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Ag ri c u ltu ral

Surv ey

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

FEDERAL RESERVE BANK OF DALLAS
Demand for Loans

Second Quarter 2011

One-third of bankers report a decrease in loan demand.
Index
50
40
30
20
10
0
–10
–20
–30
–40
–50

2001

2002

2003

2004

2005

2006 2007

2008 2009

2010

2011

Availability of Funds
The availability of funds index remains high.
Index
50
40
30
20

Bankers responding to the second-quarter survey reported that severe drought continues to manifest challenges for the Eleventh District
agricultural community. Comments from bankers noted widespread
negative impacts of the dry conditions—low or nonexistent yields for
many dryland crops, stress to irrigated crops and very poor pasture
conditions. Respondents in several regions mentioned that farmers will
likely collect crop insurance money to offset drought losses. There
were numerous reports of ranchers liquidating their cattle herds due
to inadequate grazing conditions and a lack of surface water.
Cropland values continued to rise, while ranchland values edged
down from last quarter. Expectations for farmland values were slightly
less positive than in recent reports, with less than 10 percent of bankers anticipating an increase over the next three months.
District agricultural lending trends generally worsened in the second quarter. Overall loan demand decreased, with the exception of
operating loans, which were stable. Comments suggested higher input
costs may be driving the relative strength of demand for operating
loans. The weakest loan category this quarter was for feeder cattle;
more than 30 percent of respondents saw a decrease in volumes. Despite poor agricultural conditions resulting from drought, the great majority of bankers said loan repayment rates held steady or increased.

10
0
–10

Farm Lending Trends

–20
–30

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

–40
–50

2001

2002

2003

2004

2005

2006 2007

2008 2009

2010

2011

Demand for loans
Availability of funds
Rate of loan repayment
Loan renewals or extensions
Amount of collateral required

Rate of Loan Repayment
Loan repayment rates show little change.
Index
50

Percent Reporting
Greater
Same
14.1
52.4
35.9
62.4
15.3
73.5
10.1
73.8
14.3
85.7

Less
33.5
1.8
11.2
16.1
0.0

2011:Q1
Index
–3.7
40.9
15.0
–18.0
7.5

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

40
30
20
10
0
–10
–20
–30
–40
–50

2011:Q2
Index
–19.4
34.1
4.1
–6.0
14.3

2001

2002

2003

2004

2005

2006 2007

2008 2009

2010

2011

Non-real-estate farm loans
Feeder cattle loans
Dairy loans
Crop storage loans
Operating loans
Farm machinery loans
Farm real estate loans

2011:Q2
Index
–11.2
–23.3
–15.7
–12.1
0.6
–16.9
–9.7

Percent Reporting
Greater
Same
14.2
60.4
7.3
62.0
0.0
84.4
1.6
84.7
18.9
62.8
9.0
65.1
12.7
64.9

Less
25.4
30.7
15.7
13.7
18.3
25.9
22.4

2011:Q1
Index
–7.6
–6.1
–13.8
–10.6
6.1
3.9
2.3

Survey responses are used to calculate an index for each item by subtracting the percentage of bankers reporting a decrease from the percentage reporting an increase.

Agricultural Survey is compiled from a survey of Eleventh District agricultural bankers. Data were collected June 7-15, and 172 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. Data may not match previously published numbers due to data revisions.
For questions regarding information in the release, contact Emily Kerr, 214-922-6941.

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

Loan Renewals or Extensions
A majority of bankers note no change in requests for loan renewals or
extensions.

Percent
75

Desired Ratio

70

Index

65

50

60

40

55

30

50

20

45

10

40

0

35

2010:Q2

–10

2010:Q4

2010:Q3

–30

Banks reporting (percent)

–40
2001

2002

2003

2004

2005

2006 2007

2008 2009

2010

2010

2011

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

Amount of Collateral Required
All bankers report stable or increased collateral requirements.

2011

Q2

Q3

Q4

Q1

Q2

22
10
15
21
32

20
10
14
23
33

18
16
20
19
28

28
15
15
20
22

21
18
14
22
24

Interest Rates

Index
50

Fixed

40

Average rate (percent)

30
20

2010

10
0

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

–10
–20
–30
–40
–50

2011:Q2

2011:Q1

Distribution of Loan-to-Deposit Ratios

–20

–50

Actual Ratio

2011

Q2
6.99
7.09
7.16
6.89

Q3
6.92
7.03
7.03
6.76

Q4
6.89
7.00
6.95
6.73

Q1
6.83
6.95
6.94
6.70

Q2
6.77
6.83
6.96
6.76

6.21
6.33
6.35
6.13

6.05
6.29
6.25
5.91

6.05
6.23
6.20
5.96

6.08
6.28
6.19
5.91

6.06
6.24
6.30
6.06

Variable
2001

2002

2003

2004

2005

2006 2007

2008 2009

2010

2011

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

Anticipated Trend in Farmland Values

Total Agricultural Loans*

Less than 10 percent of bankers expect farmland values to increase
over the next three months.

Eleventh District agricultural loan volumes increased slightly in the first quarter.

Index
50

8,500

Millions of dollars (seasonally adjusted)

40

8,000

30

7,500

20

7,000

10

6,500

0

6,000

–10
–20

5,500

–30

5,000

–40

4,500

–50

2001

2002

2003

2004

2005

2006 2007

2008 2009

2010

2011

4,000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

*Not based on Agricultural Survey data. Data lagged by one quarter.
SOURCE: Federal Financial Institutions Examination Council, Reports of Condition and Income.

2

Agricultural Survey

|

Second Quarter 2011

|

FEDERAL RESERVE BANK OF DALLAS

2011

Rural Real Estate Values — Second Quarter 2011
Cropland—Dryland

Eleventh Federal Reserve District
Average
value2
Second quarter 2011
Banks1

1
3
12
N E W

2

M E X I C O

4

L O U I S I A N A

5

13

6

7

T E X A S

11

8

9

10

1
2
3
4
5
6
7
8
9
10
11
12
13

Percent change3
in value from
Previous Previous
quarter
year

District

134

1,381

2.7

5.8

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
Southern New Mexico
Northern Louisiana

121
18
14
9
9
13
17
6
18
6
n.a.
10
5
8

1,403
540
575
800
828
1,323
2,103
2,200
2,717
1,525
n.a.
1,468
385
1,688

2.9
4.8
6.3
2.7
–2.7
–1.5
0.2
3.2
1.8
26.5
n.a.
–1.0
0.0
–1.0

5.5
5.7
15.5
12.2
1.2
3.4
–2.6
8.0
–0.4
40.9
n.a.
8.1
–16.5
14.5

98

1,673

1.2

10.3

85
18
14
7
6
6
5
3
10
5
n.a.
10
6
7

1,591
1,325
1,298
1,564
1,217
2,142
2,280
2,000
2,810
1,850
n.a.
3,365
1,883
2,246

2.2
0.1
6.6
–0.7
0.0
0.0
10.0
0.0
0.0
25.0
n.a.
–0.8
–0.5
–4.6

11.0
7.1
14.7
35.8
14.0
4.7
40.0
25.0
–1.5
17.5
n.a.
20.6
–1.0
17.5

District

154

1,437

–2.3

–0.7

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
Southern New Mexico
Northern Louisiana

144
17
12
9
9
15
21
18
19
5
n.a.
18
5
5

1,716
460
481
808
1,017
1,803
2,267
2,219
3,255
1,240
n.a.
1,749
240
1,530

–2.3
9.5
7.8
–1.4
–1.3
–4.6
–8.4
–2.1
2.5
–14.3
n.a.
–3.6
0.8
0.0

–0.9
14.2
10.4
25.5
5.3
–2.5
–6.7
–2.2
5.2
–5.7
n.a.
–4.1
2.1
5.0

Cropland—Irrigated
District

Real Cash Rents
Irrigated cash rents fall while dryland and ranchland cash rents
hold fairly steady.

1
2
3
4
5
6
7
8
9
10
11
12
13

2005 dollars per acre

100
Irrigated

90
80
70
60
50
40

Dryland

30
20

Ranchland

10
0
2001

2002

2003

2004 2005

2006

2007 2008

2009

2010

2011

Real Land Values
Irrigated and dryland values continue to rise while ranchland
values edge down.
2005 dollars per acre

1,600

Irrigated

1,400
1,200
Dryland

1,000
800

Ranchland

1
2
3
4
5
6
7
8
9
10
11
12
13
1

600

Ranchland

200
2001

2002

2003

2004

2005

Number of banks reporting land values.
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.
2

400

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
Southern New Mexico
Northern Louisiana

2006 2007

2008 2009

Agricultural Survey

|

2010

2011

Second Quarter 2011

|

FEDERAL RESERVE BANK OF DALLAS

3

Quarterly Comments

a dryland crop are poor. The financial condition of
most producers improved last year with high commodity prices. Projected commodity prices look
good, but production costs are higher.
The 2011 wheat crop was a bust, and cattle
struggled to gain the needed weight.
Severe drought and high winds are hurting all
areas of ag in our region.

District bankers were asked for additional
comments concerning agricultural land values
and credit conditions. These comments have been
edited.

Region 4—Southern Low Plains

Region 1—Northern High Plains
Extreme heat, wind and continued drought are
having a significant negative impact on growing
conditions. Harvestable dryland wheat is virtually
nonexistent. Irrigated wheat yields are anticipated
to be well below average with above-average
costs. Dryland crops for fall harvest will be minimal. Irrigated summer crops are stressed from
early heat, wind and lack of rainfall. The current
draw down of the aquifer could be above average,
which could impact future land prices.
Drought conditions necessitate land and herd
management for livestock producers, who are
forced to downsize due to the lack of native grass
pasture. Dryland crop production is a disaster as
well. Insured crops allow producers to avoid a potentially severe adverse impact.
Because of the expectation of higher prices
and crop success, farmers started out the year investing heavily in equipment and the 2011 crop.
However, due to the extreme nature of the current
drought, all bets are off. This is the worst start to
a crop in at least 35 years. The recent increase in
loan demand is due to higher crop inputs.
Present cattle and grain prices are extremely
high and volatile. Upon their decline, borrowers
may not be able to service their present long-term
debt load as a result of continued expansion of
their operations.

Region 2—Southern High Plains
Drought is hurting crop production. It looks
like dryland crops are gone, and insurance will pay
back the loans. Irrigated crops are fair, but having
to water almost nonstop is hard on the wells.
It has been the driest first five months of the
year since the National Weather Service has been
keeping records in Lubbock. Cotton production
will be greatly reduced. While we have irrigation,
there is not enough water to grow a crop with zero
rain. Most farmers will collect insurance money
and raise no crop, which will hurt ag-related businesses like cotton gins and their suppliers.
Dryland cotton is a total loss, with wind damage to the majority of the irrigated cotton crop.
Crop insurance claims are expected to be the major source of income for the 2011 crop year.
Dryland cotton will be abandoned and insurance collected. Irrigated cotton production will be
way off; extremely hot and windy conditions have
led to poor establishment. Production expenses for
irrigated cotton will be exorbitant. The real loser
will be ag infrastructure; input suppliers and cotton
ginners will miss out on throughput.

Region 3—Northern Low Plains
We are experiencing extreme drought conditions. Pastures are in very poor condition, and producers are liquidating their cow herds. Most crops
have been planted, though conditions for making

4

Agricultural Survey

|

Current drought conditions are affecting crop
revenues, and most farmers are planting low-inputcost crops due to the poor outlook for rainfall.
Many ranchers are being forced to reduce herd
size due to lack of surface water and land suitable
for grazing.

Region 5—Cross Timbers
Drought conditions are extreme and are triggering forced sales of livestock due to decreasing
forage supplies and availability of stock water. This
is causing decreases in what had been historically
high livestock prices. Our farmers are having similar problems due to lack of rainfall. We had a poor
wheat crop with well above average prices. Hay
production will be spotty at best.
The recent wheat harvest was decent in our
immediate area. We received some rain and snow
that others did not receive. Most farmers in our
bank have had a profitable year.
Pasture conditions are poor, and hay production is going to be short. A lot of cattle will be going to market if we don’t get rain soon, but at least
prices are still very good. Dairies are getting good
milk prices, but feed costs are very high.

Region 6—North Central Texas
Drought has caused the corn crop to be a total
disaster. Cow herds are being liquidated weekly.
Most cotton still has some potential, but that will
decline daily. Hay supplies are short, and many
ranchers are already feeding cattle. Conditions
have surpassed the legendary 1950s drought.
Dry weather continues to affect farming and
ranching in our area. While cattle prices are favorable, stock water, hay and grazing conditions continue to decline.

Region 7—East Texas
We are in the early stages of depleting our
cattle supply. Drought conditions and the efforts of
the feedlots to fulfill their contract demands with
the slaughterhouses are adversely affecting our
ability to supply replacement cattle.
New oil and gas activity in our area has played
a very important part in subsidizing ag income for
our local farmers. This has driven up land prices
as well.

We are experiencing the longest spring
drought in modern history. Dryland corn will be an
insurance claim. Grain sorghum may be harvested,
but we expect very low yields. The cotton crop still
has a chance with good rainfall, but it is highly unlikely to approach a normal yield. Hay production
was limited to one cutting, but prices are high. The
rice crop will be expensive with extra water costs;
extreme heat may affect yield and quality. Revenue
protection crop insurance should allow farmers to
be financeable next year.
Many herds have been sold off or greatly
reduced, given strong pricing earlier in the year.
Some producers are liquidating assets to pay off
loans.
Drought is currently forcing the smaller cattle
operations out of business. Hay is almost completely unavailable.
Farm and ranch income are down significantly
due to drought. Mineral landowners continue to
benefit from oil and gas leasing, pipeline construction and in some cases, production. This trend is
expected to continue for at least three to five years
in our area.

Region 11—Trans-Pecos and Edwards
Plateau
Our area has had less than an inch of rain
since October, and ranchers have begun to cut
their livestock numbers.
The drought continues to force livestock sales.
Prices are softening as more inventory hits the
markets. With livestock numbers low, it may be
expensive to buy back in. Wildfires have taken out
entire ranches, including infrastructures.
This past year has been the driest in history for
parts of the Edwards Plateau. Feed costs are high,
hay is scarce and animal conditions are less than
ideal. Prices have stayed relatively strong across the
board for livestock. Of particular concern to many
small community banks are increased regulatory
scrutiny and stringent exams, which leave them
with the impression that credit is not available.

Region 12—Southern New Mexico
Drought conditions will be a limiting factor
on crop production this year. Our area has had
very little measurable precipitation over the past
nine months. The winter wheat crop is almost
nonexistent from lack of moisture. Corn and cotton production will suffer as well if it doesn’t start
raining soon.

Region 13—Northern Louisiana
We had an excellent wheat crop. We are now
experiencing above average temperatures and
below normal rainfall. We need a rain soon, or
dryland crops will be at risk.

Region 8—Central Texas
Drought conditions continue to worsen, with
water becoming a big concern as small tanks go
dry. Hay sales are up. Cattle prices remain strong
at area sale barns, despite futures prices dropping.
We can look for a big reduction in cattle numbers
if the drought continues, making replacement heifers and cattle in the fall very expensive.

Second Quarter 2011

|

FEDERAL RESERVE BANK OF DALLAS