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Third Quarter 2013

DALLASFED

Agricultural
Survey

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

Survey
Highlights

B

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

ankers responding to the third-quarter
survey continued to report widespread
drought conditions, although there

were some reports of scattered rain. Many

2013:Q2

2013:Q3

pGreater

Same

qLess

–18.7

–10.2

12.9

64.0

23.1

23.2

21.0

23.7

73.7

2.7

6.5

7.5

11.6

84.4

4.1

–10.2

–6.1

4.7

84.5

10.8

Demand for loans
Availability of funds

ranchers continued to sell off some of their

Rate of loan repayment

herds, and survey respondents noted that cattle

Loan renewals or extensions

Percent reporting, Q3

prices remain high. Scattered rain in August in
the Northern High Plains, Cross Timbers and
Southern New Mexico improved crop conditions. Crop conditions across the other regions
were mixed, and the harvest of summer crops
has begun in a number of regions.
Farmland values increased slightly in the
third quarter and were above year-ago levels. Ranchland and irrigated cropland values
increased almost 2 percent over last quarter.

Index
50

30
20
10
Rate of loan repayment
0

Dryland values were only about 1 percent above

–10

last quarter’s level.

–20

The great majority of respondents continued to anticipate farmland values will remain

–40

incomes decreased again this quarter. Credit

–50

ter, although the vast majority of respondents
noted no change in standards.

Loan renewals
or extensions

–30

unchanged over the next three months. Farm
standards continued to tighten in the third quar-

Availability of funds

40

Demand for loans
2003

2004

2005

Loan repayment rates increased again this quar-

2007

2008

2009

2010

2011

2012

2013

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

Demand for agricultural loans continued
to decline, as did loan renewals and extensions.

2006

Non-real-estate farm loans

Percent reporting, Q3

2013:Q2

2013:Q3

pGreater

Same

qLess

–9.4

–0.7

16.9

65.5

17.6

ter. Volumes for most types of loans continued

Feeder cattle loans

–24.4

–14.1

10.2

65.6

24.2

to decrease. The exception was operating loans,

Dairy loans

–18.6

–13.9

2.0

82.2

15.8

Crop storage loans

–8.5

–1.9

7.5

83.2

9.4

Operating loans

–4.5

5.6

18.8

68.1

13.2

Farm machinery loans

–13.8

–15.2

6.2

72.4

21.4

Farm real estate loans

–8.2

–11.7

8.3

71.7

20.0

which posted increasing demand for the first
time since the second quarter 2011.

*Survey responses are used to calculate an index for each item by subtracting the percentage of bankers
reporting less from the percentage reporting greater. Positive index readings generally indicate an increase,
while negative index readings generally indicate a decrease.

} 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

XXAfter early summer rains, we have returned
to drought-like conditions with late summer
heat and lack of rain. Irrigated corn and grain
sorghum harvests will be better than the last
two years. Due to the return of drought-like
conditions, the winter wheat crop will have a
disappointing start.
XXWheat yields were small due to the May

freeze. We had good moisture in early August,
so our moisture profile has improved for wheat
planting. Feedlot closeouts are still in the red,
which is driving a lot of the noncorporate
feeders out of business. Summer crops are in
excellent shape. We should start harvesting
corn within the next three weeks.
Region 2 • Southern High Plains

XXLack of water is a very large problem,
especially as the drought in our area continues.
Irrigated crops, where there is sufficient water,
are above average. Dryland is essentially gone.
We need a workable farm bill very soon.
XXWe have had several producers pay back
loans in full from insurance proceeds. Crop
conditions are mixed depending on where it
rained.
Region 3 • Northern Low Plains

XXCurrently, crop conditions look favorable,
but the area is still in a severe drought with
very few cattle on pasture. Livestock prices
are incredibly high, but very few ranchers have
cattle to sell.

for calves and for cull cows. Dairymen are getting better milk prices now and doing somewhat better. Hay yields have been mostly fair,
and prices are still pretty high. The pecan crop
will be short after a good yield last year.

XXCattle are being sold due to lack of rainfall.
XXFarmers in our area had a good year be-

cause we had adequate moisture for the crops.
There is concern that we may be impacted by
the drought that has now moved back into our
area.

XXWe do not know of any recent sales of agricultural land. Growing conditions are somewhat
better than last year, but dry conditions remain.
Hay sales and production are up from last year
at this time.
Region 7 • East Texas

XXStocker and yearling cattle loans will be
under closer scrutiny due to last year’s losses
and the high price of cattle in relation to board
for the spring of 2014. Crop loans are still
uncertain with most farmers paying in full but
with small profits posted.
Region 8 • Central Texas

XXSome farmers in our area received a good
rain in early August, but it is very dry again
now. Beef cattle prices remain very good both

XXWe are still getting some spotty showers that
help producers who receive them, but the heat
quickly diminishes their effects. Area sale barns
are having good runs due to continued drought;
the only bright spot is that prices remain high
on calves. Not many farmers are planning on

summer, but we got some rain in early August.
Many of our ranchers continue to liquidate their
herds.

Regions of the Eleventh
Federal Reserve District

Region 6 • North Central Texas

XXThe weather has been dry most of the

XXDrought conditions continue to negatively
impact income.

M E X I C O

XXWe received approximately six inches of rain
60 days ago, but with 100 degree days, we are
in need of more rain to sow wheat and replenish lakes and stock tanks as they remain less
than 50 percent full.

XXEagle Ford production continues to affect our
bank, with continually increasing deposits and
decreasing large loan demand. Ranchers are
paying off loans with newly generated income
from Eagle Ford. It is a daily chore to seek out
new borrowers for loans.

Region 5 • Cross Timbers

12
N E W

Agricultural Survey • Third Quarter 2013 • Federal Reserve Bank of Dallas

planting oats this fall until they see a better
weather pattern, and if it does change, most
people will plant rye grass later on. Hay prices
have been inching up and should continue
higher if no more rains come. The corn harvest
is all in, and yields show a low of 60 bushels
per acre to a high of 120 bushels per acre.

XXRice farmers need water.
XXSevere drought conditions persist in most of

our market, putting financial stress on producers. Many producers will not be buying feed but
will be selling livestock. These same conditions
appear to be slowing down agricultural land
sales as well.
Region 11 • Trans-Pecos and
Edwards Plateau

XXWe have mainly irrigated farmland, and
our area is in desperate need of rain to fill the
reservoirs. Well water is too salty to apply for
long without damaging the fields, and efforts to
remove the salt are very expensive. Consequently, farm operating loans have dropped
dramatically.
XXRecent sporadic rains have helped range

conditions generally in the Edwards Plateau.
However, drought remains a problem for
agricultural production. Numbers are down, and
many producers have not received enough rain
to replenish the deep soil moisture necessary
to grow pasture grass. Prices for livestock are
still strong, reflecting the short supplies available of cattle, sheep and goats.

Rural Real Estate Values—Third Quarter 2013
1

Banks1

3

Average
value2

Third quarter
2013

Percent change3
in value from
Previous Previous
quarter
year

Cropland—Dryland

2

4

5
6

11

District

108

1,481

0.9

3.4

Texas
1 Northern High Plains

97
14

1,510
709

1.0
3.4

3.9
9.8

2 Southern High Plains

13

638

–3.1

7.0

3 Northern Low Plains

6

958

4.9

–3.2

4 Southern Low Plains

6

917

0.0

2.3

5 Cross Timbers

9

1,572

0.0

17.4

16

2,256

0.2

2.2

5

1,910

1.5

–14.0

8 Central Texas

14

2,764

1.0

6.0

9 Coastal Texas

3

1,767

0.0

13.8

n.a.

n.a.

n.a.

n.a.

10

1,640

6.1

6.6

12 Southern New Mexico

3

367

–5.9

6.3

13 Northern Louisiana

8

1,744

1.3

–2.5

81

8.5

L O U I S I A N A

7

13

T E X A S

8

9

6 North Central Texas
7 East Texas

10

10 South Texas
11 Trans-Pecos and Edwards Plateau

Cropland—Irrigated

XXDrought conditions continue. Cattle prices

District

remain good.

XXCurrent demand for land and housing in the

area is very high due to heavy oilfield activity
and has driven up land values almost double
in the last 12 to 18 months. Some ranches
are being bought so that oil companies have
a place to house not only equipment and field
offices but also personnel.

1,939

–0.1

9.9

14

1,900

–4.1

12.7

2 Southern High Plains

13

1,510

5.4

10.1

3 Northern Low Plains

3

1,383

0.0

0.0

4 Southern Low Plains

5

1,560

0.0

5.3

5 Cross Timbers

4

2,475

4.5

8.8

n.a.

n.a.

n.a.

n.a.

0.0

0.0

7 East Texas

4

2,550

8 Central Texas

9

3,511

1.6

12.5

9 Coastal Texas

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

11 Trans-Pecos and Edwards Plateau

9

3,017

2.7

–1.0

12 Southern New Mexico

6

2,575

11.6

–4.7

13 Northern Louisiana

8

2,700

5.2

11.1

123
111

1,509
1,804

1.8
1.9

5.6
6.0

10 South Texas

Ranchland
District

XXSummer monsoon rains in the region have

resulted in improved conditions on most rangeland, with some areas in excellent condition
headed into the fall and winter. Replacement
stocker cattle remain very expensive and
scarce, and considerable uncertainty remains
regarding moisture predictions, dampening
optimism for purchasing high-value replacements. Hay markets have declined somewhat,
with large alfalfa bales selling for around $230
per ton and small bales for $285 to $300 per
ton. Demand for other hay forage crops is also
down some. Corn harvest is well under way,
with steady demand and good prices.

1.8

67

6 North Central Texas

Region 12 • Southern New Mexico

XXGood rains in July and some in August kept
some ranchers from liquidating total herds.
Continued rain and winter moisture are still
needed. Topsoil erosion is inhibiting regermination of some grass seed.

2,061

Texas
1 Northern High Plains

Texas
1 Northern High Plains

13

531

–1.2

9.9

2 Southern High Plains

8

631

3.3

7.3

3 Northern Low Plains

6

904

2.7

3.3

4 Southern Low Plains

6

1,075

0.0

5.7

5 Cross Timbers

12

1,792

0.4

4.8

6 North Central Texas

18

2,314

–5.1

–2.5

7 East Texas

14

2,607

0.0

–4.4

8 Central Texas

14

3,418

3.4

7.4

9 Coastal Texas

n.a.

n.a.

n.a.

n.a.
4.5

10 South Texas

3

1,933

0.0

15

1,870

2.1

6.4

12 Southern New Mexico

5

250

–2.4

–10.7

13 Northern Louisiana

7

1,514

3.4

11.7

11 Trans-Pecos and Edwards Plateau

Number of banks reporting land values.
Prices are dollars per acre, not adjusted for inflation.
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
2
3

Agricultural Survey • Third Quarter 2013 • Federal Reserve Bank of Dallas

Real Land Values

Real Cash Rents

2005 dollars per acre

2005 dollars per acre per year
120

2,200
2,000

Irrigated

1,800
1,600

100

Ranchland

1,400

80

Dryland

1,200

Irrigated

60

1,000
800

Dryland

40

600
400

20

Ranchland

200
0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Long-term farm real estate

Intermediate term

Other farm operating

2003

2004

2005 2006

2007 2008

2009 2010

2011

2012 2013

Anticipated Farmland Values, Income and Credit Standards

Interest Rates by Loan Type

Feeder cattle

0

Fixed (average rate, percent)
2012:Q3

6.56

6.55

6.51

6.23

Q4

6.37

6.47

6.32

6.19

2013:Q1

6.43

6.53

6.30

6.12

Q2

6.21

6.39

6.22

6.01

Q3

6.16

6.34

6.25

6.04

What trend in farmland values do you expect in your area in the next three months?
Percent reporting, Q3

Index*
Anticipated trend in farmland
values

2013:Q2

2013:Q3

pUp

Stable

qDown

9.6

10.9

12.9

85.0

2.0

What change occurred in farm income for farmers and ranchers in your area in the past three months
compared with a year earlier?†
Farm income

–14.6

–4.1

17.8

60.3

21.9

What change occurred in credit standards for agricultural loans at your bank in the past three months
compared with a year earlier?†
Credit standards

2013:Q2

2013:Q3

pTightened

Same

qLoosened

6.5

4.7

6.1

92.6

1.4

Index
50
40
30

Credit standards †

20

Variable (average rate, percent)
2012:Q3

6.04

6.09

6.05

5.69

Q4

5.83

5.93

5.94

5.62

2013:Q1

5.87

5.98

5.84

5.57

Q2

5.81

5.94

5.80

5.47

Q3

5.71

5.81

5.71

5.47

10
0
–10

Farm income†

Anticipated trend
in farmland values

–20
–30
–40
–50

2010

2011

*See note on bottom of page 1.
†
Added to survey in second quarter 2011.

Agricultural Survey • Third Quarter 2013 • Federal Reserve Bank of Dallas

2012

2013

Third Quarter 2013

DALLASFED

Agricultural Survey

Special Report

Commodities and Drought

Commodities

The survey also asked how recent movements in commodity prices have impacted agricultural and credit conditions,
including the types of commodities grown. Higher commodity
prices were reported as benefiting producers. However, respondents stated that expenses have followed prices, and while
impacts on credit varied from region to region, credit conditions were largely not impacted. An increase in corn prices, in
particular, increased the corn acres planted this year.
The following pages display a graphical representation, by
region, of the data gathered in this commodities survey, along
with the comments received.

As part of the third-quarter Agricultural Survey, Eleventh
District bankers were asked to list agricultural commodities
produced in their lending region. Cattle was the most widespread response, followed by hay, with more than 85 percent of
respondents reporting production of these commodities in their
region. A great majority of bankers also noted that wheat and
cotton are grown in their area. Production of corn and sorghum
were also listed by more than half of the respondents.
The survey asked Eleventh District bankers to rank the top
three commodities produced in their lending region. Rankings
have changed slightly from 2011. While cattle held the number
one spot, corn is now the second-leading commodity in the
district in terms of importance, replacing 2011’s second-ranked
cotton. Sorghum has increased in importance, as has dairy.
Poultry and soybeans have decreased in importance over the
past two years, according to survey responses.
Bankers were asked to highlight any changes in the types
of agricultural commodities produced in their region. Most notable was a shift from cotton to grains, particularly corn. Higher
grain prices were cited as the driver of this change. Respondents
also noted a decrease in cattle numbers, largely due to continued drought conditions. Bankers in the North Central Texas
region reported that more sunflowers are being grown.

Drought
As part of this quarter’s commodity survey, respondents
were asked about the impact of the current drought on agricultural and credit conditions in their region. Most agriculture producers have been severely affected. The livestock industry has
been hit hard; poor grazing conditions and the high cost of feed
have caused ranchers to decrease inventory or liquidate their
herds. Drought has increased the costs of production on both
dryland and irrigated cropland as well as reduced crop yields.
Several bankers noted that farmers are reliant on crop insurance
to cover expenses. There were scattered reports of decreased
loan demand.

Eleventh District Agricultural Commodities, 2013

(percent of respondents reporting production of commodities in their area)
Percent

100
90
80
70
60
50
40
30
20
10

s

uit

ca
n
Pe

Fr

s

oe
s
tat

ble

Po

eta

Ri
ce

Ve
g

gs
Ho

gs
Eg

y
ltr

y

ts

er

Po
u

rs
Nu

an
u

Pe

ow

er

s

s
nfl

be

Oa
ts

an

Su

or

So
y

ats
go

iry
Da
ee
p
Sh

es
rs
Ho

m
hu

n

rg
So

n

Co
r

at

y

tto
Co

he
W

Ha

Ca
ttl

e

0

Agricultural Survey • Third Quarter 2013 • Federal Reserve Bank of Dallas

Commodities and Drought

Special Report

Agricultural Commodity Ranking in the Eleventh District
(as reported by responding banks, third quarter 2013 and 2011)*
Ranked No. 1

Ranked No. 2

Ranked No. 3

All Regions
Percent

100
90
80
70
60
50
40
30
20
10

r
he
Ot

s
ble
eta

Ve
g

rs

er

y

s
Nu

oe

ts
Oa

tat
Po

s
ow

er

gs
Su

nfl

Ho

gs
Eg

uit

rs
Ho

Fr

es

ce
Ri

ns
ea
yb

ats
go

or

Sh

ee

p

So

s
ut
an
Pe

ry

iry

ult
Po

rg
So

Da

m
hu

y
Ha

at
he
W

n
tto
Co

Co

ttl
Ca

rn

’13 ’11 ’13 ’11 ’13 ’11 ’13 ’11 ’13 ’11 ’13 ’11 ’13 ’11 ’13 ’11 ’13 ’11 ’13 ’11 ’13 ’11 ’13 ’11 ’13 ’11 ’13 ’11 ’13 ’11 ’13 ’11 ’13 ’11 ’13 ’11 ’13 ’11 ’13 ’11 ’13 ’11 ’13 ’11
e

0

NOTE: “Other” includes pecans, rye/barley and sesame.

Region 1—Northern High Plains

Region 2—Southern High Plains

Percent

Percent

100
90
80
70
60
50
40
30
20
10
0

100
90
80
70
60
50
40
30
20
10
0

’13
’11
Cattle

’13
’11
Corn

’13
’11
Wheat

’13
’11
Cotton

’13
’11
Dairy

’13
’11
Cotton

’13
’11
Sorghum

’13
’11
Peanuts

Region 3—Northern Low Plains

Region 4—Southern Low Plains

Percent

Percent

100
90
80
70
60
50
40
30
20
10
0

100
90
80
70
60
50
40
30
20
10
0

’13
’11
Cattle

’13
’11
Cotton

’13
’11
Wheat

’13
’11
Peanuts

’13

’11
Hay

*Data for Region 10—South Texas have not been reported due to insufficient responses.
Agricultural Survey • Third Quarter 2013 • Federal Reserve Bank of Dallas

’13
’11
Wheat

’13
’11
Cattle

’13
’11
Cotton

’13

’11
Cattle

’13

’11
Hay

’13

’11
Corn

’13
’11
Sheep or goats

Region 5—Cross Timbers

Region 6—North Central Texas

Percent

Percent

100
90
80
70
60
50
40
30
20
10
0

100
90
80
70
60
50
40
30
20
10
0

’13
’11
Cattle

’13
’11
Wheat

’13

’11
Hay

’13

’11
Dairy

’13
’11
Cotton

’13
’11
Cattle

’13
’11
Corn

Region 7—East Texas

Region 8—Central Texas

Percent

Percent

100
90
80
70
60
50
40
30
20
10
0

100
90
80
70
60
50
40
30
20
10
0

’13
’11
Cattle

’13
’11
Poultry

’13

’11
Hay

’13

’11
Dairy

’13
’11
Cotton

’13
’11
Cattle

’13
’11
Corn

’13
’11
Wheat

’13
’11
Cotton

’13
’11
Sorghum

’13

’13
’11
Cotton

’13
’11
Poultry

’11
Hay

Region 9—Coastal Texas

Region 11—Trans-Pecos and Edwards Plateau

Percent

Percent

100
90
80
70
60
50
40
30
20
10
0

100
90
80
70
60
50
40
30
20
10
0

’13
’11
Corn

’13
’11
Cotton

’13
’11
Sorghum

’13

’11
Cattle

’13

’11
Rice

’13
’11
Cattle

’13
’11
Sheep or goats

’13

’11
Hay

Region 12—Southern New Mexico

Region 13—Northern Louisiana

Percent

Percent

100
90
80
70
60
50
40
30
20
10
0

100
90
80
70
60
50
40
30
20
10
0

’13
’11
Cattle

’13

’11
Hay

’13
’11
Wheat

’13

’11
Corn

’13
’11
Dairy

’13
’11
Corn

’13
’11
Soybeans

’13
’11
Wheat

’13
’11
Cotton

’13
’11
Wheat

’13
’11
Cotton

’13
’11
Cattle

Agricultural Survey • Third Quarter 2013 • Federal Reserve Bank of Dallas

Special Report
Commodities
QUESTION: Over the past two years,
have there been changes in the types of
agricultural commodities grown in your
region? If so, please explain.
Region 1 • Northern High Plains

XXWater management has been one of the

largest factors in crop planning. Two years ago,
many of our customers went to less waterreliant crops instead of corn, mostly cotton.
Commodity prices this year drove most of them
back to corn.

XXLess wheat has been grown due to drought.
XXFormerly, peanuts were a major crop in our

area. Because of damage caused by feral hogs,
farmers abandoned peanuts five years ago. Due
to the necessity of rotation, peanuts are making
a small comeback. If the harvest is successful,
more will be planted in the future.

XXAdditional cotton and sorghum acres have
been planted as the water table has dropped.

Region 2 • Southern High Plains

XXCotton is still the No. 1 crop, but later moisture this year has allowed producers to plant
more grains.
XXSome more grain was planted in 2013 due to
the prices.

XXCorn acres have been reduced, replaced by

cotton and wheat, as a result of the drought
and decreasing irrigation supplies. Some farms
have reduced the amount of total planted acres
due to the drought and irrigation supplies.

XXWith irrigation water diminishing due to

heavy usage and continuing drought conditions,
producers have cut back on cotton in some
cases and planted grains due to the price.

XXCoarse grains have been increasing in popu-

larity due to markets and new water management practices.

XXRepeated failures of nonirrigated crops have

forced the majority of farmers in the region
to plant a secondary crop in an attempt to
recapture lost cash flow from the primary crop.
We have seen a number of producers replanting
guar, haygrazer and sunflowers as secondary
crops, mostly on failed cotton acres.

Region 3 • Northern Low Plains

XXA small acreage of corn is being grown under
irrigation.

XXWater issues have caused producers to plant
fewer irrigated acres or go to a half circle of
cotton or peanuts and reserve a half circle for
wheat. Reduced cattle numbers because of
drought are giving way to more dryland acres

Commodities and Drought
in cotton, peanuts, wheat and milo, which are
eligible for crop insurance coverage. Hay is being sold instead of used on the farm.

XXWe have less of all types of commodities due

to extended drought.

Region 4 • Southern Low Plains

XXFarmers have started planting corn on their
irrigated land by splitting circles half corn and half
cotton. Corn has become a very likeable rotation
with cotton, grossing larger sums per acre than
other rotational crops such as wheat or milo.
XXWe continue to have primarily dryland cotton

in our area, wheat for grazing and grain, and
haygrazer for cattle feed.

Region 6 • North Central Texas

XXCotton acreage has been reduced due to the
price difference between cotton and grain. Beef
cattle numbers have been reduced due to liquidation during recent and ongoing droughts.
XXCow-calf operations and milk production are
still the main agricultural productions in the area
along with hay production for these operations.
XXMore sunflowers have been planted, which is
unusual for this area. Cattle has been the main
commodity for many years and remains so.
XXCrop insurance has increased the planted acres
of corn and wheat. This has taken some acres
that used to be grazed by cattle.
XXCotton acres were certainly down this year,
because of the price relative to grain prices.
XXMany farmers have moved to less-volatile

crops such as sunflowers and milo, away from
corn and cotton. The cattle operations have
changed from stockers to cow-calf.

XXSunflowers were added in 2013.
XXReduced soybeans and cotton were replaced

by sunflowers.

Region 7 • East Texas

Region 9 • Coastal Texas

XXThere has been a shift from cotton to grain,

mainly corn, due to commodity pricing. Looking
to 2014, the cycle will be shifting back to cotton.

XXThere has been a significant decline in rice
production due to the continued drought and
lack of irrigation water.

Region 11 • Trans-Pecos and
Edwards Plateau

XXA few people grew peanuts when the price was
better, but no farmers planted any this year.

XXOur customers with irrigation are growing
more corn for grain and silage.

XXWe have decreasing numbers of sheep, particularly wooled sheep. Wooled sheep are being
replaced by or bred into hair sheep to lower labor
costs and increase efficiency; hair sheep require
no shearing, have greater natural resistance to
parasites and have increased average offspring
due to faster growth and rebreeding.
XXThe drought has greatly affected cattle numbers. Most ranchers have cut numbers to help
control feed costs. Lack of rain has also reduced
available hay and grains for feeding.
Region 12 • Southern New Mexico

XXWe have seen a big increase in alfalfa production. Many ranchers are selling off their cattle
currently and letting their land heal. The little rain
we have received helped a lot.
XXVery little has been grown due to drought.

Some stands of alfalfa that were still viable two
years ago are now past the point of being revived,
but it is anticipated that they will be reestablished
when moisture permits.

XXDairies have not been able to maintain a profit

margin and have been forced to close their operations permanently.

Region 13 • Northern Louisiana

XXCotton acreage has decreased by about 30
percent because of price. Acreage was made up
in corn and milo.

XXWe have more corn, soybeans and wheat, with

XXOur area is producing less dairy and more
poultry.

input risk and price.

XXDairy is on the decease.
Region 8 • Central Texas

XXChanges in acreage planted have been among
the three basic crops of cotton, sorghum and
corn.
XXOur area had strong cow-calf operations but is
changing to horses, hay, wild flowers and bees
for agriculture exemption for real estate taxes.
XXWe have two new vineyards that opened in the
area as well as two new olive oil ranches.

Agricultural Survey • Third Quarter 2013 • Federal Reserve Bank of Dallas

less cotton.

XXThere is less cotton due to margin of return,
XXOver the past several years, there has been a

movement away from cotton to corn. Very few
acres of cotton remain in the area. Soybeans are
getting more popular as the price of corn falls and
the price of soybeans remains high and stable.
Corn remains the major crop in the area.

XXThere has been a decrease in cotton acres and
an increase in grain acres.

QUESTION: How have recent movements in
commodity prices impacted agricultural
and credit conditions in your region, including the types of agricultural commodities grown? Please explain.
Region 1 • Northern High Plains

XXGrain prices are not down drastically and are
still good enough for farmers to make a little
money. Cow-calf operations are OK, but feedlot
cattle are taking losses.

XXCommodity prices have driven most of the
farmers back to corn from cotton this year.

XXThere have not been any significant price

movements within this year’s growing season.

XXRecent movements have not yet impacted the
types of commodities grown.
XXConservation Reserve Program land continues

to be brought back into production with additional
wells being developed for irrigation purposes.
While corn prices are somewhat lower, very few
producers have contracted at this time, and crops
look good, considering our dry conditions.

XXThere has not been much change this crop

production cycle, but we could see plan changes
for next year.

XXCorn prices have dropped for the first time in

three years but will still cover expenses. Cattle
prices have climbed, but cattle play a less significant role in our lending area.

Region 2 • Southern High Plains

XXCommodity price changes have not made

much difference because we have had little to no
crop for the last three years.

XXPrices have caused a slight increase in grains
planted for 2013.

XXFewer crop acres have been planted. Com-

modities requiring more water to grow—such
as corn, potatoes and peanuts—have been
replaced with crops requiring less water to
grow—such as cotton, wheat, sunflowers and
sorghum.

XXGrain prices at the end of 2012 and the

beginning of 2013 have caused more producers
to grow grains because they could contract the
commodity.

XXAs coarse grain markets went up, there

was a lot of substitution from cotton. Also, as
underground water has dwindled, farmers have
switched to half circles of irrigated grains to
increase economic returns and have put the
other half circle in dryland cotton. Because of
drought, the cotton was reliant on insurance,
which produced better returns than full circles of
cotton would have.

XXPlanting intentions are established by the

customer primarily based on contracted prices

for different commodities if available, and
futures pricing. Depending on irrigation capacity,
our farmers have been planting the crop that
projects the most cash flow. This has resulted in
prudent crop rotation practices being ignored,
which is a concern over time. For nonirrigated
farmland, the producer is making the choice of
what to plant based on the highest return when
the net multi-peril crop insurance projections
are calculated. We are basically assuming all
nonirrigated acres will fail since that has been
the overall trend the past few years.

Region 3 • Northern Low Plains

XXA small number of producers have attempted
to grow irrigated corn because the spring price
was relatively high. Historically, corn has not
been successful due to the large amount of water
required to produce a high-yielding crop. With the
decline of grain prices, we anticipate that this will
not be an ongoing crop for this county.
XXHigher cattle prices have somewhat affected
credit conditions in our region.
XXPrices have been good for our main commodities of cotton, peanuts, cattle and wheat. Because
of high corn prices, we have seen more grain sorghum and corn grown. However, the increased
costs of seed, fertilizer and other inputs have
offset the higher prices. Cash flow projections
would have been negative for a good percentage
of producers if government payments had not
been extended.

XXCattle prices are still strong, so credit conditions have not been impacted too severely by
the drought.
Region 6 • North Central Texas

XXCorn has increased in importance and cotton
has declined in importance due to the price of
grain, but there have been no real changes in
credit conditions.

XXCattle prices have encouraged local ranchers

to market their calf crop earlier and liquidate nonproducing cow inventories, creating additional
funds for debt servicing. Loan requests for operations and purchase of livestock have slowed.

XXCattle is the primary commodity in our area,
and since prices have been good for several
years, the impact has been positive.

XXLess cotton was planted this year because

corn prices were better last year; however, this
year cotton prices are better while corn prices
are down some. Input prices go up with the grain
price but do not come back down when grain
prices come down. Cattle prices remain high.

XXLess cotton has been planted.
XXProducers have moved to more drought-

resistant crops. The majority of farmers switched
to sunflowers and milo this year after anticipating
a continuation of drought conditions.

XXMore corn was planted in this area this year

because the price last year was high due to the
drought in the Midwest.

XXBecause of drought conditions and insurance indemnities tied to commodity prices that
have dropped off for wheat, farmers’ guaranteed
incomes have dropped, making it harder to obtain
operating loans.

XXWe have seen increased prices for the types of

XXWe have not noticed much change due to
commodity prices because we do not have many
choices as to what crops work here.

Region 7 • East Texas

Region 4 • Southern Low Plains

XXHigher cotton prices have increased the acreage going to cotton each year, and the increased
cattle prices have increased the volume of stocker
cattle in the area as well as the amount of wheat
acres.
XXFor the most part, commodity prices have been

favorable to us.

Region 5 • Cross Timbers

XXCommodity price changes have not af-

fected our credit decisions. Many farmers have
changed their crop production to reap the
benefits of increased prices. However, expenses
have followed suit with this increase, which has
offset large increases in net income.

XXDrought conditions have caused wheat prices
to be a non-issue as few farmers were able to
harvest.

crops sold in our area.

XXCorn prices are lower, affecting the return per
acre.

XXDue to higher commodity prices, lending

needs have expanded throughout our communities, causing an increase in overall demand for
agricultural financing.

XXCrop loans have been basically unchanged the
last few years. More equity up front is needed
for cattle loans, both stocker and cow-calf loans,
because of the cost of cattle.

XXDairy operators have had to adjust their feed
mixture to use less corn, which sometimes
results in a lower quality feed and lower yields.

XXCattle prices have improved the profitability for
many producers who are still in the business.

XXGrowers have shown increased losses in productions, reflecting negative cash flow; therefore,
financial institutions are unable to extend credit to
agricultural borrowers.
XXHigher prices have helped producers, but we
have not seen an increase in lending generally.

XXVarying drought conditions have caused those

without grass to sell and those with grass to grow.

Agricultural Survey • Third Quarter 2013 • Federal Reserve Bank of Dallas

Special Report
Region 8 • Central Texas

XXAs commodity prices have changed, farmers

have switched between cotton, corn or sorghum
crops. Dry conditions in this area have led to
more sorghum being planted because of its
drought tolerance. Higher beef cattle prices have
caused an increase in livestock sold.

XXCattle operators love the higher overall prices

but have few cattle to take to market unless they
reduce their herds. Expanding herds is costly
because replacement animals are expensive
and there is no food or water due to continued
drought.

XXCheaper corn has helped the feedlots. Oil

prices still affect fertilizer prices, which remain
high.

XXBeef prices remain strong. We view the

decrease in corn prices as a positive for livestock
and egg producers.

Region 9 • Coastal Texas

XXWith grain prices falling and cotton prices

rising, more acres will be in cotton in 2014. Rice
production remains neutral. Cattle prices remain
strong, but production is neutral. Looking to
2014, with no direct payments received from the
government, there is a chance marginal land will
come back into rotation and will most likely end
up in some type of grain.

XXProducers have better margins, which allow

for continued growth in their infrastructure. With
better cash flow from commodity prices, credit
availability is better. Producers have typically
farmed the commodities providing the highest
returns from their land in terms of crop grown
and market pricing.

XXFarmers and ranchers who have received
timely rains in our area have benefited from
increased commodity prices.

Region 11 • Trans-Pecos and
Edwards Plateau

XXThe fall in corn prices has benefited cattle
producers.

XXRelatively high prices on all agriculture

products have been beneficial, particularly when
drought has forced a producer to sell. However,
high feed prices have made restocking and
carrying costs even higher and more difficult to
finance. Cattle, sheep and goat prices are near
all-time highs, so the average producer has to be
very careful of restocking at these high prices,
since they may need to liquidate again because of
drought. The cattle industry is an industry of price
cycles, and this one has lasted longer than most.
Most lenders will be very cautious of allowing
customers to become too highly leveraged at
these high prices.

XXWe see some movement from cotton to grain
production.

Commodities and Drought
XXDuring this drought, unlike others, prices
remain attractive as ranchers sell offspring.
However, operational expenses are also at record
levels, making for thin margins.

XXProduction and harvesting expenditures for

XXCattle, sheep and goat prices remain good.
Even with higher feed costs due to drought,
producers have been able to reduce debt.

XXWinter wheat has been a huge failure for the

XXImprovement in prices for hair sheep, coupled
with their efficiency over wooled sheep, has
increased their numbers. Goat numbers in
general remain good, although prices have come
down some. Strong cattle prices have driven
producers to keep cattle numbers up in spite of
drought conditions. General rains in the past oneand-a-half months have led to improved pasture
conditions.
XXLess grain is being grown because of seed
price and soil conditions. The shortage of animal
units has also pushed up the cost of replacement
units.
Region 12 • Southern New Mexico

raising a crop cause significantly more money
to flow through the local economy than failed
crops and receipt of crop insurance as revenue.
past three years, This not only negatively affects
crop revenues but also winter wheat pastures
for cattle grazing.

XXDrought has a direct effect on the borrower’s

cash flow not only for the specific year but
also on the borrower’s average performance.
The bank’s projections are based on historical
averages. Additionally, insurance guarantees
are directly impacted by the borrower’s cash
flow and historical performance using historical yields and, as a result, affect the borrower’s
loan-to-value ratio. The effect of a drought
reaches beyond the specific year.

XXNo dryland wheat has been grown, reducing
winter pasture for cattle and grain production.
Drought has also reduced yields on other farm
production.

XXCommodity price changes have affected our
credit decisions. We also do a very shocking
stress test on the borrower’s financials to see
what effect a drop in cattle prices will have.

XXLower production has been offset by insurance proceeds and higher prices obtained for
commodities.

XXSo far, the drought has trumped any desires

reduction of farmers in this area by greater than
75 percent. The drought is causing substantial
reductions in crop insurance payouts. Continued drought threatens continued viability.

to respond to commodity price changes.

XXThe types of commodities produced have not
changed much, but crop mixes on particular
farms vary with market changes.

XXCommodity price changes have most notably
affected the dairy industry.

Region 13 • Northern Louisiana

XXThe increase in commodity prices has had a

positive impact on credit conditions and quality.
Many farmers are planting double crops, with
soybeans following wheat.

XXIf not for crop insurance, there would be a

XXDrought has caused cow herd liquidations,

greatly reduced grain production yields the past
two years and increased costs of production.

XXIn 2011, crop insurance kept a floor under

farmers’ incomes. Farming practices were
adjusted the last two years to lower exposure to
less rainfall.

Region 2 • Southern High Plains

XXCommodity price changes have had a minimal

XXWe lost most of our dryland cotton this year.

XXThe high prices of soybeans and the falling
prices of corn have caused some farmers to
switch acres from corn to soybeans. Some farmers feel that the soybean is easier to grow, making it an increasingly favored crop for the region.

XXInsurance continues to help offset the bulk of

impact on the current crop, but next year’s outlook is starting to look dismal.

Drought
QUESTION: How has the drought impacted
agricultural and credit conditions in your
region? Please explain.
Region 1 • Northern High Plains

XXWe have no dryland wheat crops for 2013.

Severe drought has had a drastic impact on grass
pasture. Cattlemen reduce herds and buy hay when
they can no longer afford to feed cattle on pasture.

Agricultural Survey • Third Quarter 2013 • Federal Reserve Bank of Dallas

We lost grapes to an early freeze, and we need a
late freeze for remaining crops because we are
about two full weeks behind our usual growing
season due to late planting.
expenses but not all of them. More farmers than
not have lost equity over the last three years.
Another year or two of no moisture would start
to have a real impact. Insurance yields are lower,
and losses will continue to deepen if we don’t get
rain. Additionally, cotton gins have taken a much
worse hit in our area. Our county is 90 percent
dryland acreage, and no cotton crop has meant
no gin work, and the gins don’t have revenue
insurance like the producers.

XXDrought has almost eliminated any cattle loan
requests.

XXOur bank’s farm operating loan volume has

decreased over the past two years. Crop failures
early in the growing season have generated a

substantial amount of federal crop insurance
proceeds that paid off, or paid down, farm operating loans. Reduced crop acreage harvested has
reduced the need for crop inputs also, leading
to less farm operating credit needs. The USDA
Supplemental Revenue Assistance Payments
program was a blessing but also decreased farm
credit needs. As a result of the drought, farmers
have been more conservative, with fewer capital
expenditures.

XXIn most cases, we are relying heavily on insur-

ance due to the amount of dryland acres. We can
still underwrite the loans properly but are really
watching what a producer is planning for that
crop year. Insurance is vital.

XXDrought has caused severe restriction of

dryland-grown crops. Limited water in this area
has also made irrigated crop production virtually
uneconomical.

XXDrought has created disaster, which caused

many farmers to claim insurance. Some farmers
have been positive, as they have gone back with
second crops after collecting insurance proceeds.
They received rainfall that has made those second
crops successful.

XXDependency on multi-peril crop insurance and
government entitlements has been significant
during the last few years due to the drought.
Water depletion is a major problem in the area,
forcing farmers to convert numerous acres
from irrigated to nonirrigated acres, which has
compounded the dependency on insurance
and government program payments. Loans are
evaluated at application primarily utilizing net of
premium insurance protection and government
entitlements for cash flow purposes, as opposed
to using an average of actual production history
for yield projections.

XXDrought has caused a loss of crops, and
therefore lower yields.

Region 3 • Northern Low Plains

XXDrought conditions affected the livestock

industry more than others, causing the liquidation
of massive amounts of cows. The local livestock
commission closed due to lack of cattle for sale.
The number of irrigation wells has increased
significantly due to drought conditions; some
wells are for new production acreage, but many
wells are to supplement the decrease in output
of existing wells due to the decline of the water
table. Cotton is the dominant crop due to its ability to tolerate dry conditions over peanuts.

XXThe drought has negatively impacted agricultural conditions, primarily through lower yields
on wheat. Additionally, dry stock tanks have
impacted the cow-calf operations in our region.
XXThe water table has dropped. Some irriga-

tion wells are no longer in service, while others
are limited. The cattle producers have been hit
hard with the drought. Pasture conditions did

not improve much last year, so the stocking rate
was still below optimum, reducing cash flow.
Pasture leases have to be paid to retain land with
limited benefits. Pasture conditions are starting to
improve, but the high cost to restock has put up
a caution sign.

XXDrought has reduced cattle inventory and

XXFarmers have had to rely on crop insurance to
stay in business.

XXHay production is extremely short this year.

XXDrought has affected the wheat crop, but

insurance helps. We have had a major liquidation
of the cow herd and no cotton for two years.

Region 4 • Southern Low Plains

XXCredit conditions have remained about the
same because commodity prices have been at
record high levels.
XXWe have had cattle liquidated, and most people
have not bought replacement cattle. Small to no
cotton crops hurt farm-related businesses.
Region 5 • Cross Timbers

XXThe drought has negatively affected the
production of crops in the past. Crop production
in 2012 and 2013 was normal, given the limited
rainfall.
XXDrought forced a reduction in herd size and

has reduced production income. Drought conditions have reduced wheat and haygrazer planting
and the amount of forage or grain produced,
which further limits herd size. Fewer customers
are requesting funds to buy livestock. Those
who have debt are struggling to cover operating
expenses with reduced income.

XXDrought has caused a cutback on cattle
numbers.
XXProducers have reduced their cattle inventories, often significantly. Operating costs have
increased as a result of limited wheat grazing and
hay production.
XXLack of grass has reduced forage and, in turn,

cattle numbers; consequently we have fewer
cattle loans.

Region 6 • North Central Texas

XXCattle inventories have decreased with a lack

of satisfactory pasture conditions and water
supplies.

XXWe have had more rain than most areas, so the
effects of drought have not been too bad.
XXCrop insurance and Supplemental Revenue
Assistance Payments program payments have
helped producers and lenders greatly. Hay is very
expensive. Cattle herds were reduced and now
replacement cattle are very expensive.
XXDrought has been rough on our producers.
The farmers who are strongest financially and
most committed are left and are outstanding
customers due to their strong financial positions
and management skills.

caused a shortage of locally grown feed.

XXThe drought has certainly had a negative

impact. Pasture conditions still aren’t good. Hay
is expensive to buy, and yields have been way
below average.
Ranchers are starting to sell cattle offspring at a
lighter weight. Milo yields were much lower than
expected due to drought.

XXDrought has led to fewer cattle and higher

input prices for feed and hay. Producers are
fortunate cattle prices were high during the recent
droughts. Historically, droughts lead to lower
cattle prices due to high numbers of cattle sold.
Some estimates put the local cattle numbers at
30 to 50 percent less than a few years ago.

XXThis year our farmers were able to take advantage of higher grain and cattle prices that were a
result of last summer’s drought in the Midwest.
Area farmers had decent wheat and corn crops
thanks to some timely rains in our area.
XXDrought has had very little effect on local
farmers.

Region 7 • East Texas

XXThe price of hay has increased in dry conditions, causing other expenses to increase as well.
XXRow crops were not affected as much as anticipated due to good insurance coverage on borrowers’ behalf. Cattle numbers have been steady
for the past 24 months, with only a few complete
selloffs reported. Stocker cattle programs have
suffered the most. Gains were late as a result of
late spring rains. Death losses were much higher
than normal due to extended heat last fall. More
equity is needed in stocker programs due to the
high cost of cattle on the front end.
XXThe drought severely impacted the livelihood
of our dairy operators.

XXMany cattle producers have decided to go
out of business due to drought conditions.

XXDrought has caused less production and
increased feed costs.

XXThe drought has caused increased feed and

hay prices, thus causing very tight profit margins
on our agricultural producers.

XXDrought has caused most of our cattle operators to sell out.
XXSome people have had to disperse a part of

their cattle herds, and the drought has drastically
cut hay production. Customers are not interested
in borrowing money on cattle until rains increase
grass production.

XXDrought has reduced cattle numbers, but

there have been no impacts on credit conditions.

Agricultural Survey • Third Quarter 2013 • Federal Reserve Bank of Dallas

Special Report
Region 8 • Central Texas

XXAverage production yields over the past few

Commodities and Drought
Region 11 • Trans-Pecos and
Edwards Plateau

years have fallen, primarily due to the drought.
This has impacted credit to marginal producers
because of increased credit risk due to lower
insurance coverage.

XXThe availability of permitted water is tight
due to the restrictions of the Edwards Aquifer
Authority.

XXThe remaining cow-calf operators have sold

off in 2011. Stocker operators also took losses
in 2011 and 2012, which have hurt their balance
sheets.

down or out, with few operators able to continue
to buy hay year after year for feeding. Row crop
operators collected insurance and hope for a
good year in the future.

XXWe have had to make more loan extensions

due to the drought and plan for longer term
payouts on cattle. We have also made more
agriculture operating loans to help people out in
the drought.

XXThe drought has made the decision to exit
agriculture easier for many older producers,
giving rise to more leasable land for other
producers. The problem is there is very little
to no forage on these acres, and given these
conditions, no one has an interest.

Region 9 • Coastal Texas

XXOur loan volume has declined because of the
drought.

XXOn average over the past two years, our

region received needed rains at critical times to
ensure average to above average crops. Further
west, down the Texas coast, more severe
drought has impacted yields for all row crops.

XXThe drought has significantly impacted rice

production in our area. Many producers have
not been able to plant a crop for two consecutive years due to lack of irrigation water. This
has caused a shift to other commodities where
soil conditions are suitable, and some acres
have been idled.

XXRanchers have less income after selling cows

XXFrom a credit standpoint, the drought has
taken many ranchers out of production, thereby
lessening the need for credit on their part. From
an agricultural standpoint, the drought has been
devastating because many operators have had
to sell many of their foundation livestock, and
it typically takes several years of continuous
feeding, working and handling of new livestock
to acclimate them to the protocol of the particular
producer. Furthermore, without grass, these new
cattle cannot even be purchased at this time. It
will take a year or two of good rains to return
much of the pastureland to optimum condition.
XXOur customers have been forced to sell down
their sheep, goat and cattle breeding stock.
XXThe majority of ranchers reduced herd size or
exited the livestock market, which resulted in agriculture loan decline. In recent months, we have
seen signs of expansion; however, loan demand
remains soft. There has been no impact on credit
availability during the drought.
XXPastures are in better condition than last year.
Spring rains and rain in July have helped pasture
conditions, but they are still suffering from
drought. Stock tanks remain low, and the hay
crop was below average. Livestock numbers are
still down due to dry conditions, and feed costs
remain high. Loan demand is down due to dry
conditions.

XXThe drought has reduced yields on cotton

XXDue to drought continuation, numbers of
cattle and sheep, particularly, have been cut back
by an estimated average of 30 to 50 percent
over the last several years. Loan balances are
down in general due to selloffs, though credit is
readily available for restocking. The drought has
increased overall feed budgets, but feed costs
remain lower for more-efficient hair sheep than
for wooled sheep.

XXFeeding expenses have increased because of

XXDrought has caused limited grazing, higher
livestock market prices and high restocking costs.

and sorghum crops; however, crop insurance
has covered most cash flow shortfalls and
little or no carryover is expected on production
loans. Poor pasture conditions have resulted in
increased feed expenses for cattle operations,
which in some cases will result in longerthan-anticipated repayment terms on cow-calf
operations.
the drought.

DALLASFED

XXHerd numbers have been cut in half and in

some cases eliminated to ease feeding pressures.

Region 12 • Southern New Mexico

XXMany ranchers are selling off their cattle or

not holding on to them as long as they would
like after a purchase. They need more time to let
their land heal due to the lack of rain. The drought
affects our credit decision process; we know that
agricultural losses are very low, but we still have
to figure in the additional risk due to the lack of
rain.

XXProduction of all commodities has significantly
decreased due to drought. Credit conditions are
stable due to good management of operators.

XXCattle prices stayed high, so the impact was

not as great as it could have been. Farmers were
highly dependent on the insurance payments, and
our average irrigation decline at the pump was
probably 30 percent in the last three years.

XXDrought caused a significant decline in cattle
inventory.

XXRanches have been so dry that herds have

been reduced and replacement heifers not kept.
Some ground is being left out of crops because
of limited water availability.

XXDrought continues to force small operators
and those with significant debt to shut down
their operations.

Region 13 • Northern Louisiana

XXWe have had very few effects from drought,

because most of the crops in our area are irrigated. However, irrigation costs have risen.

XXDrought conditions have increased our need to
look at varieties of crops grown, maturity stages
and ability to harvest.

XXThis has been a good year for growing row

crops. Irrigation did not start until late in the
season, and because of rainfall across the
region, the nonirrigated crops are holding their
own against the irrigated crops. It was not until
August that irrigation became a necessity. This
year’s crop was not as expensive as last year’s.

Agricultural Survey
is compiled from a survey of Eleventh District agricultural bankers. Data were collected Sep. 3–11,
and 149 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, contact Amy Jordan, 214–922–5178.

Agricultural Survey • Third Quarter 2013 • Federal Reserve Bank of Dallas

Agricultural Survey • Third Quarter 2013 • Federal Reserve Bank of Dallas