Full text of Agricultural Survey : Second Quarter 2018
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Second Quarter 2018 Agricultural Survey Quarterly Survey of Agricultural Credit Conditions in the Eleventh Federal Reserve District Survey Highlights B Figure 1 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? ankers responding to the second-quar- Index ter survey noted continuing drought conditions across many regions of the Eleventh District. Lack of moisture continues to put pressure on pasture grazing for cattle in many regions, and hay inventories were reported as being low. Many respondents noted wheat and corn crops were suffering due to extreme heat. Demand for agricultural loans overall decreased for an 11th consecutive quarter. Loan renewals and extensions rose but at a slower pace, while the rate of loan repayment con- 2018:Q1 2018:Q2 pGreater Same qLess Demand for loans* -4.3 -7.3 15.1 62.5 22.4 Availability of funds* 14.1 12.3 14.8 82.7 2.5 -10.6 -9.7 5.3 79.7 15.0 15.3 5.3 9.7 86.0 4.4 Rate of loan repayment Loan renewals or extensions Index 50 40 real-estate farm loans fell compared with a year 0 -10 and feeder cattle loans stabilized after nearly -20 three years of decline. Volumes of all other loan -30 categories continued to decline in the second quarter (Figure 1). District real ranchland values surged this quarter, while dryland and irrigated cropland values declined (Figure 2). According to bankers who responded in both this quarter and Loan renewals or extensions 20 10 The volume of operating loans flattened out, Availability of funds* 30 tinued to decline. Overall, the volume of nonago, as did the volume of farm real estate loans. Texas (Table 1). Southern New Mexico respon- Rate of loan repayment Demand for loans* -40 -50 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 What changes occurred in the volume of farm loans made by your bank in the past three months compared with a year earlier? Index second quarter 2017, nominal dryland and ranchland values increased year over year in Percent reporting, Q2 Non-real-estate farm loans Percent reporting, Q2 2018:Q1 2018:Q2 pGreater Same qLess 0.0 -6.0 11.1 71.8 17.1 dents indicated cropland values increased Feeder cattle loans* -13.2 -0.6 11.0 77.4 11.6 while ranchland values decreased, and north- Dairy loans* -14.1 -15.3 2.2 80.3 17.5 ern Louisiana respondents reported cropland Crop storage loans* 2.9 -8.5 2.2 87.1 10.7 and ranchland values all increased. Operating loans 7.8 0.9 14.2 72.6 13.3 Farm machinery loans* -9.6 -20.9 4.7 69.7 25.6 Farm real estate loans* -3.5 -6.9 11.5 70.1 18.4 The anticipated trend in the farmland values index rose to its highest level since mid-2014, suggesting respondents expect farmland values to trend up in the upcoming months. The credit *Seasonally adjusted. standards index indicated continued tightening 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. of standards on net (Figure 4). } 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 XXMany borrowers’ incomes were less than expected as all the 2017 cotton crop has been ginned. Quality issues reduced the price substantially under projections. The area continues to be in extreme drought with little chance of rain. XXThere are extreme drought and dangerous fire conditions. Region 2 • Southern High Plains XXDrought conditions are the major problems in our area. Future prices for our commodities are looking favorable currently if we are able to produce the product. Cattle are having to be supplemented. Hopefully, we will receive needed moisture soon and often. XXLand sales have been very limited—mostly on Conservation Reserve Program land purchased for use in irrigated organic peanut production. XXIn most areas, dryland cotton is nonexistent. With the high temperatures and lack of rain, we are struggling to keep enough moisture to get irrigated cotton up and going. We are anticipating many insurance claims to be filed. Unfortunately, in many cases, insurance does not cover the input costs. XXCrop prospects are being challenged by extreme heat and wind and almost no rainfall. Irrigated crops are having difficulties establishing a stand. Rain has fallen in brief, severe downbursts, most of which has run off. Dryland crops will be few and far between. Grazing is almost all depleted, with the decision to cull or to feed looming. Hay supplies are becoming scarce but have been augmented by the baling of wheat. One bright spot has been the big run-up in cotton prices. If these prices hold, those who can stay up with irrigation will be rewarded as will producers who fail their crops for insurance. Region 3 • Northern Low Plains XXDrought conditions persist, although rain showers brought temporary relief in some areas. Livestock herds will have to be dramatically reduced, and dry land production crops will be a fraction of typical years. Any producers that are leveraged are likely candidates to not survive. XXDrought conditions are threatening the dryland cotton crop and forage crops. Pasture conditions are fair. Supplemental feeding of livestock is taking place on a limited basis, but without rain soon, that will be the norm. Herd reduction has not started, but stocker cattle were sold earlier than normal as the wheat played out early. XXGood rains saved cow and calf producers from another selloff. Most stock ponds are now full and grass is growing. Wheat fields are like we summer fallowed them, so we can only hope for good grazing and yields next year as most farmers are getting a head start on field prep. Region 4 • Southern Low Plains XXConditions are very dry. Our wheat crop was a total loss. Pastures are in very poor shape. Several operators had to reduce herds to one-half or less. Tanks are very low. Cotton fields are generally very dry. Spotty rains in the eastern portion of the county have improved conditions. Most areas are starting to dry plant. Region 5 • Cross Timbers XXRecent dry and hot weather in our area is starting to take a toll on pastures and hay fields. The hay surplus we had a few months ago is mostly gone due to a hard winter. There has not been much change in land values, but a little less seems to be moving. Milk prices are down some, and feed costs are rising for dairymen. XXPastures are extremely dry, and the lack of stock water is fast becoming a problem due to lack of spring rains and recent hot weather. XXProperty values in our area have seen a substantial rise over the last two years. Region 6 • North Central Texas XXUnpredictable weather, weather extremes and poor crop prices continue to plague the local agricultural community. XXOur wheat crop was above average, and stocker calf performance was above average. A drought began in late April and has continued, and the corn crop is expected to be well below average. Crop insurance adjusters should arrive Agricultural Survey • Second Quarter 2018 • Federal Reserve Bank of Dallas 12 N E W M E X I C O Regions of the Eleventh Federal Reserve District in the next seven to 10 days. We need rain very soon to give cotton crop a reasonable chance. XXAfter the flood in late February, we had an unusually cool and mild April. Now we have gone from virtually no spring-like weather into full-blown summer. I believe there will be a good hay crop this year. XXThis is the beginning of a dry, hot summer, and crops are beginning to suffer. Region 7 • East Texas XXRow crops in the area are in excellent condition, corn and milo crops are being made and cotton is being watered. Early high temperatures and high winds have dried pastures and hay fields earlier than normal. Hay inventories are very low. Ranchers will have to make some critical decisions concerning the size of their herds and hay requirements if conditions persist. Region 8 • Central Texas XXOilfield activity continues, with rigs drilling and leasing going on in some areas. Recent rains were spotty at best. High heat is starting to take its toll on corn and grasses. Cattle remain in fair condition, with prices still holding up across the board. Cow prices remain low as drought conditions in other areas of Texas and the country have caused more cows than normal to come into the sale barns. The two biggest concerns going forward for the next quarter will be rain and making hay. Region 9 • Coastal Texas XXCurrent drought conditions are a major concern for 2018 crop yields. Table 1 Rural Real Estate Values—Second Quarter 2018 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 95 1,871 4.0 Texas* 1 Northern High Plains 80 9 1,883 956 4.0 2.5 2 Southern High Plains 8 763 8.6 3 Northern Low Plains* 8 834 -1.6 4 Southern Low Plains* 6 982 10.1 5 Cross Timbers 6 1,733 4.5 15 2,870 10.8 7 East Texas* 6 2,675 2.2 8 Central Texas 10 3,757 -2.3 9 Coastal Texas 3 1,867 0.0 10 South Texas 4 2,250 -2.3 11 Trans-Pecos and Edwards Plateau 5 2,740 10.6 5 10 450 2,845 6.7 4.2 6 North Central Texas 12 Southern New Mexico 13 Northern Louisiana Region 11 • Trans-Pecos and Edwards Plateau XXRainfall in the Edwards Plateau has been a mixed bag in the last quarter. Fortunately, livestock prices have remained fairly strong, and the futures market still looks fairly good for producers. Predator control still ranks among the top worries for the sheep and goat producers of our area. Wool and mohair prices are strong at present for those who can keep herds alive, given the difficulty brought about from predators. XXCattle market continues on a downward trend. XXSheep and goat prices continue a cyclical de- crease, with cattle prices being lower also, though all are above historic averages. Rainfall has been spotty, but most have at least received some, with some pasture conditions being very good for this time of year. With the higher temperatures, pasture conditions where rainfall has not been received are poor. Predator problems continue to increase, being significant in an ever-growing area. Region 12 • Southern New Mexico Cropland—Irrigated District* 73 2,497 0.3 Texas* 1 Northern High Plains 56 2,252 -2.3 9 2,119 -0.4 2 Southern High Plains 9 1,634 -0.9 3 Northern Low Plains* 5 2,149 5.8 4 Southern Low Plains 4 1,300 0.0 5 Cross Timbers 3 2,950 0.0 6 North Central Texas 5 2,910 4.8 7 East Texas 4 2,688 -60.0 8 Central Texas 7 4,131 -16.3 9 Coastal Texas n.a. n.a. n.a. 10 South Texas 4 3,375 9.7 11 Trans-Pecos and Edwards Plateau 4 3,713 7.6 12 Southern New Mexico 7 3,300 1.9 10 4,120 15.0 101 86 1,914 2,280 7.5 8.0 13 Northern Louisiana Ranchland District* Texas* 1 Northern High Plains 8 694 -7.5 2 Southern High Plains 6 850 30.0 3 Northern Low Plains 7 893 0.0 4 Southern Low Plains* 7 1,191 -12.1 7 15 1,907 3,000 3.3 7.8 XXCommodity prices are holding steady. Rainfall is badly needed. 5 Cross Timbers 6 North Central Texas XXWe have had spotty rain over some of the trade 7 East Texas area, but overall conditions are still extremely dry. There are still large runs at local livestock auctions as breeders trim herds because of dry range conditions. Wheat harvests will be limited, while corn planting is under irrigated conditions only. XXRange conditions remain very dry and, save a quality monsoon season, the late summer and early fall will see producers reducing cattle herd substantially. The forage crop shortfall over the winter has yielded improved prices for wheat, triticale and alfalfa. Dairy continues to struggle with low milk prices, compounded by increasing feed input costs. 8 2,913 2.1 8 Central Texas 11 5,909 18.5 9 Coastal Texas 3 1,833 0.0 4 2,550 6.8 10 2,205 9.1 12 Southern New Mexico 7 329 -4.1 13 Northern Louisiana 8 2,169 2.3 10 South Texas 11 Trans-Pecos and Edwards Plateau *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 2018 • Federal Reserve Bank of Dallas Figure 2 Figure 3 Real Land Values Real Cash Rents Q2 2018 dollars per acre 2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Q2 2018 dollars per acre per year 60 Irrigated Q2 2018 dollars per acre per year Irrigated 120 50 Dryland 140 100 40 Dryland Ranchland 80 30 60 Ranchland 20 40 10 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 NOTE: All values have been seasonally adjusted. Real values are created by deflating the nominal values using the implicit price deflator for U.S. gross domestic product. Table 2 20 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 0 NOTE: All values have been seasonally adjusted. Real values are created by deflating the nominal values using the implicit price deflator for U.S. gross domestic product. Figure 4 Anticipated Farmland Values and Credit Standards Interest Rates by Loan Type Long-term farm real estate Intermediate term Other farm operating Feeder cattle What trend in farmland values do you expect in your area in the next three months? Index Anticipated trend in farmland values* Percent reporting, Q2 2018:Q1 2018:Q2 pUp Stable qDown 1.6 12.6 14.5 83.6 1.9 What change occurred in credit standards for agricultural loans at your bank in the past three months compared with a year earlier?† 2018:Q1 2018:Q2 pTightened Same qLoosened 15.5 11.1 11.1 88.9 0.0 Credit standards Fixed (average rate, percent) Index 2017:Q2 6.05 6.17 6.05 5.89 2017:Q3 6.17 6.30 6.24 5.93 50 40 Credit standards† 30 2017:Q4 6.24 6.29 6.25 5.99 2018:Q1 6.41 6.51 6.28 6.10 2018:Q2 6.55 6.57 6.50 6.24 20 10 0 -10 -20 Variable (average rate, percent) 2017:Q2 5.75 5.81 5.74 5.47 2017:Q3 5.92 5.96 5.95 5.64 2017:Q4 5.91 5.93 5.97 5.65 2018:Q1 6.18 6.17 6.04 5.75 2018:Q2 6.25 6.28 6.23 5.90 Federal Reserve Bank of Dallas Anticipated trend in farmland values* -30 -40 -50 2011 2012 2013 2014 2015 2016 2017 2018 *Seasonally adjusted. † Added to survey in second quarter 2011. 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. Agricultural Survey Agricultural Survey is compiled from a survey of Eleventh District agricultural bankers, and data have been seasonally adjusted as necessary. Data were collected June 5–13, and 118 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 email@example.com or by calling 214-922-5270. It is available on the web at www.dallasfed.org/research/surveys/agsurvey.aspx, where you may sign up for free email alerts to be automatically notified as soon as the latest survey is released on the web. For questions, contact Christopher Slijk, 210–978–1411. Agricultural Survey • Second Quarter 2018 • Federal Reserve Bank of Dallas