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Second Quarter 2007
Federal Reserve Bank of Dallas
The second-quarter agricultural survey revealed renewed optimism in the Eleventh District agricultural community. Above-average rainfall alleviated drought conditions that had prevailed in the district since late 2005 and significantly improved crop yields—especially for wheat—boosting the outlook for 2007. Range and pasture growth remained favorable, nearly eliminating the need for supplemental feeding and cattle herd reduction. Most respondents indicated that the cotton crop was making good progress even as heavy rainfall hampered cotton planting in the Plains. High prices for cattle, wheat, corn and milo continued to benefit district producers, but elevated fuel and feed costs were still a concern.
Here are additional details from the survey:
- Favorable weather and growing conditions have positively impacted loan repayment rates, reducing the need for loan renewals and extensions. Eighty-seven percent of survey respondents cited stable loan repayment rates, and nearly 90 percent indicated lower or steady demand for loan renewals and extensions.
- Overall demand for loans seems to be rising. Twenty-two percent of respondents reported greater demand for loans, up from 15.4 percent a year earlier.
- The increased sale of farmland for recreational use has reduced the availability of land for agricultural production. Consequently, the percentage of bankers anticipating an increase in farm real estate loan volume over the next three months fell from 14.4 percent to 8.7 percent over the quarter.
- Healthy pasture conditions and plentiful hay supplies have increased demand for feeder cattle loans. Eighty-five percent of bankers responding to the survey reported greater or stable feeder cattle loan volumes, up from 64.7 percent a year ago
11th District Agricultural Land Values
Second Quarter 2007
Comments
District bankers were asked for
any additional comments concerning agricultural land
values or credit conditions. These comments have been
edited.
Region 1—Northern High Plains
Moisture has continued to benefit wheat, which is anticipated to be a bumper crop. Good yields and high wheat prices will benefit area farmers. Conversely, these wet conditions and cooler temperatures have been detrimental to cotton during the early growing season.
We finally have a year with some rain.
Region 2—Southern High Plains
We have received a lot of rainfall this year, almost 10 inches above normal. Now we need sun and heat. The farmers need the price of cotton to increase. Hopefully, the new farm bill will benefit our producers.
Spring rains have resulted in excellent moisture conditions, but the rains have restricted planting efforts and delayed the initial establishment of the cotton crop. Most of the area has now been planted with cotton, which is looking fair to good at this time.
Region 3—Northern Low Plains
The new farm bill will be critical to the success or demise of agriculture.
Wheat yields are excellent. Most cotton is to a stand, with the exception of areas that have received heavy rains. Most of this has been replanted, and some of the new growth is to a stand. Moisture conditions continue to be extremely good.
All ranchland that is being sold is being sold for recreational use. A lot of it is being taken out of production. Local buyers can no longer afford to buy ranchland.
Region 4—Southern Low Plains
The cotton crop looks good. Wheat and milo prices will give a boost to our farmers.
The cost of ranchland and the associated increase in cash leases are due to the Fort Worth and Dallas influence on land values and recreational hunting on the land.
Real estate sales for agricultural purposes are almost nonexistent.
The wheat crop is excellent. Cotton is up to a stand, but it is later than usual.
Region 5—Cross Timbers
Ranchland is being purchased primarily for recreational purposes, but much of it continues to be in agricultural production.
We have had good spring rains. Cattle prices are currently good, and the wheat crop is excellent.
We have received more than 20 inches of rain in the past 60 days, following the driest winter and early spring on record. Stock tanks are full, and wheat harvest is in full swing. Grass is abundant!
Region 6—North Central Texas
The past 60 to 90 days have been very wet. The drought is over. We have several farmers and cattle producers who can’t get their wheat harvested or their hay baled. There should be two or possibly three good cuttings this year. We have gone from one extreme to the other. Cattle prices have stayed high, but so have gas and diesel prices.
We have had good rainfall. Cattle prices remain good.
Region 8—Central Texas
Sales of smaller land tracts remain strong; sales on larger tracts are slowing down. Most real estate agents report fewer new listings. The rains have made everything green and, as a result, the cattle fat. There is a lot of hay being made between rain showers. Sale barn runs are slowing down due to the excellent pasture conditions. Cattle sales are not expected to pick up until late July.
Ag credit conditions are good. Prices are decent, and we have had adequate moisture. The downside is that real estate values are escalating to the point of pricing ag producers out of the market.
Region 9—Coastal Texas
Competition from the Farm Credit System (FCS) has had a dramatic effect on commercial banks’ ability to grow agricultural real estate loans, despite the fact that demand for these loans has been strong during the past several years. FCS member associations are taking prime borrowers. Their access to low-cost FCS bond markets and tax-free interest income on real estate loans puts commercial banks at a distinct disadvantage.
Region 11—Trans-Pecos and Edwards Plateau
The region has received good spring and early summer moisture for strong forage growth. Higher feed and fuel costs are still a big concern for livestock producers as both continue to cut deep into their profitability. The excellent early moisture has ag operators optimistic. Recreational real estate purchases continue to take agricultural land out of production and increase land values.
Farmland values are up due to recreational use of ranchland.
Region 12—Southern New Mexico
We continue to see interest in land, purchased primarily by out-of-state buyers who are mostly from Texas.
| Quarterly
Survey of Agricultural Credit Conditions
is compiled from a survey of Eleventh
District agricultural bankers. This publication
is prepared by the Federal Reserve Bank
of Dallas and is available without charge
by writing to the Research Department,
Federal Reserve Bank of Dallas, P.O. Box
655906, Dallas, TX 75265-5906, or by telephoning
(214) 922-5254.
For questions regarding
information in the release, contact Laila
Assanie, (214) 922-5191. |
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