Full text of Agricultural Survey : Second Quarter 2012

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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 2012

A smaller share of respondents see declining loan demand this
quarter than last.

Bankers responding to the second-quarter survey noted drought condi-

Index
50

tions continued to improve but more rain is needed as many areas are still

very dry and surface water remains low. Overall crop conditions are better

30
20

this year than last. Respondents voiced concern over low cotton prices. Cattle

prices, however, remained high, providing good income for ranchers who

were able to retain herds during the drought.

–10

Agricultural land value changes were mixed. Dryland values fell, while

–20
–30

irrigated land and ranchland values rose modestly in the second quarter. Cash

–40

rents increased across the board, with irrigated land posting the largest rise.

–50

2002

2003

2004

2005

2006

2007 2008

2009 2010

2011

2012

Bankers in the Central Texas region noted that some landowners are receiving
production payments from the Eagle Ford Shale development, allowing these
customers to pay off their existing loans.

Availability of Funds

Demand for agricultural loans remained subdued, although there are indi-

The availability of funds index remains elevated but has pulled back
from previous highs.

cations the weakness in agricultural credit conditions may be moderating slight-

Index
50

Feeder cattle loans saw the largest drop in volumes compared with the same

ly. Loan demand continued to decline but not as steeply as in prior quarters.

period last year, followed by dairy loans. Loan repayment rates rose sharply in

the second quarter, with more than 20 percent of bankers noting an increase.

20
10

Farm Lending Trends

0
–10

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

–20
–30

2012:Q2

–40
–50

2002

2003

2004

2005

2006

2007 2008

2009 2010

2011

2012

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

Rate of Loan Repayment
The loan repayment index reaches its highest level on record.
Index
50

Index
–15.0
28.6
17.0
–12.3
4.8

Greater
15.0
32.7
21.1
4.8
4.8

Same
55.1
63.3
74.8
78.1
95.2

Less
29.9
4.1
4.1
17.1
0.0

Index
–21.5
38.8
9.0
–6.7
6.7

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

2012:Q2

2012:Q1
Percent reporting

10
0
–10
–20
–30
–40
–50

2012:Q1
Percent reporting

2002

2003

2004

2005

2006

2007 2008

2009 2010

2011

2012

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

Index
–2.7
–18.0
–14.8
–7.0
1.4
–9.7
–7.0

Greater
18.5
9.4
0.9
4.4
15.1
13.1
12.6

Same
60.3
63.3
83.3
84.2
68.5
64.1
67.8

Less
21.2
27.3
15.7
11.4
16.4
22.8
19.6

Index
–14.1
–22.7
–12.4
–15.1
0.0
–13.1
–11.5

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 5–13, and 149 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./research/agsurvey.
For questions regarding information in the release, contact Emily Kerr, 214-922-6941.

Loan-to-Deposit Ratios at Survey Banks

Loan Renewals or Extensions
Bankers continue to note a decline in requests for loan renewals or
extensions.

Average desired and actual ratios
Percent
75

Desired ratio

Index
50

–10

2011:Q2

–20
–30

2011:Q4

2011:Q3

2002

2003

2004

2005

2006

2007 2008

2009 2010

2011

Banks reporting (percent)

2012

Amount of Collateral Required
Nintety-five percent of respondents note no change in collateral
requirements.
Index

2011

21
18
14
22
24

24
18
12
23
23

29
19
17
15
20

29
14
18
19
20

28
17
15
22
19

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

Fixed

Average rate (percent)

2011

10
–10

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

–20
–30
–40
2002

2003

2004

2005

2006

2007 2008

2009 2010

2011

2012

6.77
6.83
6.96
6.76

6.71
6.87
6.83
6.60

6.54
6.71
6.69
6.41

6.54
6.63
6.49
6.19

6.43
6.50
6.46
6.36

6.06
6.24
6.30
6.06

6.11
6.20
6.23
5.92

6.00
6.09
6.14
5.83

5.97
6.09
6.06
5.79

5.90
5.96
5.98
5.70

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

Anticipated Trend in Farmland Values
The outlook for farmland values is fairly stable, with 83 percent of
bankers expecting no change over the next three months.
Index

2012

Total Agricultural Loans*
Eleventh District agricultural loan volumes rose modestly in the first quarter.

50
40

Millions of dollars (seasonally adjusted)

8,500

8,000

10
0

7,500

–10

7,000

–20

6,500

–30

6,000

–40
–50

2012

Interest Rates

–50

2012:Q2

2012:Q1

Distribution of Loan-to-Deposit Ratios

–40
–50

Actual ratio

5,500
2002

2003

2004

2005

2006

2007 2008

2009 2010

2011

2012

5,000
4,500
4,000

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

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

Agricultural Survey

Second Quarter 2012

Federal Reserve Bank of Dallas

2012

Rural Real Estate Values — Second Quarter 2012
Cropland—Dryland

Eleventh Federal Reserve District
1

District
3

12
N E W

M E X I C O

L O U I S I A N A

T E X A S

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

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

Average
value2
Banks1
Second quarter 2012
112
1,379

Percent change3
in value from
Previous
quarter
–0.1

Previous
year
2.7

101
16
14
8
9
8
14
4
13
4
n.a.
10
n.a.
9

1,398
602
582
772
881
1,394
2,061
2,025
2,600
1,488
n.a.
1,680
n.a
1,739

0.1
1.2
0.0
–0.5
0.7
5.2
–1.0
–4.7
0.3
3.8
n.a.
2.2
n.a
–3.7

2.5
7.9
6.7
–7.1
8.9
7.9
3.9
0.0
–0.6
0.0
n.a.
4.5
n.a
6.4

1,861

2.9

7.5

74
16
14
6
6
5
n.a.
3
8
4
n.a.
9
3
9

1,767
1,675
1,332
1,558
1,417
2,260
n.a.
1,633
2,744
2,200
n.a.
2,889
2,100
2,522

3.1
6.2
–0.9
3.8
0.0
0.0
n.a.
0.0
3.5
6.1
n.a.
0.3
0.0
4.9

7.5
14.4
–2.9
–2.6
13.1
0.0
n.a.
0.0
7.7
29.1
n.a.
5.8
0.0
12.7

District

124

1,470

1.2

1.4

115
16
9
8
7
10
16
14
14
3
n.a.
17
n.a.
7

1,757
470
578
775
971
1,900
2,275
2,454
3,461
1,050
n.a.
1,745
n.a.
1,314

1.2
2.9
–1.5
0.7
0.0
2.9
–2.0
6.7
4.1
12.5
n.a.
0.2
n.a.
2.9

1.4
4.6
13.5
–7.8
6.2
5.0
7.0
5.4
6.9
5.0
n.a.
–5.3
n.a.
14.3

Cropland—Irrigated
District

Real Cash Rents
Irrigated cash rent values rise more than those for dryland and
ranchland.
2005 dollars per acre per year

120
110
100

Irrigated

90
80
70
60
50
40

Dryland

30
20

Ranchland

10
0

2002

2003

2004

2005 2006

2007

2008 2009

2010

2011

2012

Real Land Values
Irrigated land and ranchland values increase while dryland
values decline.
2005 dollars per acre

1,800

Irrigated

1,600
1,400
1,200

Dryland

1,000
800

Ranchland

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

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.
1

600

Ranchland

400

200
0

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

2002

2003

2004

2005

2006

2007 2008

2009 2010

Agricultural Survey

2011

2012

Second Quarter 2012

Federal Reserve Bank of Dallas

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

Region 1—Northern High Plains
We are finally getting at least some rain
around our area.

Thank goodness for the rains we have received this year compared with last. If we can
get at least an average amount of rainfall, we
should be able to make an above-average crop.
We certainly hope cotton prices improve, as we
cannot make it pay at the current price.
We continue to see increased values for
ranchland due to recreational use.
Land values remain very solid as landlords
continue to invest due to a good return relative
to any bank financial instrument.
Irrigated cotton and corn crops are looking
good at this early stage. The dryland cotton crop
has been planted with mixed results. Due to
scattered rains, some of the dryland cotton is up
with fair to good stands, but it will need timely
rains during the growing season to survive due
to inadequate subsoil moisture. Other dryland
cotton was planted in dry soil with hopes of rain
in the near future. Crop insurance planting deadlines have recently passed.
Rainfall on the South Plains is still spotty.
Some areas are good, and some are still poor.
The other problem will be the price of cotton. It
does not look favorable at this time, and there
could be some insurance crops again.
The bottom has absolutely fallen out of the
cotton market. As I write this, futures markets
suggest harvest prices of no more than $0.60
per pound—that is way, way below anything
thought possible at the beginning of the year.
Because of this, it looks like most producers
will gross no more than their crop-insurance
revenue guarantees, which are based on a $0.93
per pound price. The South Plains has received
a little rainfall. It won’t be enough to sustain the
dryland crops. There are areas too dry for the
crop to emerge. Crops that come to a stand have
hardly any soil moisture. As sorry as the cotton market is, it is probably better this way (i.e.,
farmers can collect the crop insurance and go
fishing).

Last year at this time, we were faced with
wildfires and extreme drought. Recently, we have
had planting rains, and cotton is being planted.
We are hopeful El Niño will show up so that
we can have some kind of normal year for crop
production. Grass and range lands are slowly recovering, and cattle prices should provide good
income to the ranchers that were able to keep
their herds.

Some landowners are now receiving production payments from the Eagle Ford Shale development. They are paying off existing loans. Very
little land is being sold in this area, so land loans
are difficult to acquire.
It was a promising spring but has been a hot
and dry summer so far. We need tropical activity
and hope for a wet fall and winter. Thankfully,
the cattle market is holding steady.
This spring has been better than last year;
still, some areas need more rain than others.
Rain will need to come again soon to keep grass
and crops growing through the summer. The first
hay cuttings are in, with second cuttings being
made now and in the next few weeks, depending upon rain. Oil and gas continue to remain
stable in the area, with most wells coming in
above average. Money is still going into farm and
ranch improvements, new fences, ponds being
built, grass plantings, new barns, etc.
Most, if not all, of the rural land in our area
is being bought and sold in smaller tracts of
25–75 acres or less for residential, development
or recreational purposes. The larger tracts are
being bought probably for speculation purposes
with the West Houston area moving in our direction. We have a large amount of commuters now.
The land values have gotten prohibitively high
for strictly agricultural use.
Credit conditions have improved due to
moisture received earlier and stronger cattle
prices. Hay harvested from abundant winter forage was the lifesaver; moisture conditions have
again changed as the last five weeks have been
very dry.

Drought conditions are slightly better, but we
are still well short of being out of the drought.
Our Hubbard Creek Lake is 16 feet low. This
lake provides water to Breckenridge and at least
five other communities including Abilene. We
are soon to be under restricted water use. Area
ag income is holding its own due to good cattle
and wheat prices in spite of decreased cattle
numbers and decreased wheat plantings.
We are having an average wheat harvest, but
we still need rain to fill stock tanks and lakes
that are less than half full.
There is a very good hay crop in the making and good grazing. It has been a very good
spring with adequate to ample rain over the
whole area. Beef cattle producers are benefitting from record-high calf prices and packer cow
prices. Those who were able to keep most of
their cow herd through the drought last year are
doing very well, selling calves at $1.50 to $2 per
pound. Replacement cows are extremely expensive for those who sold out or whose herds are
way down. Dairies are still having a tough time
but should be helped by lower hay and other
roughage prices and good production on their
own hay and silage.

Region 6—North Central Texas
Recent rains have increased demand for
cattle loans; however, the producers are taking
a conservative approach to expansion of their
herds. With higher cattle prices, many producers are selling the replacement heifers to aid in
recovery from prior years. The future is looking brighter with the availability of pasture, hay
and stock water at this time. Fertilizer and fuel
expenses are still an issue in crop and hay production costs. The transfer of farm real estate is
almost nonexistent.

Region 7—East Texas
Leased grazing land prices have fallen.
Moisture conditions have improved the overall ag outlook in the area. Ranchers are slowly
stocking cattle. Row crops are in good to excellent condition.

Region 3—Northern Low Plains
The cost of feeder cattle has risen dramatically, but the profits have increased, too. Cow/
calf operators are trying to rebuild herds, but the
continued drought is slowing this. Wheat crop
and prices are good. We need rain.

Agricultural Survey

Region 8—Central Texas

Region 5—Cross Timbers

Region 2—Southern High Plains

Region 4—Southern Low Plains

Second Quarter 2012

Region 9—Coastal Texas
In the previous quarter, we were at our lowest level of ag loans that we have seen in 48
years. Good yields and outstanding prices two
years in a row resulted in our customers paying
their loans off, and we lost some farmers to competition over interest rates. We are glad we have
been able to gain some back this year.

Region 11—Trans-Pecos and Edwards
Plateau
The central Edwards Plateau has been
blessed with rainfall so far this year, but much of
the forage grown has been weeds. Future rainfall
this summer will be needed to grow some grass
for cow feed. Many producers sold part or all
of their herds this past year due to drought, and
many of these folks will be looking to restock. It
is the feeling of many producers that they should
go slow because this drought is still not over.
A hot, dry summer could plunge us right back
into trouble. Fortunately, livestock prices remain
excellent, and cattle, sheep and goat numbers
are way down. Hopefully, these prices will stay
strong for the next couple of years.

Federal Reserve Bank of Dallas

Full text of Agricultural Survey : Second Quarter 2012

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