Full text of Agricultural Survey : Third Quarter 1994

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

STATISTICAL

F E D E R A L

R E S E R V E

RELEASE
B A

N

K

0

F

D

A

L

L

A

S

Quarterly Survey of
·cultural
Credit Conditions in the
Eleventh Federal Reserve District
Third Quarter 1994

Agricultural Credit
Conditions at Survey Banks
In the Eleventh District

Agricultural Lending
Up Despite Weak
Cattle Prices

Demand for Loans
Percent

Quarterly Survey of
Agricultural Credit
Conditions is compiled from
a survey of Eleventh District
agricultural bankers. This
publication is prepared by
the Federal Reserve Bank
of Dallas and is available
without charge by writing to

Results of the Dallas Fed's quarterly survey of
agricultural credit conditions indicate that the upward
trend in agricultural lending continued during the
third quarter. More than one-third of the bankers
surveyed reported an increase in loan demand during
that period. Agricultural loans reported by commercial banks in the Eleventh District of the Federal
Reserve System already had reached a record $4.6
billion at the end of the second quarter, and that
figure should increase through the rest of the year.
Bankers reporting an increase in loan demand in
the third quarter outnumbered those reporting a decline by more than two to one. Looking ahead to the
fourth quarter, responding bankers expected an

the Research Department,

80

60

40

20

1989

1990
Less

1991

• Same

1992

1993

1994

• Greater

(Continued on page 4)

Funds Available for Add itional Lending

Federal Reserve Bank of
Dallas, P.O. Box 655906,

100

Percent

District Land Values

100

1987 dol lars per acre

Dallas, TX 75265- 5906,

1,200
80

or by telephoning
1,000

(214) 922-5254.

60
800

For questions regarding

40
600

/--',

information in the release,
400

Thomas, (214) 922-5178.

....

20

Dry land

--- -------

Ranchland- -

contact Kelly George,
(214) 922-5175, or Michelle

''

200

...
1989

·52

'83

'84

'85

'86

·57

'88

'89

·90

·91

·92

·93

'94

1990
Less

1991

• Same

1992

1993

• Greater

1994

STATISTICAL

RELEASE

Agricultural Credit Conditions at Survey Banks
In the Eleventh District
Rate of Loan Repayment
Percent
100

Loan-Deposit Ratios at Survey Banks

80

Average Actual and Desi red Ratios
Percent

60

~~~~~~~~~~~~~~~~

60
55

40

50
20

1989

1990

Less

1991

1992

Same

• Greater

1993

40

Actual Ratio

1994

II

35
Desired Ratio

1993:3

1993:4

1994:1

1994:2

1994:3

Renewals or Extensions of Loans
Percent
100

DISTRIBUTION OF LOAN-DEPOSIT RATIOS

80

Banks Reporting (Percent)

60

Ratio

19 9 3
Oct. 1

Jan. 1

46
21
16
9
8

45
21
17
8
9

1994
Apr. 1
Jul. 1

Oct. 1

40

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

20

1989

1990

Less

1991

Same

1992

1993

47
20
18
10
6

48
18
17
13
5

41
18
16
14
12

1994

INTEREST RATES-FIXED

• Greater

Average Rate (Percent)

Amount of Collateral

Loan Type

1993
Oct. 1

J an. 1

9.12
9.37
9.46
9.34

9.06
9.32
9.42
9.21

1994
Apr. 1
Jul. 1

Oct. 1

Percent

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

100

80

9.16
9.34
9.40
9.24

9.63
9.81
9.74
9.67

10.05
10.11
10.07
10.14

INTEREST RATES-VARIABLE

60

Average Rate (Percent)

40

Loan Type

1993
Oct. 1

Jan. 1

7.94
8.20
8.06
7.96

7.94
8.17
8.08
7.99

1994
Apr. 1
J u l. 1

20

1989

1990

Less

1991

1992

Same

• Greater

1993

1994

Feeder cattle
Other farm operating
Intermed iate term
Long-term farm real estate

8.58
8.80
8.73
8.61

9.62
9.68
9.62
9.48

Oct. 1

8.17
8.18
8.14
8.10

STATISTICAL

Rural Real Estate Values

RELEASE

CROPLANO-ORYLAND

October 1, 1994
Region

1

Number of banks reporting land values.
Nominal dollars per acre.
n.r.-Not reported.

2

NOTE: Regional land values based on a small
number of reporting banks shou ld be used
with caution.
All figures are preliminary.

Average
Banks'
Value"
Third-Quarter 1994

Percent Changes
in Values from
Previous Previous
Quarter
Year

DISTRICT

156

563

.6

4.6

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

148
17
16
11
15
14
22
8
19
5
7

553
294
348
280
398
409
681
686
934
853
655

.2
2.9
-.4
-2.4
.1
1.2
-.1
-.4
-.2
3.7
-2.5

3.8
7.9
-1.6
-4.8
-3.0
-5.3
2.1
7.5
3.0
14.4
11.9

14

544

-2.5

-1.8

5
3

721
233

4.4
.9

12.5
1.9

Northern Louisiana
Southern New Mexico

Eleventh Federal Reserve District
CROPLAND-IRRIGATED

Region

12
NEW

DISTRICT

MEXICO

1 Northe rn High Plains
2 Southern High Plains
3 Northern Low Plains
4 Southern Low Plains
5 Cross Timbe rs
6 North Central Texas
7 East Texas

8
9
10
11
12
13

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

Average
Banks'
Value2
Third-Quarter 1994

101

Percent Changes
in Values from
Previous Previous
Quarter
Year

709

-1.3

6.2

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

92
17
16
8
9
6
n.r
4
9
n.r
8

634
515
599
413
603
630
n.r
942
1240
n.r
991

-3.0
.8
1.4
-2.2
1.4
-5.9
n.r.
3.2
-1.8
n.r.
-5.7

1.0
2.4
3.9
-4.6
-.5
-4.1
n.r.
.3
4.0
n.r.
7.3

12

815

-8.3

10.8

Northern Louisiana
Southern New Mexico

5
4

927
1371

1.6
6.5

7.5
n.r.

RANCHLAND

Region

Average
Banks'
Value2
Third-Quarter 1994

Percent Changes
in Values from
Previous Previous
Quarter
Year

DISTRICT

156

297

-4.3

.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

150
16
14
11
13
15
22
13
19
3
8

366
180
134
149
225
352
598
707
846
447
418

-1.5
4.4
-.4
-.4
.8
3.8
.3
.6
-.1
-12.2
-5.1

3.4
14.4
10.0
-5.7
-1.3
0
2.2
6.5
5.8
-6.8
6.5

16

302

-1.6

2.4

3
n.r

465
n.r

3.4
n.r.

18.l
n.r.

Northern Louisiana
Southern New Mexico

STATISTICAL

Third-Quarter
Comments
District bankers were asked for any additional
comments concerning agricultural land values
or credit conditions. These comments have
been edited.
Region 1- Northern High Plains
Feed yard cattle are still losing money and will
continue to do so until cheaper feeder cattle
start being sold. Grass cattle have had excellent gains this summer, which will help offset
the price decline. Corn is average in this area,
and the irrigated milo is excellent. Dryland
milo will be well below average because of our
dry summer. Wheat has nearly all been planted
and, with sufficient moisture, an excellent wheat
pasture is expected.
Region 5 - Cross Timbers
Soil moisture is adequate, while peanuts,
pecans and forage crops are fair to good.

RELEASE

Region 7 - East Texas
This area needs rain for pastures now and to
start winter pastures. Early hay production was
good, so there should be an adequate supply.
The deterioration in cattle prices is hurting
area producers and causing concern.
Region 8 - Central Texas
This area is in excellent condition, having
received ample rain for oats and wheat. In
addition, a hay shortage for the second year in
a row was averted by recent rains. These rains
were sufficient to replenish stock tanks in
parts of the trade area. However, declining
cattle prices are of concern.

some farmers, while others who waited until
the harvest to market their crops received
substantially lower prices. Livestock producers
have seen much of their previous year's profits
eradicated by lower prices. Rainfall throughout
the Gulf Coast Region has created aboveaverage weights for cow and calf producers,
which has partially offset the price decline.
Livestock producers with reduced profits and
high leverage are prone to credit problems
when using cash to manage their debt.

Region 10 - South Texas
Several large ranches are currently for sale in
this region. Many sellers are willing to divide
the plots. As a result, large ranches used for
beef production their entire history could be
divided.

Region 9 - Coastal Texas

-

Region 11 - Trans-P ecos and
Edwards Plateau

This region is experiencing increased competition from area banks for agricultural loans.
This demand comes after four years of average
to above-average crop years, which have increased available credit. Excellent crop yields
on corn, milo, cotton and soybeans have resulted in substantial improvement in the financial
condition of agricultural borrowers. Pricing
of corn and milo earlier in the year provided
farmers with not only good yields, but also good
prices. The use of futures and options benefited

Changes in incentive programs will negatively
affect all sheep and goat operations. The longterm viability of these operations will be determined by the market prices of wool and mohair
and how well they rebound to compensate for
the lost incentives. Volatility in the lamb market
and packing plant problems create cause for
concern, and future operations are at their
mercy.

the interest rates on loans to ranchers
by more than they have raised rates on
other types of farm loans. Since January 1994,
as market interest rates have risen, fixed
rates on short-term farm operating loans
have increased 79 basis points. Fixed rates
on feeder cattle loans, however, have climbed
99 basis points. (One hundred basis points
equals one percentage point.) Variable loan
rates for feeder cattle loans also have increased more than for other types of agricultural loans. Part of these increases refleets the greater perceived risk assumed by
banks making these loans.
Banks' cost of funds have risen less
than the rates charged on loans have increased. This increased spread indicates
that bank profits from agricultural lending
should escalate.

Average dry crop land values increased
for the seventh consecutive quarter, while
irrigated crop land and ranchland values dedined in the third quarter. Over the next
several years, land values could change as
Congress renews, reduces or eliminates the
Conservation Reserve Program. Currently,
4.1 million acres of Texas land (about 12
percent of total arable land) are enrolled in
this program, mostly in the plains region.
Neither bankers nor land owners know
what Congress will decide concerning this
program. Bankers are concerned that elimination of the program could reduce the
value of land that serves as collateral for
long-term farm loans. Farmers and ranchers
use real estate to back more than 25 percent
of agricultural loans in this Federal Reserve
District.

Agricultural Lending Up
Despite Weak Cattle Prices
(Continued from page 1)

increase in the demand for operating, crop
storage and nonreal estate farm loans but
expect continued weakness in the demand
for feeder cattle and dairy loans.
Survey results reflect the recent weakness in the cattle industry; 28 percent of the
responding bankers expect a fourth-quarter
decline in feeder cattle loans. Last spring,
cattle prices declined abruptly when heavy
supplies of cattle flooded the market.
Weakness in the cattle industry was especially apparent in the Panhandle, an area
that accounts for more than 70 percent of
Texas' cattle feedlots and grows extensive
feed crops. Bankers there reported lower
loan repayment rates and more renewals or
extensions of loans.
Bankers have responded to this
weakness in the cattle industry by raising