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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

Agricultural Credit Conditions at
Survey Banks in the Eleventh District

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

Demand for Loans
Twenty-eight percent of responding banks
report a decrease in the demand for loans.
Percent
100

80

Third Quarter 1998

60

40

20

Qu a rter~}'

Survey of

Agricult11ral Credit
Co11ditions is compiled from

a su1vey of Eleve nth District
agricultural banke rs . This
publication is prepared by
the Federa l Reserve Bank
of Da llas and is ava ilable
w ithout charge by writing
to the Research Department,

Federal Rese rve Bank of
Da llas, P.O. Box 655906,
Da llas, TX 75265-5906,
or by tele phoning
(214) 922-5254

For q uestions rega rding
infonn atio n in the release,
contact She ila Do lmas,
(2 14) 922-51 91.

The Third Quarter Survey of Agricultural
Credit Conditions shows a continued decline
from the second quarter. While still recovering
from the financia l effects of the '96 drought,
Eleventh District agricultural producers were hit
with both a severe drought and low commodity
prices. Producers' costs of irrigation and feed
increased, while commodity prices were
reduced by above-average yields in other parts
of the world. Slack demand from Asian
countries also contributed to the price declines.
In addition, many District farmers who switched
from cotton to corn were hurt by the aflatoxin
contamination of corn crops, which brought on
even lower prices for the damaged corn. Cattle
operations suffered from a shortage of hay, and
cotton growers saw yields sink far below those
of the past two years. (See page 4 for more
bankers' comments.)
Here are additional details from the survey:
• The rate of loa n re payment fell for over
half of responding banke rs. This decline was
prevalent throughout the District. Similarly, 46
percent of respondents re ported increased loan
renewals or extensions.
• The demand for loans in the third quarter
was less for 28 percent of respondents, as the
number of farm and ranch borrowers per
responding bank continued to drop from as
many as 142 a year ago to an average of 96 in
the third quarter.
• Thirty-two percent of respondents expect
farmland values to decrease in the fourth
quarter, compared with just 2 percent expecting
a decrease a year earlier.

o
01 :'92

01 :'93

01 :'94

Less

01 :'95

• Same

01 :'96

0 1:'97

0 1:'98

• Greater

Funds Available for Additional Lending
Seventy-one percent of respondents report
no change in the availability of funds for lending.
Percent
100

80

60

40

20

0
01 :'92

01 :'93

01 :'94

Less

01 :'95

• Same

01 :'96

0 1:'97

0 1:'98

• Greater

Rate of Loan Repayment
The rate of loan repayment decreases for 52 percent
of third-quarter respondents, compared with 29
percent reporting decreases in the second quarter.
Percent
100

80

60

40

20

0
01 :'92

01 :'93

01 :'94

Less

01 :'95

• Same

0 1:'96

01 :'97

• Greater

0 1:'98

STATISTICAL

RELEASE

Agricultural Credit Conditions at Survey Banks in the Eleventh District
Renewals or Extensions of Loans
Forty-six percent of respondents report
increases in loan renewals or extensions.
Percent
100

Loan-Deposit Ratios at Survey Banks
80

Average actual and desired ratios
Percent

60

~~~~~~~~~~~~~~~~-

&5

60
40

55
50

20

45
0
0 1:'92

01 :'93

01:'94

0 1:'95

Less

• Same

0 1:'96

0 1:'97

Actual Ratio

01:'98

II

• Greater

40
35

Desired Ratio

1997:3

1997:4

1998:1

1998:2

1998:3

Amount of Collateral
Twenty-six percent of survey respondents
report an increase in collateral requirements.
Percen t
100

DISTRIBUTION OF LOAN -DEPOSIT RATIOS
80

Banks Reporting (Percent)
60

Ratio
40

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

20

0
0 1:'92

01:'93

01 :'94

01:'95

Less

• Same

01:'96

01:'97

01:'98

1997
Oct. 1

Jan. 1

21
18
20
25
15

30
16
26
20
9

1998
Apr. 1
J ul. 1

33
16
22
21
9

27
16
25
21
13

Oct. 1

24
22
18
20
16

INTEREST RATES-FIXED

• Greater

Average Rate (Percent)

Total Agricultural Loans at
Eleventh District Banks
Agricultural lending dips in second quarter of 1998.
Millions of dollars (seasonally adjusted)
5,200

Ratio

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

1997
Oct. 1

Jan. 1

1998
Apr. 1
Jul. 1

Oct. 1

10.47
10.56
10.39
9.71

10.50
10.60
10.36
9.72

10.47
10.52
10.44
9.66

10.31
10.37
10.23
9.63

10.41
10.52
10.15
9.56

INTEREST RATES-VARIABLE
Average Rate (Percent)
Ratio

Feeder cattle
Other farm operating
Intermediate term
Long-term farm real estate
'86

'87

'88

'89

'90

'91

'92

'93

'94

'95

'96

'97

'98

Note: Starting May 1998, data previously reported by NationsBank of Texas
in the Eleventh District are now reported in the Fifth District.

1997
Oct. 1

Jan. 1

1998
Apr. 1
Jul. 1

Oct. 1

10.69
10.71
10.38
9.88

10.45
10.54
10.33
9.85

10.45
10.52
10.42
9.79

10.21
10.31
10.24
9.68

10.39
10.53
10.28
9.80

STATISTICAL

RELEASE

CROPLAND-DRYLAND

Rural Real Estate Vllues
October 1, 1998

Region
1

Number of banks reporting land values.
Prices are dollars per acre, not adjusted for inflation.
3
Not adjusted for inflation.
n.r.-Not reported due to insufficient responses.
2

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

Eleventh Federal Reserve District

P ercent Changes 3
in Values from
Previous Previous
Quarter
Year

DISTRICT

130

565

- 1.3

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

121
15
18
10
12
11
18
n.r.
11
9
6

558
269
333
304
413
507
917
n.r.
983
706
472

-1.7
0.8
0.1
-2.6
- 0.9
-7.4
- 1.7
n.r.
4.9
-7.3
3.7

0.2
-4.2
- 2.6
1.0
- 2.6
-0.8
16.l
n.r.
12.4
-12. 1
- 5. l

9

567

- 0. 1

5.8

5
4

666
500

0.0
36.1

1.0
114.3

Northern Louisiana
Southern New Mexico

CROPLAND-IRRIGATED

12
N EW

Average
Banks'
Value 2
Third-Quarter 1998

M E XIC O

Region

1 Northern High Plains
2 Southern High Plains
3 Northern Low Plains
4 Southern Low Plains
5 Cross Timbers
6 North Central Texas
7 East Texas

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

8
9
10
11

Average
Value 2
Banks'
Third-Quarter 19 98

Percent Changes3
in Values from
Previous Previous
Year
Quarter

DISTRICT

89

753

-0.4

TEXAS
Northern High Plains
Southern High Plains
Northern Low Plains
Southern Low Plains
Cross Tunbers
North Central Texas
East Texas
Central Texas
Coastal Texas
South Texas
Trans-Pecos and
Edwards Plateau

76
15
18
6
7
6
n.r.
n.r.
6
3
5

681
517
631
449
657
694
n.r.
n.r.
1,627
705
666

0.2
-3.6
- 2.9
- 0.7
-0.1
- 4.3
n.r.
n.r.
-10.4
- 3.1
2.7

0.9
- 14.0
- 3.4
8.4
- 1.3
- 8.6
n.r.
n.r.
23.5
- 6.0
-10.9

8

1,718

24.l

116.9

Northern Louisiana
Southern New Mexico

5
8

877
1,425

0.0
- 3. 1

- 2.9
8.1

1.9

RANCHLAND

Real Eleventh District Land Values
Ranch/and values increase in third quarter of 1998.

Region

Average
Value 2
Banks'
Third-Quarter 1998

P ercent Changes 3
in Values from
Previous Previous
Quarter
Year

1992 dollars per acre

DISTRICT

132

371

4.7

15.0

1,600

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

120
12
13
10
11
12
18
4
12
8
6

437
158
138
155
256
445
825
627
960
667
476

1.3
-0.2
-0.3
-0.8
4.9
-7.0
-1.3
-7.3
5.6
0.4
5.2

8.2
- 3.0
- 0.7
5.0
9. 1
1.6
15.9
- 15.0
10.3
21.2
7.6

14

389

2.6

12.0

4
6

394
92

- 3.6
8.4

-13.1
-28.2

1,400

\.

1,200
1,000
800
600

,, ,

-'-

Dryland

400
200
0

Ranchland

-

~"

Northern Louisiana
Southern New Mexico
~m~••~•~m~~m~~-w~

STATISTICAL

Third-Quarter
Comments
Dist1ict bankers were asked for any
additional comments concerning agricultural
land values or credit conditions. These
comments have been edited.

Region 1-Northem High Plains
We could not afford poor crops and
poor markets at the same time, but we have
both. We're going to be asked to substitute
credit for income (renewals), and that may
not work in most cases.

Region 2 - Southem High Plains
Insurance claim checks did not cover the
expenses on dryland crops. The expense of
irrigated crops is averaging 30 percent higher
than last year and will cause some of our better
farmers to lose money. We anticipate carryovers
to be the worst ever in our area.
The ox is in the ditch. Attracting and
maintaining deposits to fund loans is
becoming extremely difficult.

Region 4 - Southem Low Plains
The farm situation looks bad for all
farms and ranches, but the smaller farmers
and ranchers without outside income will
soon be all gone. Net worth of most will be
reduced by 5 percent or more.
If we don't get rain soon, wheat will not
be planted. Stockmen are beginning to sell
cattle. Crop insurance on cotton and grain
sorghum is not enough to pay out '98
operating loans.
The drought has deteriorated equity
positions of our livestock customers by 20
percent to 30 percent in some cases. If we
don't get rain by October 1, we will be
looking at complete herd liquidations.
More than 50 percent of row-crop
debtors have carryover from one or all of the
previous three years. There have been no
new startup farm operations in over five
years because of the outlook.
About 20 percent to 30 percent of the
cotton crop has been declared a disaster and
insurance paid on it. Irrigated cotton and
peanuts are in good condition.

RELEASE

Region 5-Cross Trmbers

Region 10-South Texas

We have adequate moisture to plant
small grains, but we need more rain. We can
expect a very expensive winter feeding program for our beef cattle. Cash farm income is
very low for most farm operators.

The value of ranchland is greatly influenced by recreation (hunting). How can we
assess the true agricultural value of tl1e land?
There was no rain during the critical
yield period. Yields were poor on grain,
cotton and com. Prices are low because
Midwest yields are high and many crops
have no storage space. Most com has
aflatoxin-and t11erefore little market value.
Some producers sold out, but others made it
through tl1e drought. Cattle markets should
be better after t11e rain.

Region 6-North Central Texas
Short-tem1 land values should remain
constant or decrease slightly because of the
drought; however, increased interest from
the Austin, Round Rock and Georgetown
markets should drive up long-term values.
Agricultural credit conditions are
worsening because of the drought. We are
encouraging some of our agricultural credits
to seek disaster loans for carryover debt.
It appears a large number may not stay
in farming. This year is much more serious
than 1996. In '96 we didn't have the yields,
but we had decent prices.
None of tl1e land located in a growth
corridor north of Dallas is selling for farm
purposes. It is changing from farm to residential and selling in tracts of 1 to 10 acres.
It is getting too expensive to farm or ranch.

Region 11-Trans-Pecos and Edwards
Plateau
Farm prospects are bleak for next year
because of the weakest commodity prices in
years. Purchases by out-of-area individuals
principally interested in future water sales for
nonagricultural purposes have inflated irrigated land values.
Agriculture credits continue to be put
under pressure with d1y conditions and low
prices. Producers are surviving with outside
income.

Region 7-East Texas

Region 12- Southem New Mexico

In the past 24 months approximately 10
dairymen have been forced to liquidate. If
the Agriculture Department does not offer
substantial aid, a minimum of five additional
dairies will also have to liquidate. If this liquidation occurs, more than 50 percent of the
dairies in this county will be out of existence.

Range conditions are still ve1y dry. Calf
weights are 50 pounds less t11an in '97 . We
are having difficulty selling calves.
Range conditions in southwest New
Mexico are tl1e best in six years. Most com
fanners are planning on storing the 1998
crop. The chili crop is in good condition,
and yields are normal. Cotton acreage is
small, but conditions are good. Ranchers
have sufficient forage for livestock.
Commodity prices and cattle prices are
extremely low with operating costs going up.
Leveraged producers will have a difficult
time getting operating funds. There are very
few spring seeded crops.

Region 8-Central Texas
We had no rain for five months, and
then we averaged 8 inches or more during
the past week. This should enable cattle
producers to make a late cutting of hay and
possibly plant some winter pasture.

Region 9-Coastal Texas

Region 13-Northem Louisiana
1 ~

The agricultural economy in this area
cannot continue; costs are steadily increasing
with commodity prices below those of the
late 1950s. Equipment costs are outrageous.
The future looks bleak.
Agricultural lending is becoming more
and more dependent on guaranteed loans
and higher crop insurance.

Ninety days of severe drought followed
by 8 to 11 inches of rainfall on defoliated
cotton has everyone wondering just how bad
it will be in the end. Aflatoxin claimed the
com crop, and worms and drought damaged
the cotton, soybeans and milo. All we can
say is "Help!"
Average production has been cut in half.