Full text of Agricultural Survey : Second Quarter 2015
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Second Quarter 2015 DALLASFED Agricultural Survey Quarterly Survey of Agricultural Credit Conditions in the Eleventh Federal Reserve District Survey Highlights B ankers responding to the secondquarter survey reported receiving abundant rain, which has improved ground moisture and lake and stock tank levels. However, wet conditions have prevented or delayed harvesting and planting and, in some areas, has damaged crops. Respondents in a couple of regions noted concern for continued low crop prices and their impacts on profitability and repayment rates. The livestock sector remained strong in the second quarter, and rain improved pastureland conditions. District farmland values increased in the second quarter. Real irrigated cropland values were up only slightly over last quarter, while real dryland and ranchland values saw stronger increases, likely boosted by subsiding drought conditions. After expectations about the trend in farmland values turned pessimistic in the first quarter, bankers now anticipate farmland values to trend up in the third quarter. The credit standards index indicated continued tightening of standards, although the vast majority of respondents noted no change. Demand for agricultural loans picked up again this quarter, marking the fourth consecutive quarter of increasing demand after six years of falling demand. Loan repayment rates continued to slow this quarter, while loan renewals and extensions increased. Overall, the volume of farm loans was up compared with a year ago, accounted for by increases in feeder cattle and operating loans. Farm Lending Trends What changes occurred in non-real-estate farm loans at your bank in the past three months compared with a year earlier? Index Percent reporting, Q2 2015:Q1 2015:Q2 pGreater Same qLess 8.3 14.3 28.0 58.3 13.7 Availability of funds* 21.0 16.5 18.6 79.3 2.1 Rate of loan repayment –3.2 –6.4 7.9 77.8 14.3 0.8 7.9 13.5 81.0 5.6 Demand for loans* Loan renewals or extensions Index 50 Availability of funds* 40 30 Rate of loan repayment 20 10 0 –10 Loan renewals or extensions –20 –30 Demand for loans* –40 –50 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 What changes occurred in the volume of farm loans made by your bank in the past three months compared with a year earlier? Index Percent reporting, Q2 2015:Q1 2015:Q2 pGreater Same qLess Non-real-estate farm loans 0.8 4.6 21.4 61.8 16.8 Feeder cattle loans* 0.0 11.6 22.2 67.2 10.6 –10.2 –8.0 3.1 85.8 11.1 –4.3 –3.2 7.5 81.8 10.7 5.9 15.6 24.2 67.2 8.6 Farm machinery loans* –16.5 –17.8 6.9 68.4 24.7 Farm real estate loans* –17.7 –8.7 11.2 68.9 19.9 Dairy loans* Crop storage loans* Operating loans *Seasonally adjusted. NOTE: Survey responses are used to calculate an index for each item by subtracting the percentage of bankers reporting less from the percentage reporting greater. Positive index readings generally indicate an increase, while negative index readings generally indicate a decrease. } 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 XXWe have had good rain during the first part of the year, which should help the yields on our wheat crops. XXWidespread rainfall has been plentiful, boosting the potential for grazing and future crop yields. Immediate results include delayed wheat silage harvest and cotton, corn and grain sorghum planting. Cattle marketing has also been interrupted by wet conditions. XXWe have had 13 inches of rain over the past 60 days. That is more than our annual total for both 2011 and 2012. Rangeland looks as good as it has in the past 10 years. There are some planting delays, but after the three-year drought we are coming out of, nobody is complaining. Region 2 • Southern High Plains XXWe are thankful for the rains this year. Hopefully we can make a good dryland crop and some money. Rains have helped the pastures, and cattle are looking better than they have for a while. XXSeveral farmers have been unable to secure farm financing for 2015 after a very bad 2014 farm year and current low commodity prices. The near record rainfall for May was greatly needed, and overall farmer attitudes have improved over the past month. Wet conditions have delayed planting an average of two weeks, while some isolated areas couldn’t be planted at all. Even though the drought appears to have been broken, low commodity prices continue to worry area farmers, bankers and rural businesses. XXPlanting is continuing at a furious pace to meet insurance deadlines but is progressing well. We should have enough underground moisture to make a very decent dryland crop, and if we can get additional rain in July and August, the crop could be exceptional. XXProducers have struggled to get crops planted due to recent rains; planting cotton before the insurance deadline has been difficult. The moisture profile is excellent. We have leaned on Farm Service Agency (FSA) guaranties this year more than in the past due to carryovers and very thin margins in cotton. FSA is overwhelmed with applications in our area. XXIt has been a challenging loan renewal season. A large share of our cotton-farming customers experienced carryover because the crop was generally short as rainfall came too late to be of help and market prices collapsed at harvest time. Fortunately, almost all were able to refinance against equity in land or equipment. Meanwhile, getting this crop planted has been a terrible challenge. Hardly anything is up to a stand. Cotton acres in areas north of Lubbock will be switched into short season corn or corn silage and milo. There is abundant subsoil moisture, but we will be fighting the clock as to crop maturity. Region 3 • Northern Low Plains 12 N E W M E X I C O Regions of the Eleventh Federal Reserve District XXRainfall caused an unbelievable change in the complexion of our land and attitudes. We must not forget we are still in a drought and lend and act accordingly. Region 4 • Southern Low Plains XXCotton planters are starting to move, and wheat harvest is underway. Approximate yield breakevens for most producers are between 400 and 500 pounds, while the average county yield is closer to 275 to 300 pounds, but $0.60 for cotton is just not a viable option. We expect producers to go to wheat pasture and yearlings in the fall if we can find a good marketing strategy to hedge market and basis risk. Region 5 • Cross Timbers XXMost area lakes and tanks are full and the grass is abundant. Grazing conditions are better than they have been in years. XXMost stock tanks are now full; however, our regional lake is only up from 15 percent capacity to 30 percent, so our area still needs lots of running water. Region 6 • North Central Texas XXExcess rainfall has resulted in a wheat disaster. Harvest is delayed because of wet fields, and the quality is declining daily due to low bushel weight and sprouting. Many farmers are already asking crop insurance agents for adjusters to look at farms. Corn has also suffered from nitrogen deficiency in the heavier clay soils caused by excess rainfall. Combined with declining grain prices, this will cause problems later this summer for the farm economy. XXWhat looked like a bumper wheat crop has turned ugly from all the rain. XXVery serious flooding the last 60 days may have ruined the wheat crop. Region 7 • East Texas XXLand values are holding steady to increasing. Demand for agricultural real estate is showing a slight increase. The livestock market is doing extremely well. Agricultural Survey • Second Quarter 2015 • Federal Reserve Bank of Dallas Region 8 • Central Texas XXLandowners are happy with recent rainfall. For the most part, there was no serious flooding, except along the Guadalupe River and those ranchers are accustomed to those circumstances. Ponds are full, corn crops look good and hay is being cut at record levels. Cattle prices remain high, and replacement heifers are difficult to locate and expensive to purchase. XXIt has been a blessing to see rain come to our area. The ground is finally soaked, and we should have the best early summer we have ever had in terms of grass and tank water. Cattle are in good shape, and prices continue to hold at record levels for all classes of cattle. What little crops we have are starting to take off; however, it looks like corn may be tasseling early, which will limit the size of the ears and yield. XXExcessive rains may have hurt yield potential and, coupled with current commodity prices, have created the potential for shortfalls in repayment this fall. XXAn abundance of rain has created a few operational problems for our producers, but these problems pale in comparison to the adverse conditions of severe drought. Ranchers are happy because of strong cattle markets and plenty of grass. XXA number of our revolving lines of credit are being increased due to higher purchase prices and operating costs. Region 9 • Coastal Texas XXThis year has been a planting and harvesting challenge. Excessive rains slowed wheat planting early on and then delayed wheat harvest in the past 45 days. Most wheat harvested was above average, but crops did suffer a five- to 10-bushel loss due to excessive rains. The majority of grains and cotton Rural Real Estate Values—Second Quarter 2015 1 Banks1 3 Average value2 Percent change in value from previous year3 Cropland—Dryland District* 2 4 L O U I S I A N A 5 6 11 7 T E X A S 8 9 10 13 109 1,684 3.1 Texas* 1 Northern High Plains 95 15 1,703 797 3.0 8.1 2 Southern High Plains 12 688 0.8 3 Northern Low Plains* 7 746 –2.2 4 Southern Low Plains* 9 1,026 7.4 5 Cross Timbers 5 1,670 6.4 12 2,308 –4.8 7 East Texas* 9 2,430 5.1 8 Central Texas 9 3,728 6.1 9 Coastal Texas 6 2,217 26.3 n.a. n.a. n.a. 9 1,750 4.4 4 10 356 2,360 –6.3 5.3 6 North Central Texas 10 South Texas 11 Trans-Pecos and Edwards Plateau 12 Southern New Mexico 13 Northern Louisiana crops were planted, but some were prevented from being planted with insurance being taken. Overall, crops should have a good year if the weather remains stable. Cotton prices have remained in the 63 to 66 cent per pound range, and with no major shifts expected at this time, the cotton crop will have to yield above average to break even in 2015. Cattle markets remain strong, and producers are optimistic about replacing liquidated herds. Pastures at this time are above average. Land values remain stable, with some upswing being localized from area to area. XXA very wet spring has delayed planting; in fact, there is a significant amount of cotton acreage that still needs to be planted. Producers are struggling with the decision to take preventive planting insurance or gamble with yields later. Excessive May rains could reduce yields depending on location and soil makeup. Ranchers are in great shape. Region 11 • Trans-Pecos and Edwards Plateau Cropland—Irrigated District* 80 2,353 11.2 Texas* 1 Northern High Plains 65 2,105 8.0 14 1,979 15.1 2 Southern High Plains 10 1,583 1.4 3 Northern Low Plains* 6 1,643 5.1 4 Southern Low Plains 6 1,500 3.6 5 Cross Timbers 3 2,717 5.1 6 North Central Texas 5 2,600 0.0 7 East Texas 4 2,663 5.1 8 Central Texas 4 3,650 4.6 9 Coastal Texas 4 2,488 2.3 10 South Texas 3 2,883 13.1 11 Trans-Pecos and Edwards Plateau 6 2,983 1.2 12 Southern New Mexico 6 3,617 25.9 13 Northern Louisiana 9 3,494 7.0 114 98 1,717 2,049 3.7 3.4 10.9 Ranchland District* Texas* 1 Northern High Plains 14 584 2 Southern High Plains 8 650 5.5 Plateau pastureland in wonderful shape. Livestock numbers remain low, although much restocking is going on at this time and prices are still at all-time highs for all classes of livestock. 3 Northern Low Plains 7 757 –8.2 4 Southern Low Plains* 9 1,013 –19.4 5 Cross Timbers 6 North Central Texas 7 13 1,714 2,319 –2.6 2.0 XXPastures are in good condition due to above 7 East Texas 10 2,620 2.1 8 Central Texas 10 4,775 3.5 9 Coastal Texas 4 2,025 5.6 3 2,833 11.6 13 1,985 3.8 5 285 14.8 11 1,932 5.4 XXExcellent area rains have left the Edwards average rainfall. Region 12 • Southern New Mexico XXRainfall is positively impacting all segments of agricultural operations in our area. 10 South Texas 11 Trans-Pecos and Edwards Plateau 12 Southern New Mexico 13 Northern Louisiana *Seasonally adjusted. 1 Number of banks reporting land values. 2 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. Agricultural Survey • Second Quarter 2015 • Federal Reserve Bank of Dallas Real Land Values Real Cash Rents 2005 dollars per acre per year 2005 dollars per acre 2,200 2005 dollars per acre per year 60 Irrigated 120 Irrigated 2,000 50 1,800 1,600 Ranchland 40 1,400 1,200 80 Dryland 30 Dryland 1,000 100 800 60 20 40 600 Ranchland 10 400 20 200 0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 NOTE: All values have been seasonally adjusted. 0 NOTE: All values have been seasonally adjusted. Anticipated Farmland Values and Credit Standards Long-term farm real estate Intermediate term Other farm operating Feeder cattle Interest Rates by Loan Type 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Fixed (average rate, percent) What trend in farmland values do you expect in your area in the next three months? Index Anticipated trend in farmland values* 6.12 6.19 6.05 5.79 Q3 6.12 6.22 6.00 5.80 Q4 6.03 6.14 5.96 5.77 2015:Q2 pUp Stable qDown –1.4 4.1 10.8 82.5 6.7 What change occurred in credit standards for agricultural loans at your bank in the past three months compared with a year earlier?† Credit standards 2014:Q2 Percent reporting, Q2 2015:Q1 2015:Q1 2015:Q2 pTightened Same qLoosened 7.8 12.2 13.7 84.7 1.5 Index 50 2015:Q1 6.09 6.12 6.01 5.74 Q2 5.93 6.04 5.93 5.74 40 30 Anticipated trend in farmland values* 20 Credit standards † 10 0 –10 Variable (average rate, percent) –20 2014:Q2 5.73 5.75 5.64 5.30 Q3 5.69 5.75 5.64 5.37 Q4 5.65 5.71 5.62 5.39 2015:Q1 5.56 5.66 5.54 5.26 *Seasonally adjusted. †Added to survey in second quarter 2011. Q2 5.52 5.57 5.51 5.27 NOTE: Survey responses are used to calculate an index for each item by subtracting the percentage of bankers reporting less from the percentage reporting greater. Positive index readings generally indicate an increase, while negative index readings generally indicate a decrease. –30 DALLASFED –40 –50 2011 2012 2013 2014 2015 Agricultural Survey is compiled from a survey of Eleventh District agricultural bankers, and data have been seasonally adjusted as necessary. Data were collected June 2–10, and 138 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 214-922-5270. It is available on the web at www.dallasfed.org/research/agsurvey. For questions, contact Amy Jordan, 214–922–5178. Agricultural Survey • Second Quarter 2015 • Federal Reserve Bank of Dallas