12
10.78

10.68
10.84
10.79
10.55

10.40
10.58
10.43
10.04

10.45
10.55
10.44
10.05

10.77
10.86
10.71
10.47

INTEREST RATES-VARIABLE
Average Rate (Percent)

4,000

Ratio

1995
Jul. 1
Oct. 1

Jan. l

1996
Apr. 1

Jul. 1

11.08
11.16
11.13
10.74

10.56
10.70
10.56
10.39

10.35
10.50
10.25
10.13

10.45
10.54
10.37
10.14

3,800

3,600

3 •400 +-.-86..,.-'- 87-.-'88-.--'
89
- r-,90
-,.--·9-1-.--.92.--'9-3.--'9_4,.....'-95..,.-'~
96

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

10.74
10.88
10.82
10.49

STATISTICAL

RELEASE

CROPLAND-DRYLAND

Rll'al Real Estate Values
July 1, 1996

Region

Number of banks reporting land values.
Nominal dollars per acre.
n.r.-Not reported.
1

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

Beventh Federal Reserve District

Percent Changes
in Values from
Previous Previous
Quarter
Year

DISTRICT

155

544

- 1.0

-3.6

TEXAS
Northern High Plains
Southern High Plains
Northern Low Plains
Southern Low Plains
Cross Tunbers
North Central Texas
East Texas
Central Texas
Coastal Texas
South Texas
Trans-Pecos and
Edwards Plateau

145
19
17
11
13
13
26
9
14
8
5

540
282
325
296
390
546
769
685
812
792
414

-1.0
-3.5
-2.4
-4.0
1.9
7.1
5.0
-6.2
-8.2
3.0
-6.4

-3.5
-7.0
-7.1
-2.5
-1.7
15.5
4.0
-5.3
-8.3
-1.2
-25.6

490

-9.0

8
2

632
227

-1.7
- 1.2

-4.8
-9.1

Northern Louisiana
Southern New Mexico

CROPLAND-IRRIGATED

12
N EW

Average
Value 2
Banks'
Second-Quarter 1996

M E X IC O

Region

DISTRICT

1 Northern High Plains

2 Southern High Plains

Coastal Texas
10 South Texas
11 Trans-Pecos and Edwards Plateau
12 Southern New Mexico
13 Northern Louisiana

3 Northern Low Plains
4 Southern Low Plains
5 Cross Timbers
6 North Central Texas
7 East Texas

Average
Value2
Banks'
Second-Quarter 1996

Percent Changes
in Values from
Previous Previous
Quarter
Year

103

719

-1.4

89
19
17
6
10
7
4
4
6
1
5

625
570
609
432
634
699
n.r.
833
1,131
607
623

-.8
.3
-2.4
-1.8
2.6
-.9
n.r.
1.3
-8.9
5.6
-3.0

-4.6
-.4
-.8
1.6
1.0
4.2
n.r.
-10.l
-2.5
n.r.
-32.8

886

-.1

14.4

Northern Louisiana
Southern New Mexico

8
6

891
1,578

-1.2
5.2

-.3
4.5

RANCHLAND
Eleventh District Land Values
Real land values continue to
decline in the second quarter of 1996.

Region

1992 dollars per acre
1,600
1,400
1,200
1,000
800
600

.....

....

400
Ranch land

200
0

Dryland

---- ---'92 '93 '94 '95 '96

Percent Changes
in Values from
Previous Previous
Quarter
Year

DISTRICT

168

314

-2.2

-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

156
17
13
11
13
14
27
16
17
6
7

393
180
140
154
232
473
705
724
828
533
391

-2.2
-1.2
1.3
-.9

-1.6
-4.1
-8.5
-3.0
-.5
14.2
9.9
3.1
-.3
-9.0
-7.9

338

-5.1

7
5

392
85

-2.7
-1.8

-12.6
6.6

Northern Louisiana
Southern New Mexico
'82 '83 '84 '85 '86 '87 '88 '89 '90 '91

Average
Value2
Banks'
Second-Quarter 1996

1.7

8.0
6.7
-24.2
-5.1
-1.0
-2.0

STATISTICAL

Second-Quarter
Comments

RELEASE

Region 5-Cross 'limbers

Region 8-Central Texas

Livestock and dairy producers are showing
marginal profits, with high feed costs and low
beef prices. Hay farmers have a good flfSt cutting.

Crops are a total loss. Pasture conditions
worsen by me day. Hay is selling at the highest
price it ha ever brought; no hay is being baled,
and prices are too high to purchase and truck
in. Drought has caused many cattle producers
to sell out or severely reduce the size of their
herds because they cannot afford to feed their
cattle. Some are selling at a loss. Auction barns
are having their biggest run of cattle ever. Everyt11ing mat could go wrong went wrong for our
cow/ calf producers mis year. Please let it rain.

Region 6-North Central Texas
District bankers were asked for any additional
comments concerning agricultural land values
or credit conditions. These comments have
been edited.

Region I-Northern High Plains
Many farmers and ranchers are already
experiencing financial difficulties resulting from
1994 and 1995 production.
Cattle prices are not high enough to offset
increased feeding costs. Farmers are not receiving
any of the increased commodity prices and
have dim prospects for a good wheat crop.
Lack of moisture has resulted in higher irrigation costs, and repairs to machinery and equipment have been higher than normal.
FmHA programs are difficult to get approved. The Noninsured Assistance Program
will offer some relief for cattle producers, but
the farmer is hurt as well. Multiperil crop insurance is too expensive and for irrigated crops
does not insure against drought. If the year
continues to be dry, many farmers will face
serious bank debt problems come January.

Region 2-Southern High Plains

Drought, low cattle prices and high feed
costs are causing severe economic hardship. In
1997, many farmers will exhaust tl1eir eligibility
with FmHA and will no longer qualify for its
services. This could be a big deal.
Large areas of canon were lost to wind
and hail. Replantings are a mixture of very late
cotton, milo and peanuts. Expect cotton production to decline by at least 30 percent in our
area. We will need an excellent growing season
and a late fall to prevent a very bad year.

Region 4-Southem Low Plains
,_

Crop insurance appears to be the main
source of income for 1996. Grass is in poor
condition, and rancl1ers are selling older stock
and trying to keep younger anin1als. Equity
built up in previous years has disappeared.
Corron and peanuts have been planted.
With wind and storm conditions, some of the
crops have been destroyed. Farmers will try to
replant, but these crops will be late and will
need a late fall to mature.

Livestock loans will be down for several
reasons: cattle values are lower; there is less
hospitable pasture and little hay; higher grain
prices mean that more grain is sold and less
fed; less equity is available to buy cattle. Cattle
numbers are shrinking overall and locally. Crop
production loans will be up in areas with irrigated farms as farmers seek to maximize production to take advantage of good crop prices.
In some parts of the state, the phaseout of
government payments will lessen economic stability and lower land values. Agriculture real
estate prices will seek a true value from a production standpoint if there is little recreational
or metropolitan influence. The average values
are going to have a greater range of values in
the mix. More productive ground will begin to
command a higher premium and less desirable
ground a lower value.
Drought has had a devastating effect on
many farm relationships with this bank. Approximately 50 percent to 75 percent of our customers will not be able to continue farming
without help from some government agency.
Wheat prices made farmers a profit, even
though yields were down. Com is a big question
mark. Moderate yields with current prices could
be a real bonus for farmers. Milo looks very
good. Cotton is looking good. Cattle prices are
low; some farmers have sold out but many are
trying to hold on with moderate culling. Hay is
like gold. Most farmers are round baling anything mat could be used for feed-a few are
even looking at com stalks.

Region 7-East Texas
The drought is so severe, we expect at
least one-third of the dairy farmers to be out of
business or in bankruptcy by September. Hay
production is less than half mat of normal years,
and feed costs are 50 percent higher. Cow sales
are as much as 200 percent above normal, with
price being 30 percent to 50 percent of what it
was two years ago.
The Fam1 Service Agency (FSA) is being
cautious with further guarantee exposure in the
poultry industry, which is limiting opportunities
for bankers. Producers are anxious about feed
grain costs, but the hay harvest will have a more
critical impact in the latter part of the year.

Region 10-South Texas
Pasture conditions are extremely poor, and
many have no option except to sell. Drought is
affecting the price of all commodities, and the
real estate market is depressed.

Region 11-Trans-Pecos and
Edwards Plateau
The situation is very serious. Crop failures
have driven prices for commodities up, but with
less production, me farm sector is eroding financially. This is creating pressure on lenders to
properly advise borrowers, and on borrowers
to understand me options available to avoid
bankruptcy. Land owners who rely on agriculture are being forced to consider real estate
liquidation, and bankers cannot justify loaning
additional funds without guarantees. FSA
guarantees may not always be the ultimate
answer to a farmer's heavily leveraged situation.
The cattle market is very weak, and this
reduced income stream is resulting in many extensions and/or renewals. Margins have eroded,
but with proper debt management, depending
on the amount of existing real estate debt, borrowers have a chance. Producers are replacing
old herd cows with young stock, which delays
calf production and directly affects cash flow.
Sheep and goats arc a valuable alternative, but
nothing works well without rainfall.
Extended drought and weak cattle markets
are a disaster for farmers and ranchers, although
some operators with sheep are in better shape.
Irrigated crops look good. Dryland crops are
pathetic.

Region 12-Southern New Mexico
Cattle prices are low, drought conditions
are extreme, and feed prices are high. These
factors arc having a significant effect on dairy
operations as well as cow/calf ranching operations. If me drought does not break soon, many
ranchers will have to liquidate their herds.

Full text of Agricultural Survey : Second Quarter 1996

FRASER