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Federal Reserve Bank of Dallas FARM and RANCH BULLETIN December 1971 FARM LENDING SHOWS SLIGHT INCREASE IN DISTRICT STATES Total institutional lending to farmers and ranchers in the five states of the Eleventh Federal Reserve District was nearly 8 percent greater at the begin ning of 1971 than a year earlier. Total institutional credit outstanding on that date was nearly $5 bil lion. The non-real-estate portion increased 6 per cent in 1970, reaching $2.3 billion. The real estate debt was up 9 percent to $2.6 billion. Commercial banks remained the major source of institutional non-real-estate credit with a slight in crease to about $1.6 billion in loans outstanding. This figure represents 68 percent of the total, the same as last year. However, production credit as sociations (PCA’s) expanded their share from 26 percent in 1970 to 27 percent. While both banks and PCA’s increased lending, the Farmers Home Administration had an absolute drop in non-realestate lending and the FHA share of the market declined from 6 percent to 5 percent. In farm real estate lending, insurance companies remained the largest source of institutional credit. But from January 1,1970, the total amount of loans held by these companies had declined 3 percent, and their share of the market was down from 47 percent to 42 percent. Together, federal land banks increased their portfolios 6 percent in 1970, while commercial banks had a 3-percent increase. The most dramatic change was in the FHA’s real estate lending. At the start of this year, the FHA had more than $213 million in farm real estate loans, up from just $26 million in 1970. This sevenfold expansion resulted from increased funding of the program and emergency loans due to the drouth that plagued District states last year. However, the FHA remained the smallest institutional lender and, at the beginning of this year, held only 9 per cent of the total loans outstanding. Changes in the volume of agricultural loans varied widely from state to state. Arizona showed a slight decline in non-real-estate credit, while Oklahoma had a 17-percent increase. For real estate loans, Arizona again had the smallest change— an increase of 4 percent— while New Mexico posted a 14-percent increase. Institutional agricultural lending in the District states in 1970 lagged behind the national pace for INSTITUTIONAL LENDERS’ SHARES OF FARM CREDIT MARKET F IV E S O U T H W E S T E R N ST A T E S 1 0% 21% F H A____ P C A’s m r5r7T FHA 8% 8% 27% IN S U R A N C E 4 2 % C O M P A N IE S 49% ___ , -------------69% BANKS 68% F L B ’s 33% BANKS 10% 1 96 1 1 97 1 N O N -R E A L -E S T A T E 1961 35% 15% 1971 REAL ES TA TE SOURCE: A m e r i c a n B a n k e r s A s s o c ia tio n FARM REAL ESTATE LOANS HELD BY PRINCIPAL LENDERS, JANUARY 1, 1971 Area and lender Amount held (Thousand dollars) ARIZONA $7,079 Banks ..................... 36,633 FLB’s ...................... Life insurance 106,334 companies . . . . 8,782 FHA ........................ 158,828 T o t a l................... LOUISIANA 79,734 Banks ..................... 154,935 FLB’s ..................... Life insurance 139,351 companies . . . . 25,885 FHA ........................ 399,905 T o t a l................... NEW MEXICO 10,605 Banks ..................... 62,164 FLB’s ...................... Life insurance 83,397 companies . . . . 17,360 FHA ........................ 173,526 T o t a l................... OKLAHOMA 97,386 Banks ..................... 127,590 FLB’s ..................... Life insurance 169,808 c o m p a n ie s ......... FHA ........................ 59,415 454,199 T o t a l................... TEXAS 193,843 Banks ..................... 531,134 FLB’s ..................... Life insurance 590,948 c o m p a n ie s ........ 101,877 FHA ........................ T o t a l................... . 1,417,802 FIVE STATES 388,647 B a n k s ..................... FLB’s ...................... 912,456 Life insurance c o m p a n ie s ........ . . 1,089,838 FHA ........................ 213,319 Total ................... . $2,604,260 1. Less than one-half of 1 percent SOURCE: American Bankers Association Percent of area total 4% 23 NON-REAL-ESTATE FARM LOANS HELD BY PRINCIPAL LENDERS, JANUARY 1, 1971 Percent change Jan. 1, 1970 -20% 1 67 6 100 O 578 4 20 39 13 12 35 6 100 O 467 13 6 36 23 6 48 10 100 O 1,172 14 21 28 3 1 38 13 100 -3 879 13 14 37 -1 6 42 7 100 -4 687 7 15 35 3 6 42 8 100% -3 713 9% Percent of Area and lender Amount held (Thousand dollars) ARIZONA B a n k s ..................... . . $220,786 PCA’s ..................... 18,395 FHA ........................ 4,191 Total ............... . . . 243,372 LOUISIANA 74,389 Banks ................. 64,283 PCA’s ...................... FHA ........................ 17,170 T o t a l................... 155,842 NEW MEXICO Banks ..................... 84,761 PCA’s ...................... 56,578 FHA ........................ 7,528 T o t a l................... 148,867 OKLAHOMA B a n k s ...................... 373,131 152,400 PCA’s ..................... FHA ........................ 23,097 548,628 T o t a l................... TEXAS B a n k s ...................... 817,476 PCA’s ...................... 337,653 FHA ........................ 71,979 Total ................... . . 1,227,108 FIVE STATES B a n k s ...................... . . 1,570,543 PCA’s ...................... 629,309 FHA ........................ 123,965 T o t a l................... . $2,323,817 total Percent change from Jan. 1, 1970 90% 8 2 100 -2 % 17 18 48 41 11 100 () 1 1 1 57 38 5 100 5 4 -4 4 68 28 4 100 18 14 11 17 66 28 6 100 1 12 -8 3 68 27 5 100% 5 11 -3 6% C) 1. Less than one-half of 1 percent SOURCE: American Bankers Association all lenders except the FHA. Nationally, banks in creased agricultural lending by 8 percent. In states of the District, they showed an increase of only 4 percent. PCA lending was up 17 percent nation wide but only 11 percent in District states. And loans of federal land banks showed a 7-percent in crease nationally, while the rate for District states was 6 percent. Insurance companies cut back 2 percent in the nation but 3 percent in District states. The rates of growth for all institutional lenders in the District except the FHA not only were below the national levels but were generally slower than the District averages for other recent years. This can be attributed largely to the drouth and to high interest rates that caused many farm ers and ranchers to postpone borrowing in 1970. Because of the drouth and other uncertainties in the District this year, southwestern farmers and ranchers have continued to take fairly conservative postures toward credit. Bank non-real-estate lend ing in the five states of the District increased dur ing the first six months of 1971 at close to the na tional rate of 8 percent. However, PCA loans in the District during the first nine months increased 10 percent, while the national rate of increase was 15 percent. For the year ended September 30, the Houston Federal Land Bank had increased its total amount of loans outstanding 8 percent over a year earlier; the amount for the total system was up 9.4 percent. But during September, both District PCA’s and the Houston Federal Land Bank had greater activity than the nation as a whole. While no con clusive data are available, preliminary indications are that insurance companies sharply increased agri cultural lending this year. FHA loans have con tinued to increase due to extensive emergency pro grams and heavier funding of real estate programs. mand and smaller stocks. Feed grain prices, on the other hand, have come under downward pressure due to a record U.S. crop and substantial increases in world production and stocks. As a result, the cotton program shows minimum change from last year while the feed grain program reflects substan tial changes in set-aside requirements and payments. The cotton program Provisions of the 1972 upland cotton program closely follow those of the past year. The Govern ment program provides for a national base acreage allotment of 11.5 million acres, a national average loan rate of 19.5 cents a pound, a preliminary setaside payment rate of 15 cents a pound, and a setaside requirement of 20 percent of a farm’s base acreage allotment. This means that any cotton grower signing up and complying with the set-aside and conserving base requirements for his farm can plant the acreage he chooses after studying the out look for supply, demand, prices, and other factors, including alternative crops. The 1972 national marketing quota for extra-long staple cotton has been set at 115,800 bales. The allotment of 117,763 acres is virtually unchanged from last year. This national target is expected to meet all domestic and export requirements for the 1972-73 marketing year and to rebuild the dwin dling carryover stocks to a more desirable level. MARKET INFLUENCES COTTON, FEED GRAIN PROGRAMS The feed grain program Recently announced cotton and feed grain pro grams for 1972 are in line with expectations based on current prices, production, and stocks. Both programs are aimed at maintaining farm incomes, meeting demand, and holding carryover stocks within acceptable limits. Cotton prices have held up throughout 1971, bolstered by strong world de Because of this year’s large grain crop, the new feed grain program raises the feed grain set-aside 5 percent (to 25 percent of the base), establishes higher set-aside payments (40 cents for corn, 38 cents for sorghum, and 32 cents for barley), and brings barley into the feed grain program. Along with several other adjustments, the new program offers incentives for farmers to set aside additional acreage beyond the 25 percent. The program is de signed to more than double the 18 million acres of feed grain set aside this year. Farmers will have greater flexibility in choosing how much acreage they will plant and to what crops they plant. Al though the national average loan rates for grain sorghum and barley will be slightly higher than in 1971, rates for corn, oats, and rye will not change. FARM POPULATION HITS NEW LOW The nation’s farm population dipped below the 10 million mark in 1970 for the first time since data were first collected in 1920. Government fig ures place the 1970 farm population at about 9,712,000— 6 percent less than a year before and 38 percent less than ten years before. Farm res idents made up only 5 percent of the population, compared with 9 percent in 1960. FARM POPULATION DROPS IN ABSOLUTE NUMBERS AND AS PERCENTAGE OF TOTAL (Thousand persons) Year Total resident population 1970 .............................=203,212 1969 ............................ 200,810 1968 198,833 1967 ............................ 196.894 1966 ............................ 194,972 1965 ............................ 192,920 1964 ........ 190,454 1963 ............................ 187,795 1962 185,073 1961 182,282 1960________________ =179,323 1. April-centered annual averages 2. Census count Farm population Number Percent of of total persons1 population 9,712 10,307 10,454 10,875 11,595 12.363 12,954 13,367 14,313 14,803 15,635 4.8% 5.1 5.3 5.5 5.9 6.4 6.8 7.1 7.7 8.1 8.7 The age structure of the farm population is b e coming more heavily weighted toward older adults. An apparent out-migration of young farm adults of childbearing age over the past ten years is indicated by an 8-percent decrease in the proportion of farm residents made up of children under 14 years of age. The proportion of adults 55 years old and older rose from 18 percent to 24 percent in the same period. Of the 4.3 million people in the 1970 farm resident labor force, 54 percent were employed solely or pri marily in agriculture and 44 percent had off-farm employment— chiefly in wage and salary positions. At the start of the 1960’s, the proportions of em ployed workers were 64 percent in agriculture and 33 percent in nonagricultural industries. The 1970 proportion of employed farm residents engaged in nonagricultural industries was 10 percent higher in the South than in the rest of the nation, with 50 percent of the employed southern farm residents working in nonfarm industries. This was apparently associated with the large number of low-income farms in the South, where many farm residents sought supplemental income in nonfarm work. Of the 2.3 million farm residents employed in agriculture in 1970, 60 percent were self-employed, 23 percent worked as unpaid family members, and the remaining 17 percent were wage and salary workers. However, about three-fourths of farm women were classified as unpaid family workers. Farm residents comprised 63 percent of all per sons employed in agriculture in 1970, a drop of 12 percent from 1960. The accompanying increase in the proportion of all agricultural workers that were nonfarm residents reflects an increasing tendency for people employed in agriculture to commute rather than live on the farm. Of the total agricul tural employment of 3.7 million, about 1.4 million workers were not farm residents. Prepared by Dale L. Stansbury
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