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Ag ri c u ltu ral

Surv ey

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

Federal Reserve Bank of Dallas

Demand for Loans
The share of respondents seeing declining loan demand continues to
fall.
Index
50
40
30
20
10
0
–10
–20
–30
–40
–50

2002

2003

2004

2005

2006

2007 2008

2009 2010

2011

2012

Availability of Funds
The availability of funds index remains positive but edges down.
Index
50
40
30
20

Third Quarter 2012
Bankers responding to the third-quarter survey emphasized a need
for rain as several areas in the Eleventh District are experiencing a second
consecutive year of drought conditions. Respondents voiced particular
concern for the livestock sector as pasture conditions remain poor and
ranchers face high feed costs due to elevated grain prices. Crop conditions
were mixed, depending on how much rainfall was received, but overall, crops
were in better shape than last year.
Cropland values rose in the third quarter. Irrigated cropland saw
the largest increases; values were up 4 percent from the second quarter and
were up 13 percent from last year. Ranchland values were largely unchanged.
Bankers in the Central Texas region noted that other uses of land have pushed
prices above an affordable level for farmers or ranchers to purchase the land
for agricultural use. While the majority of survey respondents expect land
values to hold steady over the next three months, 18 percent anticipate an
increase—the highest share since early 2011.
Demand for agricultural loans continued to decline but not as steeply
as in prior quarters. Feeder cattle loans continued to see the largest drop in
volumes compared with the same period a year ago, followed by dairy loans.
Loan repayment rates rose again in the third quarter, while loan renewals and
extensions continued to fall.

10

Farm Lending Trends

0
–10

What changes occurred in non-real-estate farm loans at your bank in the past
three months compared with a year earlier?

–20
–30

2012:Q3

–40
–50

2002

2003

2004

2005

2006

2007 2008

2009 2010

2011

2012

Rate of Loan Repayment
Twenty percent of bankers note increasing loan repayment rates.
Index
50

Demand for loans
Availability of funds
Rate of loan repayment
Loan renewals or extensions
Amount of collateral required

Index
–6.5
27.6
15.7
–13.1
4.6

Greater
19.5
29.6
20.3
2.6
4.6

Same
54.6
68.4
75.2
81.7
95.4

Less
26.0
2.0
4.6
15.7
0.0

Index
–15.0
28.6
17.0
–12.3
4.8

What changes occurred in the volume of farm loans made by your bank in the
past three months compared with a year earlier?

40
30

2012:Q3

20

2012:Q2
Percent reporting

10
0
–10
–20
–30
–40
–50

2012:Q2
Percent reporting

2002

2003

2004

2005

2006

2007 2008

2009 2010

2011

2012

Non-real-estate farm loans
Feeder cattle loans
Dairy loans
Crop storage loans
Operating loans
Farm machinery loans
Farm real estate loans

Index
–0.7
–17.3
–13.5
–10.1
2.7
–11.9
–8.6

Greater
19.5
9.0
1.8
3.4
21.3
10.6
9.9

Same
60.4
64.7
82.9
83.2
60.0
66.9
71.7

Less
20.1
26.3
15.3
13.5
18.7
22.5
18.4

Index
–2.7
–18.0
–14.8
–7.0
–1.4
–9.7
–7.0

Survey responses are used to calculate an index for each item by subtracting the percentage of bankers reporting a decrease from the percentage reporting an increase.

Agricultural Survey is compiled from a survey of Eleventh District agricultural bankers. Data were collected Sept. 4–12, and 157 bankers responded to the survey.
This publication is prepared by the Federal Reserve Bank of Dallas and is available without charge by sending an email to pubsorder@dal.frb.org or by calling 214-922-5254.
It is available on the web at www.dallasfed.org./research/agsurvey.
For questions regarding information in the release, contact Emily Kerr, 214-922-6941.

Loan-to-Deposit Ratios at Survey Banks

Loan Renewals or Extensions
Bankers continue to note a decline in requests for loan renewals or
extensions.

Average desired and actual ratios
Percent
75

Desired ratio

70

Index
50

65

40

60

30

55

20

50

10

45

0

40

–10

35

2011:Q3

–20
–30

2012:Q1

2011:Q4

2002

2003

2004

2005

2006

2007 2008

2009 2010

2011

Banks reporting (percent)

2012

Amount of Collateral Required
Nintety-five percent of respondents note no change in collateral
requirements.
Index

2011

40

Q3

Q4

Q1

Q2

Q3

24
18
12
23
23

29
19
17
15
20

29
14
18
19
20

28
17
15
22
19

25
13
20
19
23

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

Fixed

30

Average rate (percent)

20

2011

10

Q3

–10

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

–20
–30
–40
2002

2003

2004

2005

2006

2007 2008

2009 2010

2011

2012

Q1

Q2

Q3

6.71
6.87
6.83
6.60

6.54
6.63
6.49
6.19

6.43
6.50
6.46
6.36

6.56
6.55
6.51
6.23

6.11
6.20
6.23
5.92

6.00
6.09
6.14
5.83

5.97
6.09
6.06
5.79

5.90
5.96
5.98
5.70

6.04
6.09
6.05
5.69

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

Anticipated Trend in Farmland Values
The share of bankers expecting a rise in farmland values increases
notably in the third quarter.
Index

2012
Q4
6.54
6.71
6.69
6.41

0

Total Agricultural Loans*
Eleventh District agricultural loan volumes rose modestly in the second quarter.

50
40

Millions of dollars (seasonally adjusted)

30

9,000

20

8,500

10

8,000

0

7,500

–10

7,000

–20

6,500

–30

6,000

–40
–50

2012

Interest Rates

50

–50

2012:Q3

2012:Q2

Distribution of Loan-to-Deposit Ratios

–40
–50

Actual ratio

2002

2003

2004

2005

2006

2007 2008

2009 2010

2011

2012

5,500
5,000
4,500
4,000

2002

2003

2004

2005

2006

2007

2008

2009

2010

*Not based on Agricultural Survey data. Data lagged by one quarter.
SOURCE: Federal Financial Institutions Examination Council, Reports of Condition and Income.

2

Agricultural Survey

|

Third Quarter 2012

|

Federal Reserve Bank of Dallas

2011

2012

Rural Real Estate Values — Third Quarter 2012
Cropland—Dryland

Eleventh Federal Reserve District
1

District
3

12
N E W

2

M E X I C O

4

L O U I S I A N A

5

13

6

7

T E X A S

11

8

9

10

1
2
3
4
5
6
7
8
9
10
11
12
13

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
Southern New Mexico
Northern Louisiana

Average
value2
Banks1
Third quarter 2012
126
1,427

Percent change3
in value from
Previous
quarter
1.8

Previous
year
3.4

112
20
16
7
7
11
18
6
12
3
n.a.
11
3
11

1,445
626
588
786
896
1,523
2,081
2,433
2,729
1,350
n.a.
1,543
367
1,855

1.8
8.8
3.1
4.9
0.0
10.7
3.1
0.0
–2.2
0.0
n.a.
–1.0
0.0
2.2

2.6
16.1
10.0
–7.3
11.0
5.2
–2.2
5.5
–1.9
6.6
n.a.
1.1
0.0
14.9

93

1,933

3.9

12.7

77
20
15
5
5
6
n.a.
n.a.
7
4
n.a.
9
5
11

1,785
1,653
1,413
1,440
1,380
2,517
n.a.
n.a.
2,871
3,175
n.a.
3,444
2,620
2,645

4.5
6.5
7.5
3.5
0.0
0.0
n.a.
n.a.
–0.6
2.1
n.a.
2.5
2.2
2.7

14.1
21.3
15.0
3.5
13.1
–8.3
n.a.
n.a.
11.6
37.1
n.a.
2.3
7.1
11.0

District

137

1,490

–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
Southern New Mexico
Northern Louisiana

124
19
9
7
7
13
19
16
15
n.a.
n.a.
16
4
9

1,782
483
572
789
986
1,858
2,250
2,426
4,016
n.a.
n.a.
1,769
225
1,844

–1.4
1.7
2.1
3.7
1.5
–1.9
2.3
–1.0
–8.2
n.a.
n.a.
–0.7
0.0
1.2

0.7
7.0
25.6
–2.7
9.6
–0.2
1.2
2.0
–2.4
n.a.
n.a.
–1.0
0.0
4.8

Cropland—Irrigated
District

Real Cash Rents
1
2
3
4
5
6
7
8
9
10
11
12
13

Dryland cash rents hold steady while irrigated land and
ranchland rents decline.
2005 dollars per acre per year

120
110
100

Irrigated

90
80
70
60
50
40

Dryland

30
20

Ranchland

10
0

2002

2003

2004

2005 2006

2007

2008 2009

2010

2011

2012

Land values increase in third quarter.
2005 dollars per acre

1,800

Irrigated

1,600
1,400
1,200

Dryland

1,000
800
600

2

200
2002

2003

2004

Number of banks reporting land values.
Prices are dollars per acre, not adjusted for inflation.
3
Not adjusted for inflation and calculated using responses only from those
banks reporting in both the past and current quarter.
n.a.—Not published due to insufficient responses but included in totals for
Texas and district.
1

Ranchland

400

0

Ranchland

1
2
3
4
5
6
7
8
9
10
11
12
13

Real Land Values

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
Southern New Mexico
Northern Louisiana

2005

2006

2007 2008

2009 2010

Agricultural Survey

2011

|

2012

Third Quarter 2012

|

Federal Reserve Bank of Dallas

3

Quarterly Comments
District bankers were asked for additional
comments concerning agricultural land values
and credit conditions. These comments have
been edited for publication.

Region 1—Northern High Plains
Drought continues to affect our production around here, and with the feed prices at a
higher level, cattle feeders are showing losses
of $150 to $200 per head.
Dryland crops have been nonexistent due
to continued drought. Irrigated crops are in
better condition than one year ago as wind
and high temperatures have been less severe
than in 2011. High grain prices will boost farm
income but are seen as having an extreme adverse impact upon the cattle feeding and dairy
industry.
The corn harvest is under way, and the
yield reports are inconsistent. The top yields
are very close to our normal numbers. Feedlot
cattle are taking big losses due to high feed
costs. Cow/calf producers are struggling with
year two of a persistent drought. Further liquidation of the cowherd is likely.
Drought conditions continue for the second
straight year.

This year is better than last year, but we
still find our borrowers struggling to deal
with the drought. Those farming cotton in the
Rolling Plains needed luck to get the rain to
have a crop to harvest. Wheat seeding is under
way, and prices are looking good for 2013.
Cattlemen are weaning calves with weights
coming in better than 2011. Prices remain high
and could help cover some of last year’s additional cost. Hay prices remain high, and supplemental feed costs are going up with the price
of corn. A good fall rain would greatly help the
producers in our region.
We still need rain. We hope fall rains will
increase the demand for feeder cattle loans.
Many farmers are considering harvesting wheat
rather than grazing it, due to current wheat
prices.
There is very little land trading due to oil
and wind farm leasing.

The drought and heat are back; there have
been scattered showers in some areas, but
most areas are receiving little or no rain. Grass
continues to burn up. If we don’t get fall rains
soon, we will have another big shortage of hay
and poor cattle conditions heading into the
fall and winter. Oil and gas revenue continues
to roll in to area landowners, but most would
prefer rain at this time. It is a good thing to
have money and power, but Mother Nature can
humble anyone.
Canal-watered rice crops did not receive
water from the Lower Colorado River Authority
for 2012; thus, farmers filed for crop insurance.
Yields in Colorado, Fort Bend and Wharton
counties were at record highs for grain sorghum and cotton and were average to very
good for corn. We received very timely rainfall
in spring and early summer. Prices are excellent; some producers will see record profits.
Grazing conditions are improved, and cattle
prices are very good at this time.
All in all, the ag sector is in much better
shape than 12 months ago. There have been
more moisture, better range and crop conditions and stronger cattle prices. However, cattle
numbers are down substantially due to the selloff during the drought last year. We are seeing
some indication of restocking.
Land is being removed from ag production
and used for other purposes. Present sales prices make ag purchases infeasible. It is starting to
get dry; fall rain would be beneficial.
Land around the Austin area has become
too expensive to be sold for ag use. The majority of ag land sales are for home sites and/or
development.

Drought is still impacting our area. Farmers’
and ranchers’ crops and grazing land have suffered greatly due to extremely dry conditions.
We are seeing many ranchers already having to
purchase feed or hay.
We have had better moisture this year,
but there is still much room for improvement.
Irrigated crops look decent. Dryland crops
could have used another rain in July. Hay production is up. Cattle prices have been up and
down but seem steady.
A wet spring turned into a dry summer with
lots of grasshoppers. There has been good hay
and silage production early and good grazing
until recently. Beef cattle prices are down, but
still very good. The dairy situation is still tough.
Feed costs are very high for everyone.
It is very dry. Hubbard Lake is at only 30
percent capacity, and 60 percent of stock tanks
are completely dry. There is no moisture to
sow wheat.

We need rain in West Texas.
Drought and low cotton prices have slowed
the farm real estate market and curtailed fixed
assets purchased by farm customers.
The current drought has not broken.
Although most dryland areas have a crop,
very little of that dryland crop will yield any
harvestable product. Crop insurance is still key
to keeping these producers financially sound.
Land values remain strong, but sales are very
limited in the area. Landlords and buyers still
view ag land as a safe alternative investment
given the current low interest rates on deposits.
The second year of record drought will
continue to have a negative impact in our local
and regional economies. More and more farmers are considering discontinuing farming due
to the second year of farm losses. They do not
want to continue to lose their net worth that
took many years to build. Most of our area’s
small West Texas towns live and breathe on
agriculture. When the farmers suffer, all of our
businesses suffer. The 2012 corn crop is being
harvested, and yields are down again in the 20
to 30 percent range. Prospects for 2012 irrigated cotton production are also expected to be
below past years’ production averages. Federal
crop insurance has already been paid on most
of the dryland crops for the second year in a
row. Heavy irrigation requirements continue to
have a severe impact on our area water supply.

Agricultural Survey

Region 8—Central Texas

Region 5—Cross Timbers

Region 2—Southern High Plains

4

Region 3—Northern Low Plains

Region 6—North Central Texas
Higher grain prices are certainly helping
this year, but cotton prices are not so good. We
need some more rain soon.
Grain prices are good.

Region 7 – East Texas
Grain production was excellent, with corn
and grain sorghum production at almost record
yields. Because of excellent prices, many farmers wished they had more grain acreage than
cotton. Cotton production appears to be above
average for the area. Most dryland cotton has
been harvested. Lack of soil moisture continues
to be a problem due to high temperatures in
late August without a good widespread rain.
Pastures are short, going into fall. Rain will be
needed across the area for winter wheat and
oats to come up and sustain growth.

|

Third Quarter 2012

|

Region 11—Trans-Pecos and Edwards
Plateau
After a promising early start to the year
rainfall-wise, it seems like deja vu to many
operators in the Edwards Plateau. The rainfall
received in this area has been very spotty.
Accordingly, some folks find themselves in
almost the same situation as last year. At least
livestock prices have stayed strong. Feed costs
have gone through the roof due to the drought
in the Midwest and alternative uses for feed
corn. The ranching business in this area faces
some difficult times ahead. Thank heaven for
hunting income.
Our area is in need of rainfall.

Region 12—Southern New Mexico
We’ve had enough scattered rain showers
to keep producers from liquidating their herds,
but they are still in dire need of rainfall.

Federal Reserve Bank of Dallas