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Third Quarter 2015

DALLASFED

Agricultural
Survey

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

Survey
Highlights

ankers responding to the thirdquarter survey reported that after
their regions received beneficial
rains in the spring, limited rainfall and a
return of drought conditions in some areas
in the third quarter damped outlooks. Low
commodity prices have created profitability
concerns, and respondents expect price
pressures will result in lower farm incomes.
Bankers in a couple of regions noted that
crops and pastures were in good condition
after rain earlier in the year and that crop
yields are average to above average.
District dryland was the only land type
to see increased values this quarter. Real
dryland values were up 1 percent over last
quarter, while real land values decreased
for irrigated cropland (3 percent) and
ranchland (7 percent).
The index for the anticipated trend in
farmland values moved negative again in
the third quarter, indicating bankers expect
farmland values to head lower next quarter.
The credit standards index indicated continued tightening of standards, although
the vast majority of respondents noted no
change.
Demand for agricultural loans increased this quarter but at a slower pace
than in the second quarter. Loan repayment rates continued to slow this quarter,
while loan renewals and extensions were
unchanged on balance. Overall, the volume
of loans was up compared with a year ago.
“Operating loans” was the only category
to increase in volume year over year this
quarter.

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

Percent reporting, Q3

2015:Q2

2015:Q3

pGreater

Same

qLess

Demand for loans*

14.3

2.3

20.5

61.3

18.2

Availability of funds*

16.5

14.7

17.8

79.1

3.1

Rate of loan repayment

–6.4

–4.7

5.5

84.3

10.2

7.9

0.0

9.6

80.8

9.6

Loan renewals or extensions
Index
50

Availability of funds*

40
30

Rate of loan repayment

20
10
0
–10
Loan renewals
or extensions

–20
–30

Demand for loans*

–40
–50

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

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

Percent reporting, Q3

2015:Q2

2015:Q3

pGreater

Same

qLess

4.6

3.2

19.4

64.5

16.1

Feeder cattle loans*

11.6

–7.2

9.9

73.0

17.1

Dairy loans*

–8.0

–13.9

2.8

80.5

16.7

Crop storage loans*

–3.2

–7.1

4.4

84.1

11.5

Operating loans

15.6

17.6

28.0

61.6

10.4

Farm machinery loans*

–17.8

–11.8

9.8

68.6

21.6

Farm real estate loans*

–8.7

–10.1

9.8

70.3

19.9

Non-real-estate farm loans

*Seasonally adjusted.
NOTE: 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

XXIncreased rainfall has provided good pasture and promising crops, but lower grain
and livestock prices will result in lower
producer incomes.

XXSummer grazing conditions have been

better than in any year in recent memory.
Summer crops have the potential to
produce well-above-average yields. Low
commodity prices will limit profitability in
spite of production potential.
Region 2 • Southern High Plains

XXGood, slow soaking rain would help now
for cotton, sorghum and pastures. We are
hoping for a late freeze.

XXMost of the South Plains missed mean-

ingful rainfall in August when the dryland
cotton crop really could have used it. Crops
overall are rated average. Weeds have been
horrible and costly to control. Crop prices
are weak, so it looks like most producers
will do well to break even this year. Grazing
has been excellent. Cattle feeders are losing a lot of money from overpriced feeder
placements.
Region 3 • Northern Low Plains

XXBased on current commodity prices,

many producers will have additional equity
in their operations. This will reduce highly
leveraged borrowers in the market.

XXThe low commodity price outlook is

making profit projections weak. Crop and
pasture conditions are good, although the
cotton crop is late due to delayed planting.
Region 4 • Southern Low Plains

XXMost farmers will experience a decline in
net equity this year.

Region 5 • Cross Timbers

XXLimited rainfall in the third quarter has
put us in a poor position to get winter

wheat ground ready for planting. Those
who plowed immediately after harvest or
graze-out are OK, but those just now trying
to plow are finding it difficult.

12
N E W

M E X I C O

Regions of the Eleventh
Federal Reserve District

XXAfter a wet spring, we have not had a

drop of moisture in 60-plus days. We must
receive rain for wheat to be sowed.
Region 6 • North Central Texas

XXCrop yields are worse than expected due
to excessive rain in May and drought in
July and August. This, combined with very
low commodity prices, is causing some
farmers to struggle to meet their loan obligations this fall. Crop insurance is of little
help. The average yield across all farms
is just high enough to either disqualify
producers for crop insurance or qualify for
very small payments.

XXHeavy rains in April and May ruined

crops, so insurance claims will be larger
than normal.
XXToo much early rain and now drought,
low grain prices and lack of program payments don’t bode well.
Region 8 • Central Texas

XXDrought conditions are worsening, and

some calves are being sold earlier than
normal at lighter weights just to get them
off the cows. Although there is some grass
in pastures, it has dried up and will not last
long without adequate rainfall.

XXDrought continues to slow things down,

but Gulf Coast storms are starting to bring
small rain showers to certain areas. The corn
harvest is almost complete, while cotton will
start in two more weeks. Cattle prices have
fallen pretty hard over the past month, with
most sale barns reporting less cattle coming
in than last year. Winter oats and rye grass do
not look too promising at this time, with most
people having to carry over and others not
wanting to purchase calves to put on oats.
Some people are keeping back heifers as well.

XXCattle prices are down a little compared
with last year.

Region 9 • Coastal Texas

XXExcessive moisture early on affected the

wheat harvest and cotton and grain plantings. Farmers who were able to plant were
three to four weeks behind schedule, and
some were prevented from planting cotton.
Cotton and grains have yielded average to
above average. Cattle prices have slipped
in the area from the highs of 2014. Overall,
cattle producers have been able to capitalize
on the benefits of an upside market, good
rainfalls and reduced inputs. Land values
have remained stable, with some increases
in holding periods, but it is an opportunity
for producers to purchase. Most prior sales
had been investor related and, with the
slowdown in oilfield income, investment
purchases have also been reduced.
Region 11 • Trans-Pecos and
Edwards Plateau

XXThe region received good moisture in

winter and spring; however, the area started
drying out during the growing season, so
there are still operators who are short on
grass.

XXLow hay prices decreased farm income

this year. A number of hay producers will
need to have loans restructured or extended
in order to move into the 2016 crop year.

XXAlthough spring rains were ample and

greatly appreciated, it has been a hot, dry
summer with some areas still looking for

Agricultural Survey • Third Quarter 2015 • Federal Reserve Bank of Dallas

Rural Real Estate Values—Third Quarter 2015
1
Banks1

Average
value2

Percent change
in value from
previous year3

Cropland—Dryland
District*

L O U I S I A N A

5
6

T E X A S

101

1,706

4.2

Texas*
1 Northern High Plains

90
11

1,725
875

4.2
8.1

2 Southern High Plains

681

3.0

3 Northern Low Plains*

834

3.0

4 Southern Low Plains*

1,162

14.8

5 Cross Timbers

1,363

2.7

2,504

4.7

7 East Texas*

2,732

2.0

8 Central Texas

3,512

4.6

9 Coastal Texas

2,263

3.4

6 North Central Texas

10 South Texas

n.a.

11 Trans-Pecos and Edwards Plateau

1,279

–0.8

12 Southern New Mexico

3
8

333
2,425

–5.9
8.5

13 Northern Louisiana

moisture. Commodity prices are holding
strong, but the cattle market may be weakening just a bit while remaining at historic
levels. Predators, general economic factors
and rainfall levels still make the ag situation
a bit dicey in the Edwards Plateau. A good,
wet late summer and early fall will cover up
a multitude of ills.
Region 12 • Southern New Mexico

XXThe bank has experienced some decline

in feeder cattle loans from borrowers who
felt the high feeder market increased risk
and projected smaller margins at the point
of sale. Some of this drop was offset by
other borrowers needing more money to
purchase the higher-priced cattle.

Cropland—Irrigated
District*

2,275

2.7

Texas*
1 Northern High Plains

1,976

0.8

1,750

–3.6

2 Southern High Plains

1,621

6.1

3 Northern Low Plains*

1,721

4.7

4 Southern Low Plains

1,557

7.5

n.a.

5 Cross Timbers
6 North Central Texas

2,500

–2.6

n.a.

8 Central Texas

3,729

5.0

9 Coastal Texas

2,750

–5.2
n.a.

7 East Texas

10 South Texas

n.a.

11 Trans-Pecos and Edwards Plateau

1,660

3.1

12 Southern New Mexico

4,000

11.1

13 Northern Louisiana

3,443

2.8

112
100

1,595
1,902

1.5
1.6

Ranchland
District*
Texas*
1 Northern High Plains

597

7.7

2 Southern High Plains

614

–5.9

3 Northern Low Plains

870

2.2

1,105

3.3

5 Cross Timbers
6 North Central Texas

7
16

1,671
2,513

2.1
3.4

7 East Texas

2,550

1.5

8 Central Texas

4,215

–1.0

9 Coastal Texas

2,133

–2.3

2,517

0.0

1,712

3.4

12 Southern New Mexico

281

0.0

13 Northern Louisiana

1,688

1.6

4 Southern Low Plains*

10 South Texas
11 Trans-Pecos and Edwards Plateau

*Seasonally adjusted.
1
Number of banks reporting land values.
2
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.

Agricultural Survey • Third Quarter 2015 • Federal Reserve Bank of Dallas

Real Cash Rents

Real Land Values
2005 dollars per acre
2,200

2005 dollars per acre per year

Irrigated

2005 dollars per acre per year

120

2,000

Irrigated
50

1,800
1,600

Ranchland

1,400
1,200

Dryland

1,000

100
80

Dryland

800

600

40
Ranchland

400

200
0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

NOTE: All values have been seasonally adjusted.

Anticipated Farmland Values and Credit Standards
Long-term farm real estate

Intermediate term

Other farm operating

Interest Rates by Loan Type

Feeder cattle

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Fixed (average rate, percent)

What trend in farmland values do you expect in your area in the next three months?
Index
Anticipated trend in farmland
values*

2015:Q3

pUp

Stable

qDown

4.1

–1.5

4.8

88.9

6.3

What change occurred in credit standards for agricultural loans at your bank in the past three months
compared with a year earlier?†
2015:Q2

2015:Q3

pTightened

Same

qLoosened

12.2

12.4

13.2

86.1

0.8

Credit standards

2014:Q3

6.12

6.22

6.00

5.80

6.03

6.14

5.96

5.77

2015:Q1

6.09

6.12

6.01

5.74

5.93

6.04

5.93

5.74

6.03

6.16

6.05

5.79

Percent reporting, Q3

2015:Q2

Index
50
40
30

Anticipated trend
in farmland values*

Credit standards †

10
0
–10

Variable (average rate, percent)
2014:Q3

5.69

5.75

5.64

5.37

5.65

5.71

5.62

5.39

2015:Q1

5.56

5.66

5.54

5.26

5.52

5.57

5.51

5.27

5.65

5.70

5.63

5.36

–20
–30
–40
–50

2011

2012

2013

2014

2015

*Seasonally adjusted.
†Added to survey in second quarter 2011.
NOTE: 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.

Agricultural
Survey
• Third
Quarter
2015
• Federal
Reserve
Bank
Dallas
Agricultural
Survey
• Third
Quarter
2015
• Federal
Reserve
Bank
ofof
Dallas

Third Quarter 2015

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. Commodity prices have
hurt the profitability of many farmers while positively impacting
ranchers, respondents said. In particular, lower cotton prices
reduced the cotton acres planted. The effects on credit standards
varied across regions. Some regions noted no change in credit
conditions, while others reported tightening standards and a
decrease in credit quality.
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 80 percent
of respondents reporting production of these commodities in
their region. A great majority of bankers also noted a presence of
wheat and cotton. Production of corn and sorghum were 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 only slightly from 2013, with the top six commodities in 2013 holding their positions in 2015. Soybeans increased
in importance, as did the production of sheep or goats. Dairy
and poultry 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 away from cotton to grains, sorghum, wheat
and corn. However, there were scattered reports of more cotton
acres. Changes in crops grown over the past two years were
due to commodity prices and the availability of water. Some
respondents commented that producers are looking to alternative crops, including grape vineyards.

Drought
As part of this quarter’s commodity survey, respondents
were asked about the alleviation of drought conditions and the
impact on agricultural and credit conditions in their region.
Most producers have benefited from improved crop yields,
but respondents in some regions noted excessive rain damaged crops this year. The livestock sector has also been helped
as rains improved pasture conditions, reducing the need for
supplemental feeding. Herd replacement is occurring, but some
ranchers are limited by high livestock prices.

Eleventh District Agricultural Commodities, 2015

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

100
90
80
70
60
50
40
30
20
10

he
rs
Ot

es
ato

Po
t

ce
Ri

uit
Fr

les
tab

ltr
y

Ve
ge

Po
u

Ho
gs

er
y
rs
Nu

an
u
Pe

ea
n

we
rs

So
yb

iry
Da

nfl
o
Su

go
ats

es
rs
Ho

Sh
ee
p

gh
um

So
r

to
n
Co
t

he
at
W

Ca
tt

NOTE: “Others” includes guar, pecans, rapeseed, sesame, sod and timber.

Agricultural Survey • Third Quarter 2015 • Federal Reserve Bank of Dallas

Commodities and Drought

SPECIAL REPORT

Agricultural Commodity Ranking in the Eleventh District
(As reported by responding banks, third quarter 2015 and 2013)*
Ranked No. 1

Ranked No. 2

Ranked No. 3

All Regions
Percent

100
90
80
70
60
50
40
30
20
10

he
Ot

nfl

gs
Ho

uit

ts
Oa

es
rs
Ho

s
tat

ult
Po

s
ut
an
Pe

ea
yb

iry

ats

’15 ’13 ’15 ’13 ’15 ’13 ’15 ’13 ’15 ’13 ’15 ’13 ’15 ’13 ’15 ’13 ’15 ’13 ’15 ’13 ’15 ’13 ’15 ’13 ’15 ’13
go

m
So

hu
rg

at
he
W

n
tto
Co

ttl
Ca

’15 ’13 ’15 ’13 ’15 ’13 ’15 ’13 ’15 ’13 ’15 ’13 ’15 ’13
e

NOTE: “Other” includes pecans and timber.

Region 1—Northern High Plains

Region 2—Southern High Plains

Percent

100
90
80
70
60
50
40
30
20
10
0

’15
’13
Cattle

’15
’13
Corn

’15
’13
Wheat

’15
’13
Cotton

’15
’13
Sorghum

’15
’13
Cattle

’15

’13
Corn

Region 3—Northern Low Plains

Region 4—Southern Low Plains

Percent

100
90
80
70
60
50
40
30
20
10
0

’15
’13
Cattle

’15
’13
Cotton

’15
’13
Wheat

’15
’13
Peanuts

’15

Hay

’13

*Data for Region 10 (South Texas) have not been reported due to insufficient responses.
6

’15
’13
Cotton

’15
’13
Cattle

’15
’13
Wheat

’15
’13
Cotton

NOTE: Region 4 only ranked four commodities.

Agricultural Survey • Third Quarter 2015 • Federal Reserve Bank of Dallas

’15
’13
Sorghum

’15

’13
Hay

’15
’13
Peanuts

Region 5—Cross Timbers

Region 6—North Central Texas

Percent

100
90
80
70
60
50
40
30
20
10
0

’15
’13
Cattle

’15

Hay

’13

’15
’13
Wheat

’15

’13
Dairy

’15
’13
Cotton

’15
’13
Cattle

’15
’13
Corn

Region 7—East Texas

Region 8—Central Texas

Percent

100
90
80
70
60
50
40
30
20
10
0

’15
’13
Cattle

’15

Hay

’13

’15
’13
Poultry

’15

’13
Dairy

’15

’13
Corn

’15
’13
Cattle

’15
’13
Corn

’15
’13
Wheat

’15

’15
’13
Cotton

’13
Hay

Region 9—Coastal Texas

Region 11—Trans-Pecos and Edwards Plateau

Percent

100
90
80
70
60
50
40
30
20
10
0

’15
’13
Cotton

’15
’13
Cattle

’15
’13
Sorghum

’15

’13
Corn

’15
’13
Soybeans

’15
’13
Cattle

’15
’13
Sheep or goats

’15
’13
Cotton

Region 12—Southern New Mexico

Region 13—Northern Louisiana

Percent

100
90
80
70
60
50
40
30
20
10
0

’15
’13
Cattle

’15

Hay

’13

’15

’13
Corn

’15

’13
Dairy

’15
’13
Wheat

’15

’13
Corn

’15
’13
Soybeans

Agricultural Survey • Third Quarter 2015 • Federal Reserve Bank of Dallas

’15
’13
Cattle

’15

’13
Hay

’15
’13
Cotton

’15

’13
Eggs

’15
’13
Wheat

’15

’13
Rice

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

XXCotton is not grown as much as it used
to be.

XXDue to drought, we have seen more hay
grown.

XXDue to the price of cotton, our acres have
declined significantly for 2015. Corn and
sorghum acres increased due to the abundant moisture we received this spring.
Region 2 • Southern High Plains

XXGrape vineyards has been the fastestgrowing type of new crop in our area.

XXOur area is still primarily cotton, but

some producers have planted more grains.

XXDeclining irrigation supplies continue

to impact agricultural commodities grown
in our area, causing more crop acres to
be planted to cotton, wheat and grain
sorghum. There is less corn in our area as
corn requires significantly more irrigation
than other crops.

XXThere has been some switching to other
crops due to prices and weather. Cotton is
the main commodity grown.

XXThere have been larger shifts away from
cotton. This is based on cost to produce
and competing crop market prices making
other crops more attractive.

XXCorn has surfaced to become an alterna-

tive crop as producers seek solutions to
declining commodity prices in traditional
primary crops grown in the area, including
cotton and peanuts. Grape vineyard acreage is on the rise. Decreased water levels
have forced producers to look to alternative
crops, such as grapes. Water depletion
continues to be a great concern.

XXMore corn is being planted due to ag
programs.

XXThe South Plains has a well-established

concentration in cotton production, both
dryland and irrigated. This crop is better
adapted to the semiarid conditions found
here. Cotton prices have fallen to unprofitable levels, so acres have declined and
switched to corn and grain sorghum.
8

Commodities and Drought
Region 3 • Northern Low Plains

XXWe have more cotton acres.
XXSome dryland acres and farms with

limited irrigation have planted grasses or
crops for livestock grazing. The price of
cattle has been better than the traditional
row crops of cotton and peanuts.

XXProducers have started growing both

sesame and canola to rotate crops due to
changes in prices and to fight herbicideresistant weeds.
Region 4 • Southern Low Plains

XXWe are trying more alternative crops.
Region 5 • Cross Timbers

XXThere has been some shift away from
cotton recently due to depressed prices,
but we still have several cotton farmers. No
major changes overall.
XXA few farmers are trying to grow cotton

for the first time in many years, but only a
very small amount of acreage is involved.
Region 6 • North Central Texas

XXThe price to plant cotton has continued

to increase each year, while cotton prices
have had very little movement up. We see
more farmers planting commodities other
than cotton.

XXThere have been more corn and sor-

ghum acres grown, while a reduction
in cotton has occurred. Sunflowers had
produced sufficient income to warrant it as
a rotational crop, but pricing in the past 18
months to two years has reduced that crop.

XXCotton has seen a resurgence.
Region 7 • East Texas

XXCotton acreage has decreased as milo

has increased, primarily because of commodity prices.

XXMore grain and less cotton acres have
been planted.
XXThere are less cattle due to ranchers selling out because of the prior drought.
Region 8 • Central Texas

XXGrapes are starting to be grown as new

vineyards are being put in, and several olive
tree farms have started. Several farmers’ markets have also tried to be established as well.

Region 9 • Coastal Texas

XXDue to cotton prices, we have experienced a shift to sorghum.

XXWe have more milo and less cotton due
exclusively to commodity pricing.

XXPrimary changes are in the crop mix,
depending on commodity prices.

XXDue to forecasted prices for the 2015

crop year, more farmers planted sorghum
than cotton.
Region 10 • South Texas

XXSince the decline of corn prices, there has
been a shift to other crops.

Region 11 • Trans-Pecos and
Edwards Plateau

XXSheep and goat production continues

to dwindle due to the predator problem.
As land in our county and the surrounding
counties is bought for recreational use,
the land is taken out of production. New
landowners are not inclined to cooperate
with local ag producers in predator control
programs. It becomes more and more
difficult to raise goat kids or lambs as a
result. Cattle have become the primary
commodity. Unfortunately, this area is
more suited naturally for sheep and goat
production.

XXMore farmers are growing sunflowers,
more wheat and less cotton.

XXHair sheep continue to increasingly

replace wooled sheep on ranches. Many
producers decreased the percentage of
Boer goat influence in their herds to
increase heartiness and mothering instinct.

XXGrain and cattle prices have increased. Up
until this spring, dry range conditions were
forcing the reduction of herds. Replacement
cattle are pricey and hard to find.
Region 12 • Southern New Mexico

XXLess cotton has been grown.
XXThere have only been minor fluctuations
in crops grown from year to year.

XXCrops and products have remained pretty
consistent in this market over the past two
years.

XXWe have seen less corn and other crops
that require more water.

Agricultural Survey • Third Quarter 2015 • Federal Reserve Bank of Dallas

XXPrices have made a major impact. Cash

Region 13 • Northern Louisiana

XXCorn and soybeans have reversed in crop
rankings. Cotton is fading away and cattle
herds are growing larger in small increments. Sweet potato acreage is stabilizing
into a more economically sound crop due
to a new sweet potato plant.

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

XXLower commodity prices have negatively
impacted profitability, especially for corn
and wheat.

XXThe drop in corn and other feedstuff

prices has had a positive impact on cattle
feeders and dairy operators.

XXLower commodity prices have put pres-

sure on break-even levels and will force
changes in crop selections and resource
allocations. Operating budgets will be much
tighter going into the future.

XXLow cotton prices resulted in fewer acres
planted.

XXCommodity prices have impacted what is
grown in this area tremendously. Farmers
are always analyzing which crop will make
them the best return.
Region 2 • Southern High Plains

XXWith cotton being a genetic crop under

the current farm bill, planted acreage has
been shrinking in our area and replaced by
peanuts, sorghum and some corn acres.

XXWe are heavy in cotton, and the price

has negatively affected our producers and
their ability to get credit. Margins have
declined, and without significant moisture
to increase yields, all producers find it hard
to achieve positive cash flow.

XXWith the low commodity prices in 2015,

most farmers will struggle to break even
for the year. Agricultural banks will have to
tighten credit standards again in 2016 in
order to finance producers. Many farmers
will be sent to the Farm Service Agency for
direct funding until agricultural conditions
improve.

flows have been extremely difficult to
manage even when a producer changes
to another crop. This will continue to be a
major problem.

XXThere is a lot less cotton due to prices,

and more cows due to higher feeder cattle
prices.

XXCotton has always been the primary

crop in this area; however, planted acres
are down significantly. The market price
decline since midyear 2014 has definitely
placed a strain on cash flow probabilities
for the current crop. Grain sorghum is a
break-even alternative at best. Peanuts
should produce a small profit, provided we
have good weather from now until the crop
matures and is harvested. Cattle operations
have benefited from the strong market cycle
and are in good shape. Watermelon harvest
is going well, with prices well above recent
years. The established grape vineyards have
been harvested and are at the wineries, benefiting from excellent prices due to quality
and market conditions.

XXCotton market prices have decreased

substantially and created a situation where
we need a large, if not record, crop to allow
farmers to just break even.

XXThere is little, if any, profit in current

crop prices. It takes good yields just to
break even. The consequence is that
leveraged borrowers are facing repayment
pressures. Many producers are fortunately
not excessively leveraged. However, some
are and tend to be either young and growth
oriented or growers who incurred losses
from poor crop insurance coverage plans
during the drought.
Region 3 • Northern Low Plains

Region 4 • Southern Low Plains

XXMore wheat was planted instead of cotton

due to cotton’s high input cost and low price.

XXCredit has tightened, but there have been
no changes in commodities grown. Prices
in commodities have impacted farmers’
ability to pay.

XXThe weakness in commodity prices has
tightened cash flow margins drastically.

XXCotton prices are putting pressure on farmers’ ability to cash flow all of their obligations.
Region 5 • Cross Timbers

XXCotton prices have fallen significantly

since early 2014. This has compressed
margins for cotton farmers in our area and
has caused some of them to shift away
from cotton in order to remain profitable.

XXHigh replacement cattle prices will have

an effect on operators’ ability to borrow
funds to replace cattle sold due to drought
conditions.

XXDairies experienced good profits in 2014

due to high milk prices, but these appear to
be headed down again. This did not result
in a change in the overall demand or availability of credit, nor did it entice any new
investors or existing producers to expand.

XXThe increase in cattle prices has greatly

helped cattlemen reduce debt and hold
heifers for restocking. The price of wheat
really hasn’t increased significantly in the
past 65 years; therefore, most of the wheat
is sowed for winter grazing.
Region 6 • North Central Texas

XXThere has been an increase in heifers
held for breeding stock.

XXThe decline in commodity prices has

XXThis crop season saw fewer corn acres

XXLow prices for cotton, peanuts and grains

XXPrices during 2015 have been generally

not significantly altered the commodities produced but has increased lenders’
awareness of how sensitive cash flow is to
changes in commodities prices.
have weakened cash flow projections, making it difficult to finance producers.

XXAfter the drought and selloff of cattle,

currently higher prices have producers
working to rebuild herds. Cotton has taken
the biggest hit, and acreage has decreased
due to uncertain pricing.

planted due to future contracts and hedging activities. Based on hedging, more
sorghum acres were planted, with adequate
yields to verify a better revenue decision.
down and have caused a movement away
from some corn acreage due to the production costs of corn versus other commodities.

XXLower prices have decreased profits.

Commodities grown have not changed.

XXCow and calf ranchers have had two or
three years of good prices, and the trend
should last a few more years.

Agricultural Survey • Third Quarter 2015 • Federal Reserve Bank of Dallas

SPECIAL REPORT

Commodities and Drought
XXCattle prices have been good. There are a

Region 7 • East Texas

XXLess cotton acreage, in favor of more

milo as opposed to corn, has been planted.

XXRecent commodity prices have had little

impact on the types of commodities grown
as capital requirements limit new borrowers to the industry. Overall credit quality
has improved.

XXWe have 75 percent less cattle loans.
XXProducers planted less corn and more

wheat and sorghum because input costs
for corn are higher than for other grains.
Input costs have not receded as fast as the
price per bushel.
Region 8 • Central Texas

XXCattle prices are still very good, and producers are starting to retain replacements
for their herds. Lenders are worried about
when cattle prices will decline.

XXThe cattle market has improved rancher

balance sheets and credit worthiness, leading to the rebuilding of drought-stricken
cattle herds and the replacement of old
farm equipment.

XXSome of our larger cattle operators are

requesting increases in their revolving lines
of credit to help offset higher purchase
prices and feed.
Region 9 • Coastal Texas

XXLower commodity prices are impacting
the ability to zero out operating loans.

XXAgricultural credit conditions at this time
have remained stable and may change in
the future with the decrease in prices.

XXWith decreased commodity prices for

corn and cotton, cash flow has tightened,
which may cause defaults on equipment
debt going forward.

XXRecent weakness in the commodity

market has compressed our producers’
margins, causing credit underwriting to be
more difficult. Credit availability remains
the same in our area.

lot of replacement cattle at this time, but 2016
will see a drop in replacement cattle prices.

XXThere has been an increase in the risk as- XXThe recent decline in commodity prices
sociated with lending, based on the capital
injection it takes to purchase replacements.
The volatility of the cattle, sheep and goat
market has made it more difficult to lend.

XXSome commodity prices have remained
high and helped keep many producers in
business.

XXThe cost of planting cotton has caused a

change. Continued high prices received for
sheep, goats and cattle have allowed some
producers to recover some of their losses in
recent years due to drought. Restocking at
high prices continues to be a challenge. We
have seen no change in credit conditions.

XXThe movement in prices in our region

has not had much impact other than causing us to require more capital for down
payments. As far as crops grown, range
conditions dictate what the growers can
plant during the seasons.
Region 12 • Southern New Mexico

XXStocker cattle operators aren’t as aggressive currently. The potential profit margin
versus the investment isn’t as palatable as
it has been.

XXMany farmers in the area are suffering as
the price of hay has dropped. This causes
customers to have carryovers and issues
paying back on their credit lines.

XXThere has been more hay grown and a

shift away from cotton, and highly leveraged
farms are starting to stress for cash flow.

XXCattle prices, together with post-drought

herd rebuilding, have made replacing cattle
numbers difficult, requiring substantial equity in existing cattle and ranch real estate a
necessity. Much of the farm and ranch land
in this area is somewhat subsidized by oil
prices through surface damage payments
and mineral royalties.
Region 13 • Northern Louisiana

XXCredit quality and debt-to-income ratios

Region 11 • Trans-Pecos and
Edwards Plateau

XXThere has been a restocking of rangeland, with increasing cattle prices and
ample moisture.

have decreased for all borrowers. Commodity prices now determine the acreage
makeup of crops grown.

has seriously impacted the profitability of
many farmers in the region.

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

XXThe crops are doing well with all of the
added rain.

XXSummer precipitation is back to more

normal levels this year. As a result, our native grass pastures are in excellent shape,
corn and milo look good, and we have the
potential for an early wheat pasture.

XXRain this year has resulted in good crop
yields. The biggest problem this year is it
being too wet to harvest timely.

XXImproved range conditions have driven de-

mand for replacement cows and pasture cattle.

XXWithout the spring moisture we received,
this area would have been in big trouble.
We’re dry again now, and crops are showing signs of stress, especially dryland and
crops with limited irrigation.

XXThe alleviation of drought conditions has

helped with irrigation costs but has increased
chemical expenses due to weed control.
Region 2 • Southern High Plains

XXIt has given us hope that we can make

a good dryland poundage to offset the
prior four years of drought, poor insurance
coverage and low prices.

XXWithout direct U.S. Department of Agri-

culture payments or disaster funding, many
producers find it hard to produce sufficient
cash flow. Higher inputs coupled with
drought and reduced or no government
payments make credit decisions much
more difficult.

XXIf it weren’t for the current rainfall conditions over the growing season, it would be
a complete disaster.

XXWe expect producers to have tighter cash XXIncreased rainfall in 2015 has had a
flows, less disposable income and possible
crop loan carryovers. We expect it to be

a lot more difficult to generate a positive
cash flow in the upcoming crop year, especially for the more marginal producers.

positive impact on crop production and re-

Agricultural Survey • Third Quarter 2015 • Federal Reserve Bank of Dallas

ducing irrigation input costs. The negative
to this increase in moisture is the increase
in weeds, with a large percentage being
chemical resistant. Gains from reducing irrigation costs have been wiped out by weed
control. Cow–calf operations have benefited the most from drought alleviation,
and most of our cattle producers are able
to retain some of their offspring to restock
a portion of their herds they were forced to
sell during the drought.

XXMany cotton growers fared better during

the drought than they likely will this year. In
2011 and 2012, crop insurance guarantees
were based on high prices. Once the crop
was failed, expenses were cut and the indemnity resulted in a positive outcome. This
year, growing costs have been expensive
because plentiful rainfall promoted weed
problems and poor cotton prices won’t allow
any money to be made. The livestock sector
has benefited tremendously from drought
relief. Grazing has been excellent, and a lot
of hay is being put up.

XXRain in 2015 has helped agricultural conditions. However, commodity prices remain
low, and many producers will struggle to
break even.
Region 3 • Northern Low Plains

XXOverall pasture conditions have im-

proved, but 60 days of rain do not necessarily end a drought; we will need extended
rain to fully recover.

XXIrrigation expenses have been less, but

herbicide and hoeing expenses have been
greater than the savings on irrigation. Our
bank has tightened lending for cattle by
increasing collateral requirements. Machinery and equipment values have also
dropped, changing leverage positions.

XXDrought alleviation has increased yields,
which generates more cash flow and helps
debt repayment.
Region 4 • Southern Low Plains

XXPeople are trying to restock their cattle
due to greater availability of grazing.

XXDrought conditions caused many people
to get out of the cattle-raising business.

from growing at the rate they need. Because
of low prices, our only saving grace in cotton is yield, which may become realistic this
year with higher rainfall amounts.
Region 5 • Cross Timbers

XXThe huge increase in rainfall this spring

helped improve crop yields and pasture for
cattle, farmer and rancher profitability and
borrower credit conditions overall.

XXMost stock tank levels are adequate to

full. Forage levels are more than adequate
for most operators based on current stocking rates. Numerous operators are increasing their cattle numbers to more efficiently
utilize current forage levels. Most operators
in our area are replacing their cattle numbers out of cash or by saving their heifer
calves. We have had only a few requests
for funds to replace livestock.

XXThe most important improvements are

in the water available in surface ponds and
lakes for livestock and wildlife and in pasture conditions for grazing. Hay production
has been the best in years, which should
lower the cost of wintering cattle.

XXWe had nice spring rains to fill stock

tanks, but our area lake that supplies water
for 175,000 people is only at 35 percent
capacity. The rains grew weeds, but now
more rains are needed to grow grass and
sow wheat. These conditions have greatly
helped cattle lending.
Region 6 • North Central Texas

XXMore commodities per acre created more
profits.

Region 7 • East Texas

XXWe have had more calls for cow–calf
purchase loans.

XXThe break in the drought has allowed
borrowers to be more profitable.

XXGrowing conditions are favorable,

causing farmers and ranchers to be more
optimistic and willing to produce.

XXThis spring was very wet, and many

producers were not able to do their first
cutting of hay. It then turned very dry, and
most farmers have only been able to get
one cutting of hay, when normally by this
time of year they would have three.
Region 8 • Central Texas

XXThe spring and early summer rains were
great, but hay production was hurt.

XXWinter and spring rains were excellent.
All hay crops have been harvested, but
current hot and dry weather conditions
are burning the pasture grasses. Rain is
needed badly.

XXThis year, all crops were a failure or had

XXDrought fears will remain with us for a long

XXWe have had more demand for cattle

XXRanchers are able to rebuild herds and

XXDrought impacted our cattleman
negatively. Generally, herds were reduced
over the past several years due to the lack
of grass, and the price of hay increased
dramatically, which resulted in reduced
livestock numbers. The drought had little
effect on overall credit conditions and lending, but it could have inhibited a borrower’s
desire to purchase livestock or make other
capital purchases.

XXProducers have been keeping heifers to

very poor yields due to too much rain all at
one time.
loans since drought conditions subsided.

XXWe still have some drought conditions now. XXIn general and over time, drought alleviaXXCattle prices have been very good the last tion will be very favorable to agricultural
couple of years, but the cost to restock after
a severe drought has hindered producers

early summer of 2015 caused a general
crop failure for wheat, corn and soybeans.
Most farmers engaged in crop production
would not be able to survive if it were not
for the crop insurance program that most
participate in. Cattle production conditions
have generally improved as drought conditions have improved.

and credit conditions. However, excess
rainfall and flooding during the spring and

time to come. Expansion will be slow until we
get a more stabilized weather pattern.
strengthen balance sheets.
increase their herds.

Region 9 • Coastal Texas

XXExcess moisture actually had a negative

impact on yields for the 2015 year, making
it difficult for some operating credit facilities to zero out in a timely fashion. With
the increase in the moisture levels and the
recent drop in sorghum prices, we may see
a more normal planting ratio of cotton and
grain in the 2016 crop year.

XXCredit conditions improved with the rains
received this year. Recent 60-plus days

Agricultural Survey • Third Quarter 2015 • Federal Reserve Bank of Dallas

SPECIAL REPORT
of dry weather have helped the scattered
harvesting.

XXDrought conditions are still impacting

our area. We had some beneficial rains earlier this year, but we continue to have water
restrictions. These restrictions have had a
significant impact on our rice production.

XXOverall, those who were able to plant

cotton timely can expect higher yields.
However, breaking the drought had unintentional consequences—cold temperatures
and continued rainfall caused some farmers
to be unable to plant cotton by the due date.
Those farmers generally planted sorghum,
but additional rains caused water to stand in
fields on young plants, reducing yields.
Region 10 • South Texas

XXMost of our area relies on irrigation for

farming, and dryland farming has been
virtually nonexistent for a long time. The
alleviation of drought conditions has had
the greatest impact on cattle pastures.
Operators will begin to be able to rebuild
herds. It has also helped lessen the strain
on the aquifer and cut down on irrigation
and operating costs.

Commodities and Drought
XXWith cattle, goat and sheep prices as

high as they are, the welcome rains of
spring allowed ranchers in our area to grow
some hay to alleviate this fall’s coming feed
needs and reduce the costs of feed for the
first half of the year, increasing the overall
net income picture.

XXCustomers had sold off some cattle and
sheep that they are now trying to replace.
XXRainfall last fall and this spring was

good, but our area is in need of rainfall at
the present time. Some producers have
been restocking but at a slower rate due to
high replacement costs.

Region 13 • Northern Louisiana

XXWe had more problems with the heat

rather than the lack of rainfall since the
majority of our crops are irrigated, with an
abundance of water available.

XXThe increase in irrigation availability and

drought control has greatly increased the
stability of yields on grain crops in the area.
Spring rains contributed to excellent yields
for dryland crops for 2015, with some
farmers’ dryland crops producing a higher
yield than irrigated crops.

XXEasing of drought conditions has allowed
producers to retain some of their raised
breeding stock, although high prices have
caused many to sell some of the replacements that they would normally keep. Additional grass from rains has allowed some
producers to increase cattle numbers.

XXSpring rains produced a lot of grass,

which is extremely dry right now due to
the lack of summer rains and presents an
extreme fire hazard.
Region 12 • Southern New Mexico

XXConsiderably more land has a viable crop

Region 11 • Trans-Pecos and
Edwards Plateau

growing on it than in the past several years.

XXProfit margins are projected to be higher

for livestock producers with the reduction
of the need for supplemental feed. As a
downside, hay producers have experienced
decreased quality levels due to rained-on hay.

XXCattle prices have been good, but we

need rain. Dry land will drive prices down.

XXProducers have kept more heifer calves
and ewe lambs as a result of improved
range conditions.

XXSpring rains aided in the mitigation of

input costs. However, demand increased in
the replacement market, and the price push
has limited some smaller operators from
purchasing cattle.

DALLASFED

XXMost of the ranchers in the area are

relieved to have drought alleviation and are
able to supplement less feed.

XXAs the drought breaks, cattle ranchers

are beginning to restock, helping drive up
the local price.

XXNet farm and ranch income is at an

all-time high due to lower input costs such
as irrigation pumping and supplemental
feeding requirements. On the cow–calf
side, debt per cow is increasing on many
ranches due to the high cost of replacing
herds that were somewhat liquidated during the drought.

Agricultural Survey
is compiled from a survey of Eleventh District agricultural bankers, and data have been seasonally
adjusted as necessary. Data were collected Sept. 1–9, and 139 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 214-922-5270. It is available on the web at
www.dallasfed.org/research/agsurvey.
For questions, contact Amy Jordan, 214–922–5178.

Agricultural Survey • Third Quarter 2015 • Federal
Agricultural
Reserve
Survey
Bank• of
Third
Dallas
Quarter 2015 • Federal Reserve Bank of Dallas

Full text of Agricultural Survey : Third Quarter 2015

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