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Quarterly Survey of Agricultural Credit Conditions in the Eleventh Federal Reserve District
Second Quarter 2009
Federal Reserve Bank of Dallas
Agricultural lenders responding to the second quarter survey report that persistent drought conditions have increased strain on the Eleventh District agricultural community. Ranchers in the driest parts of the District are liquidating their cattle herds at a loss because of limited water and forage availability and high supplemental feed costs. The wheat harvest has been poor and most crops are suffering from heat and lack of moisture.
The dry spell has affected credit conditions in the District. A higher share of bankers report lower incidence of loan repayment, increased collateral requirements and greater demand for loan renewals compared with last year. Moreover, there is growing concern among respondents about the future viability of some producers, especially dairy farmers who have suffered large losses due to record-low milk prices.
Farmland sales continue to weaken, and a third of respondents expect a decline in demand for farm real-estate loans over the next three months. Sluggish sales activity has slowed land price appreciation. Dryland values held steady while irrigated land prices fell in the second quarter. Four-fifths of respondents expect farmland prices to remain stable in the near-term, while only 2.6 percent expect increases—the lowest share since 1991.
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
A cooler than normal early growing season has the cotton crop off to a poor start. The wheat harvest is wrapping up with very poor yields due to dry growing conditions. Dairymen and cattle feeders continue to face extremely difficult economics. One bright spot is the opportunity corn growers have to be profitable in 2009.
Increased FDIC assessments will probably drive up interest rates on loans.
Region 2—Southern High Plains
Conservation Reserve Program contracts that are expiring in 2009 and are not being renewed will have a negative impact on farm real estate values.
Region 3—Northern Low Plains
Most of the cotton has been planted. Current moisture conditions are good.
Rains have been intermittent. Pasture conditions are generally good. There is a lot of real estate on the market but very little is selling.
Region 4—Southern Low Plains
We remain in a drought. Recent rains will enable farmers to plant, but rainfall levels are still 2 inches below normal.
Our farmers and ranchers are suffering from the drought as well as high input costs. Only the big farmers remain in business; the family farmer does not have enough acreage to spread the fixed costs over.
Region 5—Cross Timbers
We have had very few ag land sales since the first of the year. Very little wheat was harvested this year, and what was harvested averaged 15–18 bushels per acre.
We have had decent rains over most of the area in recent weeks, but some lakes and ponds are still low. Pastures are in fairly good shape. Hay production is good so far, with lower fertilizer and fuel costs helping. Cattle prices are softening. The dairy business is the worst it has ever been due to prolonged record-low milk prices. Several dairies in the area have gone out of business, and more will likely follow in the next few months.
We have had very little rain in the past 90 days. Hay is planted, but it needs rain to make. Stock tanks are either half full or completely dry.
Region 6—North Central Texas
The drought returned quickly and there is no rain in the forecast. Pastures are already stressed from the heat. Grain and corn yields will be lower than average.
We are hoping crop insurance companies are ready.
The area is in need of rainfall. Early rains have helped pastures and the hay crop, which is being cut at the present time.
One hundred thirteen acres with a nice home recently sold for $2,330 per acre.
Dry weather is hurting crops and pastures.
Region 8—Central Texas
Dry weather patterns are keeping the grass short. Some producers will have to begin feeding again. Operational expenses remain elevated.
Rains have helped out in most areas, but the continued heat and lack of rain so far in June is not encouraging. Most people have just completed their first cutting of hay with weak to fair yields. The biggest concern is cattle prices trending downwards. This will not help the cash-strapped producers.
Nonirrigated crops are being hurt by dry conditions. Hay yields may be low again.
To sum it up in one word—DROUGHT! We anticipate large sales or liquidation of cattle herds. We have not had an appreciable amount of hay since 2007. Cattle prices are sinking fast.
Mixed weather, heavy rain and drought, has left the dryland cotton crop in huge peril. Crop estimates are too high and are pressuring cotton prices down. The late freeze lowered wheat crop yields by 65–80 percent.
Region 11—Trans-Pecos and Edwards Plateau
Recent heavy rains have led to good pasture conditions. High feed prices and economic uncertainty will likely cause producers to take a “wait and see” approach. However, the gradual increase of oil and gas prices may lead to an increase in herd sizes.
After receiving good rains in April and early May, South Central Texas (the Edwards Plateau) is now back in hot and dry conditions. July never promises much in the way of moisture, and so far it looks like it will be a hot and dry summer. Livestock prices are still pretty good, but will be very much impacted by the weather.
Region 12—Southern New Mexico
The dairy crisis is beginning to be a major concern. Most dairy farmers finance with farm credit. Current conditions are beginning to affect the farmers’ ability to purchase land and feed inputs, which is having an impact on our local providers.
| 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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