Full text of Agricultural Survey : Third Quarter 2002
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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 0 F D A L L A S Agricultural Credit Conditions at Survey Banks in the Beventh District Quarterly Survey of Agricultural Credit Conditions in the Eleventh Federal Reserve District Demand for Loans Twenty-four percent of those surveyed experience lower loan demand. Percent 100 80 Third Quarter 2002 The Third Quarter Survey of Agricultural Credit Conditions indicated that Eleventh District bankers anticipate slightly improved financial conditions in coming months. The improved outlook was attributed to favorable summer growing conditions and the passage of the 2002 Security and Rural Investment Act. However, some bankers are worried about the lingering effects of the 2001 crop shortfall. Passage of the farm bill may have a positive effect on land values, as near-term revenue prospects for some producers have improved. Competition from alternative land use continues Quarterly Suroey of to bid up land values as well. Seventeen percent of bankers expect an increase in land values over Agricultural Credit the next three months, up from only 7 percent a Conditions is compiled from year ago. (See page 4 for bankers' comments.) Here are additional details from the survey: a survey of Eleventh District • Nineteen percent of bankers reported agricultural bankers. This greater loan availability in third quarter 2002 than the previous year, down slightly from 22 percent publication is prepared by in third quarter 2001. Fifteen percent of responthe Federal Reserve Bank dents experienced increased loan demand over a year ago, reversing a downward trend, which of Dallas and is available began in fourth quarter 2001. • Bankers report that there has been no easwithout charge by writing ing of lending standards, as collateral requirements to the Research Department, have remained relatively unchanged from a year ago. Eighty percent of respondents reported the Federal Reserve Bank of same collateral requirement compared with a Dallas, P.O. Box 655906, year earlier, up slightly from 77 percent in third quarter 2001. Dallas, TX 75265-5906, • Banks' cost of funds declined another 18 or by telephoning basis points this quarter to an average rate of 2.4 percent. The cost of funds rate began its decline (214) 922-5254. It is in first quarter 2001 and is currently the lowest in more than 20 years. available on the web at • The percentage of bankers expecting inwww.dallasfed.org. creased loan volume over the next three months rose in all categories except farm machinery. Twelve percent of respondents expect farm real For questions regarding estate loans to grow in the fourth quarter, up from 9 percent who expected an increase for information in the release, the third quarter; 10 percent expect feeder cattle contact John Thompson, loans to increase, up from 5 percent last quarter. • Data show that the number of agricultural (214) 922-5191. borrowers has dropped 15 percent over last quarter. 60 40 20 01 :"97 01:'98 Less 01 :'99 • Same 01:'00 • 01:'01 01:'02 Greater Funds Available for Additional Lending Ten percent of bankers cite less funding availability. Percent 100 80 60 40 20 0 01 :'96 01 :'97 01:'98 Less 01:'99 • Same 01:'00 • 01 :'01 0 1:'02 Greater Rate of Loan Repayment Seventy-two percent of respondents indicate no change in loan repayment rates. Percent 100 80 60 40 20 0 01 :'96 01:'97 01:'98 Less 0 1:'99 • Same 0 1:'00 • 0 1:'01 Greater 0 1:'02 STATISTICAL RELEASE Agricultural Credit Conditions at Survey Banks in the Eleventh District Renewals or Extensions of Loans Eighteen percent of bankers cite increased renewals and extensions. Percent 100 Loan-Deposit Ratios at Survey Banks 80 Average actual and desired ratios 60 Percent ~~~~~~~~~~~~~~~~-70 65 40 60 55 20 50 0 01 :'96 01 :'97 01 :'98 Less 0 1:'99 • Same 01 :'00 • 01 :'01 45 01 :'02 Actual Ratio 40 Greater II Amount of Collateral Eighty percent of respondents require the same levels of collateral. 35 Desired Ratio 2001 :3 2001 :4 2002:1 2002:2 2002:3 Percent 100 DISTRIBUTION OF LOAN - DEPOSIT RATIOS 80 Banks Reporting (Percent) 60 2001 Ratio 40 Less than 41% 41% to 50% 51% to 60% 61% to 70% More than 70% 20 0 01 :'96 01:'97 0 1:'98 Less 0 1:'99 Same 01:'00 • 0 1:'01 0 1:'02 2002 Oct. 1 Jan. 1 April 1 July 1 Oct. 1 14 12 24 26 23 22 15 21 21 22 20 17 16 22 26 19 12 20 20 30 16 14 17 20 33 INTEREST RATE-FIXED Greater Total Agricultural Loans at Eleventh District Banks Total loan volume in the agricultural sector slips in the second quarter of 2002. Millions of dollars (seasonally adjusted) 5,600 5,400 Average Rate (Percent) 2001 Ratio Feeder cattle Other farm operating Intermediate term Long-term farm real estate 2002 Oct. 1 Jan. 1 April 1 July 1 Oct. 1 9.15 9.16 9. 18 8.52 8.31 8.37 8.45 7.98 8.23 8.30 8.23 7.99 8.14 8.19 8.24 7.82 8.08 8.08 8.10 7.79 5,200 5,000 INTEREST RATE-VARIABLE 4,800 Average Rate (Percent) 4,600 Ratio 4,200 4 ,000 3,800 3,600 2002 2001 4,400 +-~---.---.--.---.---.---,-----.-----r----.---,---,.----.----,..---r--,---, •w·-~~w~~~~W•WOO~ Note: Some of the volatil ity observed in agricultural loan levels is due to the acq uisition of several Eleventh District banks by banks headquartered in other Reserve Districts. Feeder cattle Other farm operating Intermediate term Long-term farm real estate Oct. 1 Jan. 1 April 1 July 1 Oct. 1 8.26 8.48 8.37 7.94 7.29 7.43 7.27 7.00 7.23 7.34 7.29 7.08 7.20 7.19 7. 19 6.95 7.03 7.13 7.10 6.77 ST.ATISTICAL RELEASE CROPLAND-DRY LAND Rural Real Estate Values October 1, 2002 ' 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. NOTE: In recent years we have seen some agricultural land values driven up as a result of urban expansion and land conversion to recreational use. These inflated values were sometimes omitted to reduce volatility in reporting regions. Eventually the number omitted grew so large as to threaten the reliability of the data series. Therefore, we are reinstating all reported land values. This revision includes data reported from first quarter 2001 through second quarter 2002. Historic tables containing these data can be found at http://www.dallasfed.org/ htm/data/about.html. Region 2 Beventh Federal Reserve District 177 653 1.4 1.1 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 T rans-Pecos and Edwards Plateau 161 18 23 14 14 16 25 9 18 9 6 653 280 364 324 413 582 970 798 1,162 961 579 1.6 -0.9 0.6 -0.9 LO -1.1 1.2 1.9 3.4 7.4 - 3.8 0.8 -0.1 4.3 - 4.2 0.5 -5.2 - 3.9 0.9 10.5 5.4 - 8.4 9 578 - 0.6 2.9 Northern Louisiana Southern New Mexico 13 3 700 256 - 0.8 1.1 3.9 -1.0 CROPLAND-IRRIGATED 12 M EX IC O 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 8 9 Coastal Texas 10 11 12 13 Percent Changes' in Values from Previous Previous Quarter Year DISTRICT Region NE W Average Value 2 Banks' Third Quarter 2 002 South Texas Trans-Pecos and Edwards Plateau Southern New Mexico Northern Louisiana Average Value• Banks' Third Quarter 2002 P ercent Changes' in Values from Previous Previous Quarter Year DISTRICT 121 778 -1.3 - 1.1 TEXAS Nor thern 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 22 12 11 6 n.r. 4 8 4 5 715 582 687 523 643 861 n.r. 857 1,981 650 789 -2.0 -1.3 0.8 1.3 -0.8 - 3.3 n.r. - 6.4 11.l - 10.8 - 5.5 -1.9 - 1.8 3.6 - 3.1 -3.9 -9.0 n.r. 5.0 26.9 -9.6 -13.3 10 1,173 -6.3 -0.5 Nor thern Louisiana Southern New Mexico 13 7 923 1,347 0.8 2.2 4.7 1.8 RANCHLAND Eleventh District Real Land Values Dry/and values increase 1.4 percent. Irrigated land and ranch/and values decline 1.3 percent and 1 percent, respectively. Region Average Value• Banks' Third Quarter 2002 P ercent Changes' in Values from Previous Previous Quarter Year DISTRICT 192 477 - 1.0 2.7 1992 dollars per acre TEXAS 1,600 Northern Hig h 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 175 17 18 14 12 17 26 17 20 10 5 561 191 181 199 318 661 958 874 1,340 808 664 0.1 0.2 2.5 - 1.4 1.6 0.2 0.9 -1.8 3.8 3.6 - 1.3 4.0 0.4 14.2 -2.3 5.5 3.0 2. 1 -0.7 8.3 5.9 8.3 19 459 - 1.4 1.6 10 7 622 236 - 7.9 - 7.8 - 15.1 - 4.4 1,400 1,200 1,000 Irrigated 800 600 400 200 ~ _,.. _/ ' .... ~ Dl)lland ' ./" Ranch land ... Northern 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-Northem High Plains Most producers need an additional government payment this year. Quite a few producers have had to request additional operating funds to carry them through harvest. Sustained drought conditions adversely affect value. Commodity prices are low. There is concern over water rights and the potential effect of nonagricultural commercial use of underground supply. Abundant rainfall should provide adequate wheat pasture; plus, the cattle market is gaining strength. It could be a positive first and second quarter for 2003. Region 2-Southem High Plains General lending practices have not varied from last year. Growth and increased volume are seen in cattle lending. Bank margins have improved from a year ago. Irrigated cotton and peanut yields will surpass expectations. The dryland cotton crop will be disappointing. Conditions are stable, with few forced liquidations. Little land is available for purchase or rent. Prospects for federal disaster assistance appear to be improving. This would greatly assist many growers still trying to overcome the poor 2001 crop. Cattle markets have stabilized. Region 3-Northern Low Plains Land values are generally supported by the increase in recreational owners. We could see changes in real estate after the farm bill is finalized. Crops are late. With late frost and additional rain, the cotton crop could be average or above. Also, irrigated peanuts are above average. Region 4 -Southem Low Plains After the relatively wet summer, pastures have come back with fairly good growth. Rangeland [values] in this area have increased dramatically due to the sale of several large acreages to wealthy out-of-state buyers interested in recreation. Prospects look good for wheat yield, but prices are depressed. Region 5 - Cross Timbers Our area has good rains, and most stock tanks are full. Wheat grounds have been pre- pared and fertilized. Our ranchers and farmers are starting to buy stocker calves. Cattle prices in some areas have gone up by $15 to $20. Other areas have had a slight increase in cattle prices. Ranchland values continue to be affected by proximity to major metropolitan areas. The new farm bill should help. Also, there would be an increase in wheat prices if we could get out of the karnal bunt quarantine. We still need runoff water to replenish stock tanks and area lakes. Farmers are waiting for moisture before sowing wheat. Region 6-North Central Texas Overall, crop production yields have been good. Prices for grains are 25 to 35 percent above last year. However, I am convinced when all income for the year is in, farm income will be down 15 to 20 percent from 2001. Also, increases in grain prices will be reflected in lower livestock prices to the producer. I expect slightly lower loan repayments and tighter loan requirements for the coming crop year. We have completed the 2002 harvest, which is about 60 to 70 percent of the average yield for Williamson County. Farmers are looking forward to the new farm program. Land values continue to increase, a result of more land being developed and new people moving to the area. Demand is very good for small tracts at a premium price. The increase in corn prices will help the dryland corn farmers in Central Texas as well as farmers of irrigated land in the Panhandle. Region 7 -East Texas Farming conditions continue to be difficult due to high production costs and minimal returns on investments. Land values are excessive for production returns. The cotton crop appears good, and harvest has started. The dairy industry is very important to Hopkins County, even though the number of dairy farms has fallen from a peak of more than 500 to about 160. Region 8-Central Texas This is a year to forget for the Coastal Bend area. Not considering poor market prices for crops, our production of corn, milo and cotton is 60 to 75 percent less than normal, and grades are poor. We had rains this summer when they were most needed. Most cattle producers have plenty of hay going into the fall. Only the most efficient producers are making any money right now; the rest are just getting by. September through November is the main selling period for feeder calves in our area. With corn prices steadily increasing and the large number of feeder calves being sold this fall , I look for a substantial decrease in cattle prices. Region 9-Coastal Texas Wharton County is a major agricultureproducing county. Our corn and milo yields were average, but grades were off because of heavy rains prior to harvest. Rice yields were excellent, but there is a limited market and a depressed price. Our cotton crop is mostly excellent; however, recent rains from Hurricane Faye will hurt the grades on most remaining cotton in the fie lds. Region 10-South Texas Rainfall has been great over the past three months. We have received over 30 inches. Some of the crops did wash, but the benefit has been greater than the loss. We are going into the fall in great shape. Region 11-Trans-Pecos and Edwards Plateau We have received localized rains in the Big Bend country that have greatly helped our pastures. It is still dry in many places, though. Availability and cost of water will be critical next year. Dairy prices are a very big concern. The drought has forced many ranchers to liquidate. Cattle are in poor to fair condition. Region 12-New Mexico Real estate subdivision and water issues are driving the ranch real estate market. The severe drought continues. Our local irrigation district is out of water in the reservoir. For the most part, all crops appear better and are priced better than last year. Range (cattle) conditions remain very dry, and many cattle are being sold or moved out of the country. Land values vary. Some irrigated land is sold at industrial prices because of water values. Region 13-Louisiana The local economy depends heavily on agriculture. Pricing and the yield of crops in past years have placed a heavy burden on local farmers. Risk on farm loans is greater than in the past, resulting in fewer crop loans funded. Agricultural land values continue to be driven by recreation-related sales. Late summer rains increased grass base and hay yields. We expect producers to buy feeder cattle for fall and winter grazing in our area.