Full text of Agricultural Survey : Third Quarter 2006

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S T A T I S T I C A L R E L E A S E
F

Agricultural Credit Conditions at
Survey Banks in the Eleventh District
Demand for Loans
Fifty-two percent of bankers report no change in
loan demand.

Quarterly Sur vey of Agricultural
Credit Conditions in the
Eleventh Federal Reser ve District

Percent
100

Third Quarter 2006

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 the Research Department,
Federal Reserve Bank of
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 Laila Assanie,
(214) 922-5191.

The Third Quarter Survey shows marginal
improvement in the Eleventh District’s agricultural conditions. Several regions received badly
needed rain in September, which helped enhance
irrigated crop yields, slightly improved cattle
grazing conditions and boosted soil moisture
levels for winter wheat planting. However, the
rains were too late to salvage dryland crops, and
a large area of the district remains in drought.
Ranchers in Central, North Central and East
Texas continue to liquidate their breeding stock
because of limited forage availability and high
supplemental feed costs. Operating margins
remain lackluster, and bankers say the ongoing
drought, along with high feed and production
costs, has increased demand for new loans and
spurred renewals of existing loans.
Here are additional details from the survey:
• Land values continue to rise in most
regions, largely due to the sale of farmland for
nonagricultural purposes, such as investment
and recreation. Dryland, irrigated land and
ranchland prices were up 3.9 percent, 2.4 percent and 7.1 percent, respectively, in the third
quarter. Bankers say the recent run-up in land
values has priced many agricultural producers
out of the market.
• The ongoing dry spell, coupled with
higher interest rates and production costs, has
increased financial strain on the district’s agricultural producers. Seventeen percent of bankers
saw a decline in the rate of loan repayment,
compared with 10 percent last quarter and 6
percent a year earlier. Additionally, 18 percent of
those surveyed cite an increase in loan renewals
or extensions, compared with 8 percent a year
ago.
• High production costs may have limited
purchases of farm machinery. Fewer bankers
(only 4 percent vs. 17 percent last year) anticipate making more farm machinery loans.

0
Q1:'00

Q1:'01

Q1:'02
Less

Q1:'03
Same

Q1:'04

Q1:'05

Q1:'06

Greater

Funds Available for Additional Lending
Funds available for lending remain the same, say
82 percent of respondents.
Percent
100

0
Q1:'00

Q1:'01

Q1:'02
Less

Q1:'03
Same

Q1:'04

Q1:'05

Q1:'06

Greater

Rate of Loan Repayment
Seventeen percent of bankers see lower loan
repayment this quarter.
Percent
100

0
Q1:'00

Q1:'01

Q1:'02
Less

Q1:'03
Same

Q1:'04
Greater

Q1:'05

Q1:'06

S T A T I S T I C A L R E L E A S E

Agricultural Credit Conditions at Survey Banks in the Eleventh District
Renewals or Extensions of Loans
Eighteen percent of bankers see an increase in loan
renewals and extensions.
Percent
100

Loan–Deposit Ratios at Survey Banks
Average actual and desired ratios

70
65

60
55

50
0
Q1:'00

Q1:'01

Q1:'02
Less

Q1:'03

Q1:'04

Same

Q1:'05

Actual Ratio

Q1:'06

Greater

Desired Ratio

Amount of Collateral
Collateral required remains unchanged, report
93 percent of bankers.

2005:3

2005:4

2006:1

2006:2

2006:3

Percent
100

DISTRIBUTION OF LOAN – DEPOSIT RATIOS

Banks Reporting (Percent)
60

2005
Ratio

2006

Oct. 1

Jan. 1

Apr. 1

July 1

Oct. 1

18
16
14
15
37

20
15
21
14
30

25
11
21
15
28

16
14
27
13
30

18
9
22
18
33

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

0
Q1:'00

Q1:'01

Q1:'02
Less

Q1:'03

Q1:'04

Same

Q1:'05

Q1:'06

INTEREST RATE — FIXED

Greater

Total Agricultural Loans at Eleventh District Banks
Agricultural lending continues to grow in the
Eleventh District.

Average Rate (Percent)
2005

2006

Oct. 1

Jan. 1

Apr. 1

July 1

Oct. 1

8.41
8.53
8.36
7.97

8.86
8.85
8.72
8.11

8.96
9.15
8.84
8.19

9.37
9.57
9.19
8.12

9.61
9.68
9.36
8.53

Millions of dollars (seasonally adjusted)

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

6,400
6,200
6,000
5,800

INTEREST RATE — VARIABLE

5,600
5,400

Average Rate (Percent)

5,200

2005

5,000

Oct. 1

Jan. 1

Apr. 1

July 1

Oct. 1

8.19
8.33
8.18
7.81

8.26
8.37
8.20
7.79

8.53
8.84
8.62
7.96

9.10
9.32
9.18
8.66

9.47
9.55
9.48
8.73

4,800

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

4,600
’96

’97

’98

’99

’00

’01

’02

’03

’04

’05

’06

Note: Some of the volatility observed in agricultural loan levels is due
to the acquisition of several Eleventh District banks by banks
headquartered in other Reserve Districts.

2006

S T A T I S T I C A L R E L E A S E

CROPLAND—DRYLAND

Rural Real Estate Values
October 1, 2006

Region

Number of banks reporting land values.
2
Prices are dollars per acre, not adjusted for inflation.
3
Not adjusted for inflation.
n.r.—Not reported due to insufficient responses.
1

Eleventh Federal Reserve District
1

Percent Changes3
in Values from
Previous Previous
Quarter
Year

DISTRICT

142

970

3.9

15.4

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

129
22
17
10
11
13
20
8
13
7
n.r.

982
358
422
412
554
870
1,572
1,208
1,948
1,005
n.r.

4.2
1.9
–1.6
3.2
1.3
4.4
0.3
6.9
6.7
2.7
n.r.

16.5
8.9
1.9
3.3
12.1
10.4
6.5
36.4
27.1
0.3
n.r.

926

5.3

24.4

7
6

900
336

–0.2
–5.4

2.7
10.9

Northern Louisiana
Southern New Mexico

Average
Banks1
Value2
Third Quarter 2006

12
N E W

M E X I C O

L O U I S I A N A

CROPLAND—IRRIGATED

13
6

T E X A S

Region

DISTRICT

1
2
3
4
5
6
7

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

8
9
10
11
12
13

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

Northern Louisiana
Southern New Mexico

Average
Banks1
Value2
Third Quarter 2006

Percent Changes3
in Values from
Previous Previous
Quarter
Year

1,088

2.4

11.6

78
20
17
8
7
4
n.r.
3
7
4
n.r.

1,011
733
847
731
743
1,701
n.r.
1,439
2,413
1,152
n.r.

3.1
0.9
0.6
7.3
–2.1
6.6
n.r.
9.0
0.5
– 0.4
n.r.

13.0
9.5
7.2
9.7
0
27.1
n.r.
37.2
19.1
–4.4
n.r.

1,623

–2.6

2.6

7
8

1,064
1,856

0.3
1.0

–5.6
8.6

RANCHLAND
Eleventh District Real Land Values
Dryland, irrigated land and ranchland values
continued to rise in the third quarter of 2006.

Region

2000 dollars per acre

1,000
900
Irrigated

800

Dryland

700
600

Ranchland

500
400

200
’96

’97

’98

’99

’00

’01

’02

’03

’04

’05

’06

Percent Changes3
in Values from
Previous Previous
Quarter
Year

DISTRICT

158

962

7.1

30.2

142
21
13
10
10
14
22
18
16
6
n.r.

1,215
272
272
373
573
1,132
1,664
1,363
2,597
1,051
n.r.

7.3
–0.6
7.2
7.4
3.5
5.9
0
3.8
7.1
6.4
n.r.

32.8
8.6
17.6
23.9
22.1
18.4
8.5
17.5
26.5
10.3
n.r.

1,214

4.2

38.5

7
9

748
240

–3.6
–6.4

–6.2
3.4

Northern Louisiana
Southern New Mexico

300

Average
Banks1
Value2
Third Quarter 2006

S T A T I S T I C A L R E L E A S E

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
While too late for dryland crops, the
recent moisture helped fall crops and winter
wheat planting. More wheat is being planted.
Land sales for dairy sites and dairy-related forage production are driving up irrigated farmland prices.
Our small- to medium-size farmers are
going out of business. We finance mostly large
farmers operating over 3,000 acres.
The silage harvest is complete. The wheat
looks good. The corn harvest is under way,
but the yields are off.
Recent rainfall has boosted all crops
except cotton and silage. Winter wheat planting is in full operation, with prospects of
wheat pasture grazing looking good. Feeder
cattle prices are near break-even levels, while
stocker cattle prices remain high. However,
profitability levels are strained. Prices of land
with recreational usage remain strong.
Region 2 —Southern High Plains
Rain has helped irrigated crops and winter wheat planting. Dryland crops were lost to
drought. Input costs are higher than last year.
Rains were too late for the 2006 dryland
cotton crop. Irrigated cotton appears headed
for a good harvest season. Net income will be
down due to high production costs.
Region 3 — Northern Low Plains
Our area received rain, and farmers are
able to sow rye and wheat for winter grazing.
Cotton crops will be short due to the earlier
dry weather. Irrigated cotton is below average.
We are waiting on insurance checks. The
cotton harvest may be half of last year’s. The
cattle business is still good.
The drought has reduced demand for
feeder cattle loans. Hay is in high demand.
Farmers are trying to keep their cattle herds
together. Recreational use continues to drive
land prices up. We received rain last week but
need more.
Region 4 — Southern Low Plains
Pastureland is selling for nonagricultural
purposes. The only three land sales in the last
six months were to outside investors.

Recent rains were too late for the cotton
crop. Pastures will need time to regrow before
the frost.
Region 5 — Cross Timbers
As consumer spending and the economy
slow down, land prices should stabilize or
decline. Farming costs are high for the price of
wheat.
We received 2 to 3 inches of rain in
September, allowing farmers to sow wheat.
More rain is needed or the wheat grazing will
be limited. Stock tanks are low, so runoff
water is critical.
Region 6 — North Central Texas
Land sales have increased both in number and cost. Most sales are for 100 to 200
acres to people who are moving back after
retiring.
Some farmers will have problems refinancing in 2007 after a second year of increased expenses and reduced yields resulting
from the drought.
We had 3 to 4 inches of rainfall this last
month. We should be able to get a cutting of
hay before frost. Things are looking better,
with interest rates remaining stable and gas
prices dropping 50 to 60 cents a gallon.
Drought conditions have made pastures
nonexistent and increased feeding costs.
Ranchers are selling their breeding stock.
Cattle prices are good.
Our area has gone to five- to 10-acre
tracts. The farm and ranch customers are
being replaced by city people.
Corn and grain sorghum crop yields have
been below average. For the first time in
years, corn and grain sorghum stalks have
been baled and sold, averaging $50 per bale.
Hay is in short supply and selling for $100 per
round bale. Cotton yields were above average
despite the dry conditions. Tanks are dry, and
producers are relying on rural water or even
hauling water. Herds are being culled.
Fortunately, prices have remained strong. Land
prices continue to increase in Williamson County
due to development by outside investors.
Dry weather persists. More cattle are
being sold due to feed costs. Prices remain
stable, but they will not hold unless rain is
received soon.
Region 7 —East Texas
Northeast Texas is experiencing severe
drought conditions, causing a sell-down of cattle
inventory and reduced crop yields. Agricultural
purchasing will be down into the first quarter
of 2007 or until weather conditions improve.
Because of the drought, operating loan
requests are up. However, land values continue to increase despite the drought.

Region 8 — Central Texas
There are more hay trucks on the road
than gravel trucks. Gas prices slowed some
people down. Real estate is starting to cool
off. Borrowers are not able to come up with
cash down payments as before.
Some say this is the worst drought since
1924. Many acres of winter pastures are being
planted. Old cows are being culled. Many
producers anticipate that heifers will be in
demand next spring due to the sell-off this
year.
Ranchers have about one-third the
amount of hay needed to make the winter.
Hay shipped into this area is costing $70–$90
per roll, causing an increase in cattle operating
loans. Land prices have become outrageous;
local people can’t buy additional property.
Region 9 — Coastal Texas
Agriculture is in a crisis as a result of low
prices, high production costs and lower subsidies. Young people can’t or choose not to go
into agriculture. Outside investors are buying
the land.
Conditions in the Texas Gulf Coast are
improving with recent rains. Crop results were
fair to poor for grains and fair to good for cotton. We receive calls almost daily from cattle
owners in Central South Texas looking for hay
to purchase.
All types of crops have had better than
average yields this year. The cotton crop looks
really good.
Region 11 — Trans-Pecos and
Edwards Plateau
An overabundance of water due to the
recent rains is causing concern.
Recent rains have helped agricultural producers, but the hot, dry summer hurt range
conditions. A wet fall and winter will be needed. Livestock prices have remained good
through this dry time.
Interest in agricultural-valued properties
for recreational use appears to coincide with
the hunting season.
Region 12 — Southern New Mexico
We have the best grazing conditions in
20 years. Fuel costs are impacting operating
expenses. It is hard to find fuel-efficient farm
and ranch vehicles, making it very difficult to
control costs.
The price of grassland has been affected
by out-of-state buyers. Dairy expansion continues to push up the price of irrigated land.

Full text of Agricultural Survey : Third Quarter 2006

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