Full text of Agricultural Survey : Third Quarter 2017
The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Third Quarter 2017 DALLASFED Agricultural Survey Quarterly Survey of Agricultural Credit Conditions in the Eleventh Federal Reserve District Survey Highlights B Figure 1 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 noted moisture conditions are generally good, but flooding in a couple Availability of funds* yields are expected to be above average. Re- Rate of loan repayment spondents noted that livestock prices generally Loan renewals or extensions remained good. Demand for agricultural loans overall decreased for the eighth consecutive quarter. Loan renewals and extensions continued to increase. 20 0 all other loan categories’ volumes fell year-over- –10 –30 values increased (Figure 2). According to bank- –40 third quarter 2016, nominal district cropland values increased year over year while ranchland values held steady (Table 1). –11.1 9.6 69.7 20.7 7.0 8.3 11.5 85.3 3.2 –0.8 –3.9 5.4 85.3 9.3 3.9 7.0 10.1 86.8 3.1 Availability of funds* Loan renewals or extensions –20 decreased this quarter, while irrigated cropland ers who responded in both this quarter and –4.6 10 loans. The volume of operating loans increased; District real ranchland and dryland values qLess 40 after stabilizing last quarter. Overall, the volume year this quarter (Figure 1). Same Index 30 year ago, as was the volume of farm real estate pGreater 50 The rate of loan repayment declined slightly of non-real-estate farm loans was lower than a 2017:Q3 Demand for loans* regions caused losses of crops and cattle. Crop Percent reporting, Q3 2017:Q2 –50 Rate of loan repayment Demand for loans* 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 What changes occurred in the volume of farm loans made by your bank in the past three months compared with a year earlier? The anticipated trend in the farmland val- Index Percent reporting, Q3 2017:Q2 2017:Q3 pGreater Same qLess secutive quarter, suggesting respondents expect Non-real-estate farm loans –7.8 –9.3 8.5 73.6 17.8 farmland values to trend up in the upcoming Feeder cattle loans* –9.2 –8.7 7.0 77.3 15.7 Dairy loans* –9.1 –7.3 7.0 78.7 14.3 Crop storage loans* –3.3 –8.5 3.3 84.9 11.8 4.8 3.8 15.4 73.1 11.5 Farm machinery loans* –17.8 –13.1 6.6 73.7 19.7 Farm real estate loans* –8.9 –10.3 8.6 72.5 18.9 ues index remained positive for a second con- months. The credit standards index indicated continued tightening of standards on net (Figure 4). What’s New This Quarter: This quarter’s survey data include seasonal factor revisions. The Federal Reserve Bank of Dallas revises the historical data for the Agricultural Survey after calculating new seasonal adjustment factors. Seasonal revisions result in slight changes in the seasonally adjusted series. Operating 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 XXThe recent rains we experienced in August helped our farmers cut back their expenses. We need some good heat units for the cotton we have as the rain showers were good but did cool us off tremendously. XXLate summer rainfall has significantly improved our moisture conditions, improving anticipated fall crop yields with lower irrigation expense. Soil moisture is excellent for planting wheat. Grain sorghum and cotton yields are still very dependent upon a normal to later than normal freeze date. Region 2 • Southern High Plains XXWe need rain and a late freeze. Most crops are Region 5 • Cross Timbers XXIt has turned dry in recent weeks, but overall has been a fairly good-weather year in most of our area. Good hay production has led to a big surplus after a sizeable amount was carried over from last year. Local pecan growers should have a big crop this year with what looks to be good prices at this point. Dairies have a good supply of roughage at low cost and fair milk prices. Beef cattle prices seem to have stabilized, and grazing conditions have been good. Region 6 • North Central Texas XXLoan demand has weakened. XXCentral Texas is experiencing so much growth looking good, and we expect production to be above average for 2017. Ranchland is good; cotton and peanuts are holding up well but moisture would help. that land prices will continue to escalate, shrinking the tillable acres. XXIrrigated cotton crops are excellent, while dry- XXThe cattle market is better, and summer rains land cotton crops are very good but late and catching up with heat and open weather. Grain crops are good but there is some insect pressure. XXWe have had the second largest rainfall totals for the summer months in 2017. Although most crops were later going in, they have made good progress, and for producers who have a crop, the prospects look good. We still need a good, dry fall. There are still some areas where the crops didn’t make it, and those will be problem areas. XXIt was difficult to get crops started in our area due to hail, wind and drought, which caused expenses to run somewhat higher than normal. XXCrops in West Texas are looking very promising. Very beneficial rainfall has been received throughout much of the month of August, which is helping finish things up. Most of the cotton is later than desired, though, so we really need a warm, open September and October. It will take every bushel and pound to clear expenses. Region 3 • Northern Low Plains XXIrrigated cotton looks good. Fifty percent of dryland cotton has already been destroyed. The remaining dryland will need a warm fall to finish. Pasture conditions are dry to average. Wheat ground is being prepared but it is too dry to plant. Our area needs a rain. XXRain three weeks ago ruined a lot of hay, but hopefully it hasn’t ruined the soybeans. have been timely. Hay is plentiful. XXOur area received unusual rainfall amounts in July and August. Wheat crop yields were fairly normal. However, corn and soybean yields are proving to be well above normal. Cotton yields are projected to be well above normal as well. These yields will be a plus for the farm economy all around our area. Region 8 • Central Texas XXRural land prices have softened in the past few months, especially for the larger tracts and the less desirable land tracts—those with no improvements or recreational use. More qualified borrowers are starting to become more rate sensitive and looking for the best rates available before making credit decisions. Demand for feeder loans has been steady, with no big increases noted at this time— we are waiting on the calf market to stabilize and hedging to become a viable option again. Recent rains will help area farmers and ranchers for the next few months, as fall planting will start soon. XXFlooding on the Colorado caused loss of cattle for some. Most had moved livestock to higher ground. On the beneficial side, there will be a lot of grass going into fall. 12 N E W M E X I C O Regions of the Eleventh Federal Reserve District Region 9 • Coastal Texas XXReal estate values are driven by recreational users. XXOverall current conditions in the area vary from being dry in the western areas to adequate moisture along the eastern fringe. The majority of the damage [from Hurricane Harvey] was to the northern counties that had sizable amounts of cotton damages that had been harvested or in the field. Several ag-business facilities also had damages. Cattle feeding has increased in the last 60 to 90 days with the dry time from June to August. The sale of cattle has recently ramped up. Prices have held steady. Current sales have included a higher number of cows, with some larger ranches starting to use their reserve pastures. Hay purchases have increased. Inputs have also remained fairly stable, with margins being at lower levels when compared to 2014–16. All grain and corn have been harvested, with yields being at average levels compared to the last two years. The crops were marketed this year in a different fashion with an ample amount going straight to the Port, where producers were able to obtain a better basis than at the local co-ops. Cotton was well over 90 percent harvested, with the northern counties having some still in the fields. Prices lost some core value prior to Hurricane Harvey and gained on price with the damage to cotton further up the coast. At this time, the prices and quality of the cotton are still good with overall yield above average. The crop will be ginned later than average due to the larger amount of cotton produced. Most producers are looking at keeping a traditional mix of plantings for the 2018 crop year and awaiting the overall production on various areas across the country. XXHurricane Harvey and floodwaters from the Brazos and Colorado Rivers damaged a significant portion of the cotton acreage. The range of damage was lower yields/quality degrades to complete losses. All other crops were harvested prior to the storm. XXThe few agriculture loans that we had have recently been sold for non-agricultural use. 2 Agricultural Survey • Third Quarter 2017 • Federal Reserve Bank of Dallas Table 1 Rural Real Estate Values—Third Quarter 2017 1 Banks1 3 Average value2 Percent change in value from previous year3 Cropland—Dryland 2 District* 4 L O U I S I A N A 5 6 11 13 7 T E X A S 8 101 1,824 3.1 Texas* 1 Northern High Plains 88 10 1,841 928 2.9 4.3 2 Southern High Plains 11 759 10.1 3 Northern Low Plains* 7 885 4.9 4 Southern Low Plains* 8 1,059 –5.7 5 Cross Timbers 6 1,683 –6.1 15 2,697 4.3 7 East Texas* 6 2,804 6.8 8 Central Texas 12 3,600 –9.0 9 Coastal Texas 5 2,120 12.2 6 North Central Texas 9 10 10 South Texas n.a. n.a. n.a. 11 Trans-Pecos and Edwards Plateau 6 2,083 11.9 12 Southern New Mexico 4 9 363 2,689 5.7 7.2 13 Northern Louisiana Region 11 • Trans-Pecos and Edwards Plateau Cropland—Irrigated District* XXPasture conditions range from fair to excellent depending on location. The end of the growing season is near, so additional rainfall would greatly improve grass quality going into winter. XXLivestock prices are steady. Some areas are in good shape with ample rains going into fall, but other areas are extremely dry. Land sales for larger tracts are slow. XXLivestock prices rebounded somewhat from their lows earlier in the year. Range conditions are still above average even though rain has been very spotty. Some areas received excellent rainfall, and hay crops have been better this year. Feed prices remain high, and the predator issue is still high on sheep and goat operators’ lists of obstacles to overcome. As is always the case, rainfall—or lack thereof—will dictate how 2017 winds up on the Edwards Plateau. XXPasture grass coverage and volume is as good as it’s ever been, though we need some moisture. Livestock is mostly in very good condition. Predators are still a real problem, particularly in sheep and goats. Hunting revenues remain a key revenue source for most ranching operations and leasing appears to be stable. Livestock prices remain good overall, though there was some recent weakness in sheep and goat markets. Region 12 • Southern New Mexico XXBetter than average rainfall in late summer has been great for cattle and dryland farm operations. XXThe monsoon was slow to start and pretty spotty, but has finally kicked in and most areas have had good moisture. Feed commodities remain depressed, primarily driven by dairy producers. The vertical integration of dairies to grow substantial amounts of their own feed input has placed significant stress on non-dairy, forage crop producers. 75 2,548 5.0 Texas* 1 Northern High Plains 61 2,222 2.9 10 2,100 2.7 2 Southern High Plains 10 1,590 2.4 3 Northern Low Plains* 5 2,218 20.2 4 Southern Low Plains 7 1,407 –1.6 5 Cross Timbers 3 3,383 0.0 6 North Central Texas 5 2,750 2.4 7 East Texas 3 2,800 16.7 8 Central Texas 7 4,114 0.7 9 Coastal Texas 4 2,275 7.8 n.a. n.a. n.a. 11 Trans-Pecos and Edwards Plateau 5 3,200 0.0 12 Southern New Mexico 5 4,100 5.6 13 Northern Louisiana 9 4,206 18.3 119 106 1,677 2,000 –0.1 0.5 10 South Texas Ranchland District* Texas* 1 Northern High Plains 10 720 1.8 2 Southern High Plains 9 678 0.0 3 Northern Low Plains 7 943 7.4 4 Southern Low Plains* 9 1,092 0.0 5 Cross Timbers 6 North Central Texas 8 16 2,025 2,791 0.0 4.7 7 East Texas 12 2,754 1.6 8 Central Texas 14 4,736 –1.9 9 Coastal Texas 4 2,388 –1.3 4 2,400 1.9 13 1,669 –0.8 10 South Texas 11 Trans-Pecos and Edwards Plateau 12 Southern New Mexico 5 280 –12.0 13 Northern Louisiana 8 2,025 –4.8 *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 2017 • Federal Reserve Bank of Dallas 3 Figure 3 Figure 2 Real Cash Rents Real Land Values 2016 dollars per acre 2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 2007 2008 2009 2010 2011 2012 2013 2016 dollars per acre per year Irrigated 120 50 Dryland 100 40 Ranchland 80 Dryland 30 60 20 Ranchland 40 10 0 2014 2015 2016 2017 NOTE: All values have been seasonally adjusted. Real values are created by deflating the nominal values using the implicit price deflator for U.S. gross domestic product. Table 2 2016 dollars per acre per year 140 60 Irrigated 20 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 0 NOTE: All values have been seasonally adjusted. Real values are created by deflating the nominal values using the implicit price deflator for U.S. gross domestic product. Figure 4 Anticipated Farmland Values and Credit Standards Interest Rates by Loan Type Long-term farm real estate Intermediate term Other farm operating Feeder cattle What trend in farmland values do you expect in your area in the next three months? Fixed (average rate, percent) Index Anticipated trend in farmland values* Percent reporting, Q3 2017:Q2 2017:Q3 pUp Stable qDown 7.0 5.3 10.0 85.3 4.7 What change occurred in credit standards for agricultural loans at your bank in the past three months compared with a year earlier?† Credit standards 2017:Q2 2017:Q3 pTightened Same qLoosened 10.9 8.5 10.1 88.4 1.6 Index 50 2016:Q3 5.98 6.07 5.96 5.72 Q4 5.98 6.11 6.03 5.72 2017:Q1 6.19 6.24 6.21 5.95 20 Q2 6.05 6.17 6.05 5.89 10 Q3 6.17 6.30 6.24 5.93 40 Credit standards † 30 0 Anticipated trend in farmland values* –20 Variable (average rate, percent) 4 –10 2016:Q3 5.60 5.63 5.64 5.36 Q4 5.65 5.65 5.63 5.29 2017:Q1 5.73 5.74 5.80 5.47 Q2 5.75 5.81 5.74 5.47 Q3 5.92 5.96 5.95 5.64 –30 –40 –50 2011 2012 2013 2014 2015 2016 2017 *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 2017 • Federal Reserve Bank of Dallas Special Report Commodities modities, peanuts jumped in the rankings, as did poultry. Sorghum 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 back to cotton from sorghum and corn. However, there were scattered reports of more corn acres, especially for insurance coverage. Changes in crops grown over the past two years were largely due to commodity prices and also due to aphids. The survey also asked how recent movements in commodity prices have impacted agricultural and credit conditions, including the types of commodities grown. A number of bankers reported that lower prices for some commodities had caused credit conditions in their region to deteriorate. Some respondents said they are tightening credit conditions, and a couple noted producers will likely have carry-over debt. A few bankers expressed concern that farm incomes will be lower and producers’ cash flows will be tighter. A couple respondents noted that there is some additional hedging and/or contracting being done by producers. 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 again the most widespread response, followed by hay, with more than three-fourths of respondents reporting production of these commodities in their region. However, reports on hay production were less widespread than in 2015—the last time bankers reported on the commodities produced in their region. Corn and cotton production were reported by equal shares, almost 70 percent, of respondents, and while fewer bankers indicated that wheat is produced in their region than in 2015, still more than half noted some wheat production. The prevalence of sorghum production declined slightly from 2015, with just under half of respondents noting some production of sorghum in their region, down from over 60 percent in 2015. The survey asked Eleventh District bankers to rank the top three commodities produced in their lending region. The top five commodities in 2015 remained in the top five again in 2017; however, the rankings changed. Cattle continued to maintain the top position. Cotton and corn traded places, with cotton coming in second. Rounding out the top five were hay and wheat, which also exchanged positions in the rankings. Looking to the importance of production of other com- Eleventh District Agricultural Commodities, 2017 (Percent of respondents reporting production of commodities in their area) Percent 100 90 80 70 60 50 40 30 20 10 he r Ot uit Fr oe s tat les tab Ve ge Po y s rs er Nu Ho g s Eg g Ri ce ult r y s Po nu t rs Pe a s ow e yb ea n Su nfl Oa ts So oa ts iry or g Sh ee p Da es Ho rs hu m n he at So rg W Co tto Co rn y Ha Ca ttl e 0 NOTE: “Other” includes sesame and timber. Agricultural Survey • Third Quarter 2017 • Federal Reserve Bank of Dallas 5 Commodities SPECIAL REPORT Agricultural Commodity Ranking in the Eleventh District (As reported by responding banks, third quarter 2017 and 2015) Ranked No. 1 Ranked No. 2 Ranked No. 3 All Regions Region 1—Northern 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 ’17 ats ry ’15 Cattle ’17 ’15 Cotton ’17 ’15 Corn ’17 ’15 Wheat ’17 ’15 Sorghum ’17 ’15 Wheat ’17 go ult Sh ee p or Po ea yb hu So So rg an Pe ns m s ut at he y W Ha rn Co n tto Co Ca ttl e ’17 ’15 ’17 ’15 ’17 ’15 ’17 ’15 ’17 ’15 ’17 ’15 ’17 ’15 ’17 ’15 ’17 ’15 ’17 ’15 Region 2—Southern High Plains Region 3—Northern 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 ’17 ’15 Cotton ’17 ’15 Cattle ’17 ’15 Corn ’17 ’15 Peanuts ’17 ’15 Sorghum ’17 ’15 Cattle ’17 ’15 Cotton Region 2 6 Agricultural Survey • Third Quarter 2017 • Federal Reserve Bank of Dallas ’17 ’15 Peanuts Hay ’15 Region 4—Southern Low Plains Region 5—Cross Timbers Percent Percent 100 90 80 70 60 50 40 30 20 10 0 100 90 80 70 60 50 40 30 20 10 0 ’17 Cattle ’15 ’17 ’15 Wheat ’17 ’15 Cotton ’17 Hay ’15 ’17 ’15 Cattle ’17 Hay ’15 ’17 ’15 Wheat ’17 ’15 Cotton ’17 ’17 ’15 ’17 ’15 Dairy ’17 ’15 Corn ’17 ’15 Sorghum ’17 ’15 Corn ’17 ’15 Wheat Dairy ’15 NOTE: Region 4 only ranked four commodities. Region 6—North Central Texas Region 7—East 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 ’17 ’15 Cattle ’17 ’15 Corn ’17 ’15 Wheat ’17 ’15 Cotton ’17 Hay ’15 ’17 ’15 Cattle ’17 ’15 Poultry Region 8—Central Texas Region 9—Coastal 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 ’17 ’15 Cattle ’17 ’15 Hay ’17 Corn ’15 ’17 ’15 Cotton ’17 ’15 Rice ’17 ’15 Cattle ’17 ’15 Cotton Agricultural Survey • Third Quarter 2017 • Federal Reserve Bank of Dallas Hay 7 Commodities SPECIAL REPORT Agricultural Commodity Ranking in the Eleventh District (continued) (As reported by responding banks, third quarter 2017 and 2015) Ranked No. 1 8 Ranked No. 2 Ranked No. 3 Region 10—South 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 ’17 ’15 Cattle ’17 ’15 Cotton ’17 ’15 Corn ’17 ’15 Hay ’17 ’15 Peanuts ’17 ’15 Cattle ’17 ’15 Sheep or goats ’17 Hay ’15 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 ’17 ’15 Cattle ’17 Hay ’15 ’17 ’15 Dairy ’17 ’15 Cotton ’17 ’15 Corn ’17 ’15 Corn ’17 ’15 Soybeans Agricultural Survey • Third Quarter 2017 • Federal Reserve Bank of Dallas ’17 ’15 Cotton ’17 ’15 Cotton ’17 ’15 Cattle ’17 ’15 Wheat ’17 ’15 Rice 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 Region 6 • North Central Texas XXThere has been more cotton and less milo. XXWe had quite a few farmers plant cotton, due to XXThere has not been as much corn and wheat. XXThere has been an increase of commodities prices. XXA switch from grain sorghum to cotton has been made due to the sugarcane aphid. XXThere was an increase in cotton acres. XXThere has been more cotton with less sorghum and corn. Region 2 • Southern High Plains XXMost everyone has grown more cotton due to low commodity prices for grains. XXThere is a definite switch away from grain (mostly corn) to cotton. This is in response to downward trending grain prices and upward trending cotton prices. Cotton also needs less irrigation. Region 3 • Northern Low Plains XXThere has been more cotton, and cattle herds increased. XXPeanut production has declined significantly due to minimum profit margins; wheat production has declined due to negative profits, with former wheat producers searching for alternative crops. XXAs of this year, we have seen producers move more acres to cotton with a few planting dryland corn. Region 4 • Southern Low Plains XXWith cotton not being a covered commodity, many farmers are looking to other crops such as peanuts, wheat or triticale. XXOur region is predominately a cotton-growing region with other crops not really being a vital option unless under irrigation. We really do not have a better option even with low cotton prices and no government support. other than wheat. This is spread between sorghum, corn and soybeans. XXRain three weeks ago ruined a lot of hay, but hopefully it hasn’t ruined the soybeans. XXThere has been less sorghum and more corn and cotton—mostly due to aphids. XXCotton has made a comeback. Region 7 • East Texas XXThere has been less dairy. Region 8 • Central Texas XXWe have seen several closures of table grape operations and wineries in the area, with a slight expansion of a few olive farms. XXThere has been more corn—both dryland and irrigated—because we have a growing demand for corn, and it has had a better price than wheat. XXThere has been continued movement from wool sheep to hair sheep. Region 12 • Southern New Mexico XXMore corn is being grown in the irrigated areas. Region 13 • Northern Louisiana XX2017 shows an increase in cotton acreage due to grain prices. XXA sizable increase in the amount of cotton acreage came from soybean and corn acres normally planted. XXThere were more acres of cotton planted this year than in the past several years. Corn fell into second place with soybean acres getting the most planted acres in the area. XXThere has been more corn, less cotton. Region 9 • Coastal Texas XXCotton increased due to low prices of sorghum. XXThere has been no shift in the crops grown in the area. Rotation is normal, with some shift in acres based on prices and profitability. XXCorn has increased, replacing non-program cotton acres, primarily to take advantage of the safety net provided by Price Loss Coverage and Agricultural Risk Coverage provisions included in the farm bill. Region 11 • Trans-Pecos and Edwards Plateau XXWool sheep are being sold and replaced with hair sheep. Meat goats are still more desirable than Angora goats, even though mohair prices are healthy. Predators are a huge concern as coyotes and hogs continue to expand their territory. Many sheep and goat ranchers are replacing herds with just cattle due to predation. Agricultural Survey • Third Quarter 2017 • Federal Reserve Bank of Dallas 9 SPECIAL REPORT Commodities and Drought Commodities 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 XXCommodity prices affected some of our farmers in being able to pay back their notes, but we have worked through those issues. XXMore favorable economic conditions for cotton have encouraged increased cotton acreage. Region 5 • Cross Timbers XXWe are now farming below breakeven. XXThe decline in cattle prices has hampered profitability; however, they are still above historical norms. Region 6 • North Central Texas XXThe decline in corn prices has moved more acres to cotton. XXCash flows have been tighter; there has been a shift from corn and sorghum to cotton. XXThere are more cotton acres this year as corn prices are not favorable. XXWeak prices for wheat are causing people to Region 2 • Southern High Plains XXCotton prices have ranged from $0.55 to $0.70 per pound over the last two cycles. Average yields at $0.55/lb. are not sufficient for positive earnings, and average yields at $0.70/lb. are at or near breakeven for most dryland producers. In short, with rising input costs, prices need to increase to at least $0.75/lb. for producers to make net income. XXProducers are marketing better, and hedging or consider other crops. XXThere has been more corn storage on farms in the hope of higher prices in the future. Cotton acres have increased. XXIncome is up slightly due to higher cattle prices. XXCorn and wheat prices were low, but yields were good. Region 7 • East Texas contracting. Crop insurance has also been utilized better. XXThere has been increased profit for cattle ranch- XXLower corn and milo prices have reduced the XXThe price of cattle seems to have moved down number of acres planted. ers. after moving up slightly earlier this year. Region 3 • Northern Low Plains XXDue to input costs and lower commodity prices, cotton acres have increased. XXProducers are limited to alternative crops due XXAll producers have experienced less net income either due to lower prices received for their commodity or increased expenses. Region 8 • Central Texas to weather patterns, the growing season and soil types. XXPricing has forced more farmers and cattle rais- XXLower commodity prices make positive cash XXIt seems that some cattle operations are not ex- flow projections harder to obtain. Our area is not suited to a big variety of commodities because of soil type, water availability and climate. XXWith the steady prices of cotton, many producers are moving acres out of wheat and into cotton. Region 4 • Southern Low Plains ers to hedge a larger percentage. panding until we get some price stabilization, with some hay and corn growers anticipating cutting back on acreage as well. Region 9 • Coastal Texas XXLower grain prices have impacted crop mix XXRecent price movements have been discouraging and frustrating. Although the area has some excellent irrigated production potential at this time, we anticipate the majority of producers will once again have some operating and term debt carryover. Region 11 • Trans-Pecos and Edwards Plateau XXDecreasing cotton prices and increasing farm expenses have tightened credit in our area. XXCattle and sheep and goat prices have a direct impact on the credit conditions in our region, and the recent slump (over the past couple of years) has impacted cattle income on all of our producers. However, in the past six months or so, cattle prices strengthened somewhat and returned to a level which works more favorably for all producers in our area. Sheep and goat prices have stayed pretty strong. Good early-year rains produced a good hay crop in our area, and hay is still fairly plentiful, compared to the past three or four years which saw a shortage of affordable hay (or any hay, for that matter) available. Feed prices, as a general rule, have stayed at high levels continuously and we don’t see any relief to speak of forthcoming in that area. XXCheaper prices have hurt our farmers. Region 12 • Southern New Mexico XXWe have seen some shift from milo to corn on irrigated ground. XXMost commodities in this area are contracted; therefore, prices have not been impacted significantly. Region 13 • Northern Louisiana XXIn 2016–17, cotton increased, corn decreased, grain sorghum decreased, and soybeans decreased. Since 2015, wheat acreage has decreased due to price. XXLower wheat prices have caused a diversifica- XXThe changes in commodity prices have led to tion in plants, resulting in more corn being planted. which in turn impacts input cost. More cotton has been grown which increased the overall cost per acre to the grower. XXCommodity prices staying low and input costs XXCommodity prices have impacted some ag and XXLower grain prices have been the basic reason XXCotton and cattle prices have been lower and XXCredit conditions have deteriorated in general continuing to be high continues to keep a strain on cash flow. have lowered income for the area. 10 credit conditions in the region. Some credits did not do well with the excessive rains in some areas. for row crop producers due to weather issues and commodity prices. Cotton acres have increased due to the commodity price. few acres of corn and more acres of cotton being planted. why there are more cotton acres planted. XXCommodity prices have been a major factor in the number of acres of planted crops. Agricultural Survey • Third Quarter 2017 • Federal Reserve Bank of Dallas Special Report Oil and Gas Prices As part of this quarter’s commodity survey, respondents were asked how the change in oil and gas prices impacted the demand for agricultural credit in their region. Responses on the impact to credit demand varied by region, while a number of respondents commented that lower oil prices reduced input costs for producers. Many bankers noted they have seen slight to no impact on the demand for credit from the change in energy prices. Some did note, though, that producers in their region are able to supplement their income from oilfield-related activity, and that has, in turn, lessened demand for credit. Others indicated that lower oil prices led to tighter operating budgets for producers. QUESTION: Over the past two years, how has the change in oil and gas prices impacted the demand for agricultural credit in your region? Region 1 • Northern High Plains Region 6 • North Central Texas XXThere has been an adverse effect on cash flow XXThere has been very little impact, although as and spending. XXIt has not changed demand for credit but has tightened operating budgets. prices for commodities come down, input prices do not follow suit. XXPrices have actually been down until Hurricane Region 2 • Southern High Plains Harvey; now we expect a substantial impact could be possible due to Hurricane Harvey’s impact. XXThe drop in oil prices has had a negative impact XXNo, however Hurricane Harvey has caused some on grain. However, fuel and fertilizer input costs have been down as well. XXOur farming customers have been very suc- cessful selling water and caliche to the oil patch. This cash flow has offset much of their need for operating credit, and we have witnessed softer loan demand as a consequence. Region 3 • Northern Low Plains short-term problems with extra costs and shortages (perceived or factual). Long-term problems are unknown at this time. XXI don’t believe that oil prices impact ag credit as much as oil prices impact the prices paid for real estate and other purchases. Land prices usually go up in our area when oil is high. XXIt has lowered input costs and lessened operating cost. XXOperating lines have been increased and used more because of the decrease in oil and gas prices. XXOil production does impact the direct credit needs in our area, so in theory, lower petroleum prices should lower fertilizer, chemical and fuel costs, but this does not always correlate directly. Region 4 • Southern Low Plains XXIt has been one of the few small positive items, with farm fuel prices lower and fertilizer costs down. Region 5 • Cross Timbers XXProbably the most significant impact would be to reduce demand for ag real estate purchases. Region 7 • East Texas Region 11 • Trans-Pecos and Edwards Plateau XXIt affects all areas of our economy and causes ranchers to make more profit-based decisions. XXThere has been little impact in our immediate area, as we have few customers with production in our county. Those customers who have production elsewhere have typically been non-borrowing. XXNot really, although a lot of ranchers’ budgets are very tight due to decreased oil and gas income. XXYes. The “weekend farmer or rancher” is not applying as often for credit to buy property and/or livestock at this time. Region 12 • Southern New Mexico XXOil and gas are not seen in our region, so therefore there has been no impact on our ag credits. XXThis has improved profit, which has in turn encouraged growth, increasing demand. Region 8 • Central Texas XXThe additional income to local ranchers has allowed them to pay off much of their debt and allowed them to begin saving substantial funds toward retirement. Region 9 • Coastal Texas XXThere has been no major shift in the demand for ag credit in the region with the changing oil and gas prices. It has changed inputs, and some pricing is affected by competitive synthetic fibers that are competition for cotton. Agricultural Survey • Third Quarter 2017 • Federal Reserve Bank of Dallas 11 DALLASFED 12 Agricultural Survey is compiled from a survey of Eleventh District agricultural bankers, and data have been seasonally adjusted as necessary. Data were collected September 5–13, and 133 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/surveys/agsurvey.aspx, where you may sign up for free email alerts to be automatically notified as soon as the latest survey is released on the web. For questions, contact Amy Jordan, 214–922–5178. Agricultural Survey • Third Quarter 2017 • Federal Agricultural Reserve Survey Bank• of Third Dallas Quarter 2017 • Federal Reserve Bank of Dallas