Full text of Agricultural Survey : Third Quarter 2000

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STATISTICAL RELEASE
I
'

F E D E R A L

R E S E R V E

B A N K

Agricunural Credit Conditions at
Survey Banks in the Eleventh District

Quarterly Survey of Agricultural
Credit Conditions in the
Eleventh Federal Reserve District

Demand for Loans
Twenty-five percent of responding banks
indicate an increase in loan demand.
Percent
100

Third Quarter 2000

The Third Quarter Survey of Agricultural
40
Credit Conditions indicates strain in the agricultural community. As the Eleventh District ends
20
one of the driest summers on record , agricultural bankers express concern about the future
0
01:'94
01:'95
01 :'96
01:'97
01 :'98
0 1:'99
viability of some produce~s. Crop production
Less
• Same
• Greater
appears to be hardest hit, although dry conditions have forced livestock liquidations as well.
Funds Available for Additional Lending
High energy costs are hurting an already difficult
Seventy-one percent of respondents report
production environment, according to bankers, no change in funding availability
Quarterly Suroey of
who report that government payments have pre- Percent
100
vented
significant loan repayment problems.
Agricultural Credit
(See page 4 for bankers' comments.)
Conditions is compiled from
Here are additional details from the survey:
80
•
The
average
loan-to-deposit
ratio
for
rea survey of Eleventh District
sponding banks climbed to 57 in the third quar- 60
agricultural bankers. This
ter, the highest level reported since 1986. The
publication is prepared by
rise reflects both a slight increase in lending and 40
a
drop in core deposits , as banks turn to nondethe Federal Reserve Bank
posit funding sources, such as the Federal Home 20
of Dallas and is available
Loan Bank. The increase in the loan-to-deposit
ratio is consistent with a trend at all banks in the 0
without charge by writing
region. The reported ratio continues to be lower 0 1:'94 0 1:'95 01 :'96 0 1:'97 01 :'98 01 :'99
to the Research Department,
Less
Same
• Greater
than the average desired ratio of 65 reported for
Federal Reserve Bank of
the quarter.
Dallas, P.O. Box 655906,
Dallas, TX 75265-5906,
or by telephoning
(214) 922-5254. It is
available on the web at
www.dallasfed.org.

For questions regarding
information in the release,
contact john Thompson,
(214) 922-5191.

01 :'00

01:'00

Rate of Loan Repayment
• Twenty-one percent of responding
Sixty-six percent of respondents report
District bankers reported a drop in loan repaythe same rate of loan repayments.
ment in the third quarter compared with the secPercent
ond quarter. This figure was lower than the 27
100
percent who reported a decline in the third
quarter of 1999. However, some regions reported
80
a larger decline in the rate of loan repayment
than that reported a year ago. Bankers in the
60
Northern High Plains reported a 53 percent
decline in the rate of loan repayment, and
40
bankers in the Southern Low Plains and the
Trans-Pecos and Edwards Plateau regions report20
ed a 45 percent drop .

(continued on page 4)

0
01 :'94

01:'95

01:'96

Less

01:'97

•

Same

01 :'98

•

01 :'99

Greater

01:·00

STATISTICAL RELEASE

Agricultural Credit Conditions at Survey Banks in the Eleventh District
Renewals or Extensions of Loans
Twenty-two percent of respondents report
a greater level of loan renewals or extensions.
Percent
100

Loan-Deposit Ratios at Survey Banks

Average actual and desired ratios
60

Percent
-------------===-~ &5

55
20

50
0
01 :"94

45
01 :'95

01 :'96
Less

01 :'97
•

Same

01 :'98
•

01:'99

01 :'00

Actual Ratio

Greater

Amount of Collateral
Seventeen percent of respondents indicate
an increase in collateral requirements.

35
Desired Ratio

1999:3

1999:4

2000:1

2000:2

2000:3

Percent
100

DISTRIBUTION OF LOAN - DEPOSIT RATIOS

Banks Reporting (Percent)
60

Ratio
40

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

0
01 :'94

01 :'95

01:'96
Less

01:'97
•

Same

01 :'98
•

01 :'99

01:'00

1999
Oct. 1

26
22
21
14
17

2000
Jan. 1

Apr. 1

J ul. 1

Oct. 1

24
20
26
17

30
19
25
12
14

23
15
29
15
18

20
17
26
17
21

INTEREST RATE-FIXED

Greater

Total Agricultural Loans at
Eleventh District Banks
Agricultural lending continued to grow
rapidly in the second quarter of 2000.
Mi llions of dollars (seasonally adjusted)
5,200
5,000

Average Rate (Percent)
Ratio

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

2000

1999
Oct. 1

Jan. 1

Apr. 1

Jul. 1

Oct. 1

10.16
10.19
10.10
9.50

10.39
10.46
10.13
9.59

10.56
10.61
10.51
9.86

10.98
10.84
10.66
10.16

10.94
11.00
10.76
10.14

4,800

INTEREST RATE-VARIABLE
4,600

Average Rate (Percent)
4,400
4,200
4,000

3,800 -+-----r---.----r----.-.--..-----.----r---.----r----.-.--..---~
'BS '87 '88 '89 ·90 ·91 ·92 ·93 •94 ·95 '96 ·91 '98 ·99 ·oo

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

Ratio

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

2000

1999
Oct. 1

Jan. 1

Apr. 1

Jul. 1

Oct- 1

10.06
10.17
10.01
9.47

10.20
10.30
10.08
9.63

10.59
10.67
10.53
10.07

11.09
11.13
11.00
10.56

11.06
11.19
10.91
10.31

STATISTICAL RELEASE

CROPLAND-DRY LA ND

Rural Real Estate values
October 1, 2000

Region
' 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.

Average
Value'
Banks'
Third Quarter 2000

Percent Changes'
in Values from
Previous Previous
Quarter
Year

DISfRICT

109

589

- 2.0

1.9

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

101
17
15
7
9
8
14
5
9
4
6

589
293
335
305
387
565
925
619
1,027
785
512

-2.0
0.0
1.2
-1.4
-3.5
- 2.2
1.0
- 6.4
- 7.4
- 0.3
2.1

2.7
1.8
3.8
-1.8
-2.1
0.8
8.9
-9.2
3.3
8.3
3.9

573

0.1

0.6

5
3

625
252

- 2.5
-0.5

-6.0
-14.2

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

Beventh Federal Reserve District

Northern Louisiana
Southern New Mexico

CROPLAND-IRRIGATED

12
NE W

ME XI CO

Region

Northern High Plains
Southern High Plains
Northern Low Plains
Southern Low Plains
Cross Timbers
6 North Central Texas
7 East Texas

1
2
3
4
5

8
9
10
11
12
13

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

Average
Value'
Banks'
Third Quarter 2000

Percent Changes'
in Values from
Previous Previous
Quarter
Year

DISTRICT

753

2.3

4.0

TEXAS
Northern High Plains
Southern High Plains
Nor thern Low Plains
Southern Low Plains
Cross Timbers
North Central Texas
East Texas
Central Texas
Coastal Texas
South Texas
Trans-Pecos and
Edwards Plateau

67
16
14
7
5
3
n.r.
3
6
n.r.
6

702
619
665
470
650
794
n.r.
800
1,700
n.r.
771

2.1
8.4
-1.0
1.9
-4.2
2.9
n.r.
7.5
- 2.0
n.r.
- 0.9

4.8
9.6
1.9
12.8
0.3
-3.0
n.r.
17.1
1.8
n.r.
6.1

726

- 0.9

- 15.7

5
4

843
1,221

1.2
3.5

-0.5
1.2

Northern Louisiana
Southern New Mexico

RANCHLAND
Eleventh District Real Land Values
Region

Dry/and and ranch/and values fall slightly,
while irrigated land values rise modestly
in the third quarter of 2000.
1992 dollars per acre
1,600
1,400

1,200
1,000

___,...__

800

600
400
200
0

..... .....

Dryland

Ranch land

••~••w~•w~-~~••w••w

Average
Banks'
Value'
Third Quarter 2000

Percent Changes3
in Values from
Previous Previous
Quarter
Year

DISTRICT

110

380

- 0.1

7.0

TEXAS
Northern High Plains
Southern High Plains
Northern Low Plains
Southern Low Plains
Cross Timbers
Nor th Central Texas
East Texas
Central Texas
Coastal Texas
South Texas
Trans-Pecos and
Edwards Plateau

101
17
9
7
8
8
15
8
10
3
6

468
189
135
191
292
531
834
824
987
569
570

- 0.5
2.0
- 7.9
- 1.0
-5.7
- 2.9
0.9
1.3
- 2.4
- 4.9
1.3

5.5
12.4
-4.6
9.9
23.6
5.6
10.6
5.6
4.4
9.9
16.2

385

0.3

-3.5

5
4

523
124

- 6.1
5.7

1.8
28.3

Nor thern Louisiana
Southern New Mexico

STATISTICAL RELEASE

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
Low commodity prices and drought will
certainly affect the equity of our farm and
ranch customers. If not for Farm Service
Agency assistance, losses would be devastating. Higher energy cost for 2001 will have
a major impact on irrigated crop producers.
The whole agricultural sector looks very
troubled.
The future appears bleak for agriculture.
Drought conditions are significantly
reducing fall wheat planting. Fuel costs and
low crop prices make farm profitability marginal.
Credit quality on farm operating loans
continues to deteriorate due to the severe
drought conditions, depressed commodity
prices and the tremendous increase in the
natural gas price, which also impacts fertilizer costs. Natural gas is used for irrigation
fuel, and we have had corn producers report
costs of $130-$150 per acre just for irrigation fuel. Drought conditions resulted in much
lower yields on wheat, corn, rnilo and soybeans. The government assistance payments
received in early September helped to some
extent to offset the low commodity prices,
but producers are still faced with increased
fuel and fertilizer costs. We will be looking
at increased carryovers on these farm operating lines.
Our stocker and feeder cattle operators
are making a little money, but those in the

feedlot are losing about $50 per head.
These conditions have been seen many times
before. There will be recovery, but I can't
say when.

The dry weather is starting to take
hold, and stock tank water is short. Cattle
Region 2-Southern High Plains
prices are still strong, even with the drought.
Most of our cow and calf producers would
There is currently a severe drought.
like to expand but can't, due to the drought.
Crops are poor to fair. We expect repayEast Texas finally received a small
ment problems on many operational loans.
amount of rainfall. Some have started hayConditions are dry, and there is no
ing already. Stock ponds are low, so water
crop. Livestock numbers and the cotton
is a problem for cattle. Fires have been bad,
market are both down. Energy costs have
mostly destroying timberland, not a lot of
doubled or will shortly. The increased cost
pasture. Contract calf prices are down for
of irrigation and dwindling water supply in
October. Stocker prices have held in spite
the aquifer will soon eliminate irrigation. For of the dry weather.
a number of years the South Plains enjoyed
a very low break-even cost compared with
Region 8-Central Texas
the rest of the nation. This is no longer the
case. Today we loan about the same total
Cattle prices have suffered because of
dollars as 10 years ago to about half as
drought conditions. We need rain if ranchmany farmers. I expect the trend to continers are to get another cutting of hay.
ue.
Rice crops set record yields in our
area. A second government payment will
Region 5-Cross Timbers
provide profits. It has been another tough
year for row crops, with farmers receiving
Conditions are very dry. There is no
average yields and low prices.
cotton crop, and livestock are being liquiAbnormally dry conditions are forcing
dated. Very little wheat is planted at this
cattlemen to begin feeding hay and suppletime.
ments. It appears that no more hay will be
cut, even if it rains. Drought conditions
devastated the peanut crop.
Regio n 6-North Cen tral Texas

Grain and cotton production is not currently profitable when all fixed costs are
factored in. If commodity prices don't catch
up to loan rates soon, we anticipate some
real problems in the agricultural sector.
The 2000 crops have all been harvested. Williamson County had an average to
above-average yield on grain. Cotton harvested at three-quarters to a whole bale per
acre. Market conditions remain a great concern, and many are holding commodities in
hopes of a price increase. I feel that most
farmers will meet loan obligations this year,
1 - - - - - - - - - - - - - - - - - - - - - ; but it will be a close call. Drought conditions have been really hard on cattle operations. Most farmers have been forced into
feeding for the summer. Calves have been
(continued from page 1)
sold early, and some have culled cows, just
• A sharp increase in renewals or trying to hang on for a little longer. We
have had a few rains, but not a good generextensions was reported in several
al
rain. Stock water is very low. Most farmregions. For example, responding bankers
ers are going to plant small grains, in hopes
in the Southern New Mexico, Northern
of rain and making it through the winter
High Plains, Southern Low Plains and
months. Costs continue to increase; there is
Trans-Pecos and Edwards Plateau
very little profit margin, if any. Overall conregions reported a 40 percent or greater ditions are very poor for agriculture-and
the banker.
increase in renewals or extensions in
Most of the land sales are to people
the past three months compared with a
wanting to get out of big cities, thus driving
year earlier.
agricultural real estate values to unrealistic
highs.

Agricultural Credit Conditions

Region 7-East Texas

Region 9-Coastal Texas
Agricultural land values are affected by
the proximity of Houston. The majority of
crop land sold is for development.

Region 10-South Texas
A strong demand for recreational
ranches continues to drive up prices.
Inventory does not last long; it is a seller's
market.
The grain sorghum, corn and cotton
harvests are complete. With the government's help, it looks like anticipated repayment problems may not materialize. It
appears that row crop farmers are going to
come out okay. Cattle prices at the auction
remain good. The sugarcane harvest will
begin soon. Pasture conditions seem to be
holding, with some spotted showers helping in late September. Cattle on feed are
losing money. Land prices are holding
steady. Demand is good for property
around urban fringes, which continues to
command exceptional prices. Attention now
turns to fall weather as we look for rains to
improve subsoil moisture conditions.

Full text of Agricultural Survey : Third Quarter 2000

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