Full text of Agricultural Survey : Second Quarter 2003

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STATISTICAL RELEASE

F E D E R A L

R E S E R V E

BANK

DALLAS

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
Fifteen percent of bankers report
an increase in loan demand.
Percent
100

Second Quarter 2003
The Second Quarter Suivey of Agricultural
Credit Conditions revealed some improvement in
the Eleventh District's agricultural environment.
Loan repayment rates and fund availability both
rose, potentially indicating improved liquidity.
However, many bankers expressed caution
because of farmers' ongoing confusion over
farm program participation. In particular, uncertainty about the timing of program payments
makes it difficult for bankers to assess overall
loan risk. Higher natural gas prices and concerns
Quarterly Survey of
about water rights continue to negatively affect
production. (See page 4 for bankers' comments.)
Agricultural Credit
Here are additional details from the suivey:
Conditions is compiled from
• Loan demand is up relative to last year.
Fifteen percent of responding banks noted a
a sutvey of Eleventh District
greater demand for loans, compared with 11
agricultural bankers. This
percent a year ago. In addition, the number of
bankers who reported increased availability of
publication is prepared by
funds rose 5.6 percentage points.
the Federal Resetve Bank
• The incidence of loan repayment continues to rise. Over 10 percent of respondents reof Dallas and is available
ported an increased rate of repayment, double
without charge by writing
the 5 percent of a year earlier. Thirty-two percent of bankers in the Southern Low Plains and
to the Research Department,
20 percent of bankers in South Texas reported
Federal Resetve Bank of
higher loan repayment rates relative to a year ago.
• Nineteen percent of respondents reported
Dallas, P.O. Box 655906,
increased collateral requirements, down from
Dallas, TX 75265-5906,
24 percent a year ago and 26 percent in the first
quarter of 2002. This suggests that lending criteria
or by telephoning
are less stringent than in recent quarters.
(21 4) 922-5254. It is
• Favorable grazing conditions and strong
cattle markets have contributed to bankers'
available on the web at
expectations of increased volume for feeder catwww.dallasfed.org.
tle loans. Fourteen percent of bankers reported
that they expect the volume of feeder cattle
loans to increase during the next tllfee months,
For questions regarding
compared with 5 percent a year ago.
• Banks' cost of funds declined another 21
information in the release,
basis points in the second quarter, to an average
contact D'Ann Petersen,
of 1.9 percent. This is the first time in 18 years
that the rate has fallen below 2 percent. Respon(214) 922-5190.
dents reported stable loan-to-deposit ratios.

0
01 :'97

01 :'98

01 :'99

Less

01 :'00

•

Same

01 :'01

•

01 :'02

01 :'03

Greater

Funds Available for Additional Lending
Twenty-seven percent of bankers cite an increase
in the funds available for lending.
Percent
100

0
01:'97

01:'98

01 :'99

Less

01 :'00

Same

01 :'01

•

01 :'02

01 :'03

01 :·02

01 :·00

Greater

Rate of Loan Repayment
Ten percent of respondents see greater
loan repayment.
Percent
100

0
01 :'97

01 :'98

01 :'99

01:·00

Less

• Same

01 :·01

•

Greater

STATISTICAL RELEASE

Agricultural Credit Conditions at Survey Banks in the Eleventh District
Renewals or Extensions of Loans
Seventy-three percent of respondents report no
change in renewals or extensions.
Percent
100

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

Percent
~~~~~~~~~~~~~~~~-10

•I •••
I I I

0
01 :'97

01 :'98

01 :'99

Less

01 :'00

•

Same

01 :'01

•

01 :'02

01:'03

Greater

Amount of Collateral
Eighty-one percent of bankers report no change
in collateral requirement levels.

Actual Ratio

Desired Ratio

I
·I
I

I
I
I

2002:2

2002:3

2002:4

60
55
50

I
I
I

2003:1

45
40

2003:2

Percent
100

DISTRIBUTION OF LOAN -DEPOSIT RATIOS
80

Banks Reporting (Percent)
60

Ratio
40

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

2002
July 1
Oct. 1

19
12
20
20
30

16
14
17
20
33

2003
Jan. 1

April 1

July 1

14
17
18
21
30

19
16
18
18
29

20
15
13
21
31

0
ill~

ill~

Less

ill~

•

Same

ill~

•

ill ~

ill~

INTEREST RATE-FIXED

Greater

Total Agricultural Loans at
Eleventh District Banks
Total loan volume continues to rise in the first quarter
of 2003.
Millions of dollars (seasonally adjusted)
5,600
5,400

Average Rate (Percent)
Loan Type

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

2002
July 1
Oct. 1

8.14
8.19
8.24
7.82

8.08
8.08
8.10
7.79

Jan. 1

2003
April 1

July 1

7.62
7.67
7.73
7.51

7.59
7.64
7.68
7.50

7.63
7.53
7.61
7.22

5,200
5,000

INTEREST RATE-VARIABLE

4,800

Average Rate (Percent)

4,600
4,400

Loan Type

4,200
4,000
3,800
3 , 600-+-~~~~~~~~~~~~~~~~~

•w••~~-m~••w• • w~~m

Note: Some of the volatility observed in agricultural loan levels is due
to the acquisition of several Eleventh District banks by banks
headquartered in other Reserve Districts.

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

2002
July 1
Oct. 1

7.20
7.19
7.19
6.95

7.03
7.13
7.10
6.77

Jan. 1

2003
April 1

July 1

6.71
6.87
6.83
6.57

6.68
6.86
6.87
6.48

6.60
6.67
6.65
6.35

STATISTICAL RELEASE

CROPLAND-DRYLAND

1111'81 Real Estate V8lual
July 1, 2003

Region

• Number of banks reporting land values.
2
Prices are dollars per acre, not adjusted for inflation.
3
Not adjusted for inflation.
n.r.-Not reported due to insufficient responses.
NOTE: In recent years we have seen some agricultural
land values driven up as a result of urban
expansion and land conversion to recreational
use. These inflated values were sometimes
omitted to reduce volatility in reporting regions.
Eventually the number omitted grew so large as
to threaten the reliability of the data series.
Therefore, we are reinstating all reported land
values. This revision includes data reported
since first quarter 2001. Historic tables
containing these data can be found at
www.dallasfed.org/htm/data/about.html.

Beventh Federal Reserve District

184

708

1.8

10.0

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

165
21
19
14
15
16
21
11
22
10
5

707
293
389
345
441
603
1,109
842
1,233
1,002
725

1.5
1.5
3.8
4.6
2.5
0
0
4.3
1.3
-0.2
3.0

10.1
3.5
7.5
5.4
7.7
2.5
15.7
7.5
9.7
12.0
20.5

581

0.8

-0.1

Northern Louisiana
Southern New Mexico

14
5

778
242

5.6
-1.1

10.2
-4.3

CROPLAND-IRRIGATED

12
MEXICO

8
9

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

10
11
12
13

P ercent Changes'
in Values from
Previous P revious
Quarter
Year

DISTRICT

Region

NEW

Average
Value'
Banks'
Second Quarter 2003

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

Average
Value'
Banks'
Second Quarter 2003

P ercent Changes'
in Values from
P revious Previous
Quarter
Year

DISTRICT

127

800

-0.4

1.6

105
19
19
12
13
4
n.r.
5
13
5
5

743
532
704
583
751
1,059
n.r.
886
1,820
835
897

-0.8
-4.4
-1.8
5.5
2.7
4.6
n.r.
-0.3
4.8
4.9
1.8

1.8
-9.8
3.4
12.9
15.9
18.9
n.r.
-3.2
2.0
14.5
7.4

1,299

-3.0

3.7

Northern Louisiana
Southern New Mexico

14
8

1,079
1,267

7.4
-0.l

17.8
-3.9

RANCHLAND
Average
Banks'
Value'
Second Quarter 2003

P ercent Changes'
in Values from
P revious Previous
Quarter
Year

Eleventh District Real Land Values
Dry/and and ranch/and values increased 1.8 percent
and 1.3 percent, respectively. Irrigated land values
edged down 0.4 percent.

DISTRICT

194

518

1.3

7.4

1992 dollars per acre

TEXAS

1,600

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

172
18
15
14
13
16
22
19
24
10
5

621
201
192
229
362
626
1,089
938
1,547
966
747

1.5
1.9
3.2
6.1
1.3
-4.0
-1.2
1.4
0.5
1.0
1.7

10.9
5.1
9.1
13.5
15.5
-5.2
14.7
5.4
19.9
23.8
11.l

506

3.8

8.7

13
9

762
217

10.9
-0.6

13.0
-15.0

1,400
1,200
1,000
800

600

.... ....

400

........ .... _

---

Ranch land

200
0

'83

'89

'91

'93

Dry land

r .......

Region

Northern Louisiana
Southern New Mexico
'01

'03

Second-Quarter
Comments
District bankers were asked for any additional comments concerning agricultural land
values or credit conditions. These comments
have been edited.

very favorable economics, with better grazing
availability and strong markets. Dairy enterprises are suffering from continued low milk
prices. Raw crop prospects are mixed. Peanuts
are doing well.

Region 5-Cross Timbers
Region 9-Coastal Texas

Excellent moisture. There's not much of a
wheat crop but an excellent start to the corn
crop. Grass pastures are in excellent condition.
Natural gas prices and U.S. farm programs
make profitability for irrigated farms difficult.

The area has received four to six inches
of rain in the past three weeks. However,
lakes remain at approximately 50 percent of
normal levels, so more runoff water is needed.
Hay-grazer is late, but hay will be ample
because of recent rainfall.
Tracts are getting smaller due to land sales
for recreational uses, which reduces the demand
for farming and ranching inputs. Small tracts
make agriculture operations less efficient.

Region 2-Southern High Plains

Region 6-North Central Texas

Region I -Northern High Plains

Water rights and their sale have driven
irrigated farmland to new highs.
Demand for crop and operating loans is
down due to long-time farmers leaving the
business. Most farmland is being planted to
grassland. Peanuts are no longer being planted.

Drought conditions will likely once again
cause farm borrowers to experience negative
cash flows. Competition from farm credit system lenders is a problem because they don't
pay income taxes on their real-estate-secured
loans. Yet community banks pay 34 cents of
every $1 of net income in taxes.
The rice crop is later than usual because
of the wet spring. Many farms struggle with
low prices and unclear government programs.

Region 10-South Texas
Weather is currently playing a big part
in our region. Several areas will have to be
replanted, and costs will increase.
Secluded areas of irrigated land that have
abundant underground water have sold for
premiums of $1 ,259 to $1,500 per acre.
Cattle feeders have experienced outstanding results this year, with strong beef prices.
Dairy operators are pressured by low milk prices;
highly leveraged operations are distressed. The
South Plains will experience high cotton abandonment because of late May and early June
storms and seedling diseases. But dryland
acreage has benefited from improved moisture,
so the crop outlook is mixed as of early June.

The cattle market appears to be strong
and improving. Row crop farming operations
are caught in a squeeze between production
cost and price received. Production prospects
are good but not adequate at today's market
prices. Most farm borrowers have requested
additional loan funds to cover higher input
costs. The unknown variable is the amount
they will receive from government programs.
It is difficult to use government disaster
programs as collateral or a source of repayment for loans when the programs are so
poorly administered.

Region 7 -

East Texas

Region 3-Northern Low Plains

Agricultural land values are high compared with income generated from agricultural
products. Production costs continue to escaThe receipt of USDA disaster money and
late, while prices are below value. Cash flows
FSA program payments is expected to reduce
do not adequately cover cost of production.
loan demand in the next quarter.
We are near the deadline for planting cot- That results in greater credit risk and less
ton, but some fields are still too wet to plow.
available credit to the producer.
Cotton has come up and died because of high
Milk prices are at a four-year low. The
winds and cold weather. Peanut growers are off milk income loss contracts (MILC) program is
to a good start. Cattle prices are still good. Pro- saving most milk producers. The feed-to-milk
ducers are waiting for USDA disaster payments. ratio is 2.4, well below the 3 percent profit
margin needed. Beef prices are steady. Feed
prices are stable. The poultry business is good.
Region 4-Southern Low Plains

We have received good planting rains for
the first time in about five years. Our area
lakes are still in need of major runoff.
Overall, we are not seeing any large
changes in our loans. Repayment has been
satisfactory considering our current economic
times. Most of the wheat crop is out. However,
cotton may be expensive since some farmers
may have to plant again.
Beef cattle enterprises are experiencing

Timely rains and light insect pressure
should result in average to slightly better than
average yields for most Lower Rio Grande
Valley cotton, corn and grain sorghum. The
water situation with Mexico is still a concern,
but small amounts of water have been released,
which should help. The onion harvest is over,
and while yields and acreage were down,
prices made up the difference. Watermelon
and cantaloupe prices were good, but yields
were off. Signup continues to be slow for the
new farm program.

Region 8-Central Texas

Region 11-Trans-Pecos and
Edwards Plateau

Availability of water continues to be a
cause for concern.
Recent rains have helped prospects for a
good year, but follow-up will be needed
before restocking can be considered. Many
ranchers are concentrating on maximizing
hunting income and not counting as heavily
on income from cattle, sheep and goats.

Region 12- Southern New Mexico
Milk prices have caused dairy farmers to
cut back on irrigated land purchases.

Region 13-Northern Louisiana
Agricultural loan values are steady to
strong. Heavy fall and winter rains in 2002
replenished deep subsoil moisture, but the
late spring and early summer were very dry.
The crop worst hit by this dry pattern was
corn. Early to midsummer has brought some
rains-very timely for the grain sorghum crop
and rangelands.

Land values are stable. The exception is
for land near large cities, where values are
increasing. Rates on agricu ltural loans are
becoming more competitive, especially in the
poultry business. More local banks are becoming interested in agriculture loans because of
poultry predictions in this area.

Full text of Agricultural Survey : Second Quarter 2003

FRASER