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Quarterly Survey of Agricultural Credit Conditions in the Eleventh Federal Reserve District
First Quarter 2009
Federal Reserve Bank of Dallas
The first quarter survey found continued apprehension about farming and ranching conditions in the Eleventh District agricultural community. Despite spring rains, the entire region is still in drought. Bankers reported that many ranchers are unable to reach a break-even point, which is forcing livestock liquidations. The dairy industry is suffering from large losses as a result of high input costs and low milk prices. Farmers in some areas planted crops later than usual due to poor soil moisture levels. The outlook for crop production remains bleak.
Bankers report that a poor production environment coupled with volatile commodity prices and high feed costs continue to impact lending activity. Nearly a fourth of those responding noted rising requests for loan extensions, up from just 6 percent a year ago. A third of respondents noted softening loan demand, and a few cited the difficult economic climate and poor agricultural conditions as factors.
Land values remain stable, but sales have slowed. Cash rents were little changed from last quarter, with the exception of lease rates for irrigated land, which have increased as a result of the widespread drought.
11th District Agricultural Land Values
Quarterly Comments
District bankers were asked for additional comments concerning agricultural land values and credit conditions. These comments have been edited.
Region 1—Northern High Plains
Dry conditions persist in our area, and the outlook for any dryland crops is bleak for the summer of 2009. Cattle feeding and the dairy industry are both suffering from large losses. We are operating in survival mode at best. Inflationary fears are bringing about some optimism with regard to future commodity prices.
Cattle feeders are still suffering large losses. Pastureland and dryland wheat crops need moisture soon.
Dry conditions continue. The wheat crop will not be very good, with anticipated yields off 40 to 50 percent.
We really need moisture.
Region 4—Southern Low Plains
Current economic conditions are slowly driving land prices down. Any acreage that is for sale is remaining on the market longer before being sold.
Region 5—Cross Timbers
After five months, we finally received 2 inches of rain. Unfortunately, it was too late for wheat grazing or for a wheat crop. Stock tanks and lakes are at 50 percent of their normal levels.
Region 6—North Central Texas
The corn crop was planted (very timely) in dry soil. We have recently had 2.5 to 3 inches of rain. Pastures have finally greened up. However, ranchers are out of hay, and without more rainfall, they will have to liquidate their herds.
Two hundred acres of land was recently sold just outside the city limits. The final price was about $3,375. The purchase was possibly made for the development of smaller home sites.
Land values are increasing in our area. Credit conditions remain stable.
Region 7—East Texas
Ag prices remain unstable, reflecting the current economic conditions. The outlook locally appears good for crop yields, but prices are too unstable for farmers to make definite plans. Our area has received moisture, which will help with crop yields, but additional rain will be needed before harvest. Farmers appear to have an optimistic attitude and are continuing to plant as planned. Crops are becoming more diversified, with more corn acreage than in past years.
We are slowly reducing our exposure to any and all agriculture-related loans.
Dairy farmers are currently struggling due to high input costs and low milk prices. Some loans have been extended and others are interest only.
Region 8—Central Texas
Many of our long-term ranching enterprises have decided to cull their herds and plan to sell the entire base herd if adequate moisture is not available by June 2009. Our cotton, milo and corn producers have planted some crops, but they planted later than normal. The corn that has come up is thin and unhealthy due to lack of rainfall and high winds.
We finally received rain. Row crops were planted, albeit three weeks later. Farmers have planted less cotton and more grain for the 2009 crop. The local water system is maxed out. It will not furnish water for row crops this year.
We received decent rainfall, which is helping ranchers hold on to their herds. The current economic conditions are not helping producers with planning for the future. As a result, not much is happening in our market.
Economic and drought conditions are deeply affecting our ranching customers. Operating costs (feed, fuel, labor) are up, while cattle prices are down. Pasture conditions are deteriorating because of the drought, and cattle are declining both in number and quality. Ranchers are not seeking credit with us because, we believe, they are afraid to make any moves in this economy. We are experiencing very difficult conditions in this area.
Region 9—Coastal Texas
Declining cattle prices have increased borrowers’ requests to restructure and extend payments.
Region 11—Trans Pecos and Edwards Plateau
The Hill Country recently received a soaking rain, which was the first of its kind in over six months. Though the rain was not a drought breaker, it helped to replace some soil moisture. With any luck at all, more rain in the next few weeks will help bring on spring growth. The general economy has slowed, but livestock prices are up slightly.
Recent rains have improved pasture conditions, but the long, sustained drought combined with high feed prices will likely cause ranchers to downsize their herds. Our ranchers have depended on oil and gas income to supplement any losses in ranching. With falling oil and gas prices, there will not likely be a chance for expansion in the near future.
| 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 Public Affairs 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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