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Quarterly Survey of Agricultural Credit Conditions in the Eleventh Federal Reserve District
Third Quarter 2009
Federal Reserve Bank of Dallas
| NOTE: For this quarter's survey, district bankers were asked to rank the top three commodities produced in their region, highlight any changes in the types of crops grown and comment on the impact of the recent drought on growing and credit conditions. See special reports: commodities and drought. |
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Bankers responding to the third-quarter survey reported that the ongoing drought continues to manifest challenges for the Eleventh District agricultural community. Poor grazing conditions and water shortages have forced cattle producers to liquidate much of their herds. The lack of moisture has also resulted in poor crop yields for many dryland farmers. On a positive note, recent rains have somewhat improved growing conditions in several regions of the district.
District bankers are feeling the pinch as well. Thirty-eight percent of those responding noted a decline in loan demand. One-fourth of respondents reported falling loan repayment rates, up from 11 percent a year earlier. Additionally, a higher share of bankers said they anticipate making fewer crop storage, feeder cattle, operating and dairy loans next quarter compared with year-ago levels.
Farmland prices continued to weaken in the third quarter. Dryland and irrigated land values edged down, and 26 percent of respondents said they expect farmland values to fall over the next three months. This is an increase from last quarter, when only 17 percent expected a decline in land prices.
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
2009 is shaping up to be an average year for crop production. Cattle prices have stabilized. Milk prices appear to have bottomed out, and improvements will now begin to lessen dairy losses.
Region 3—Northern Low Plains
Ag land values in this area have been pushed upward as a result of the potential for income from hunting leases. This is to the detriment of some and the benefit of others.
Region 4—Southern Low Plains
Our farmers will lose some ground this year; however, they are still “riding the coat tails” of five good crop yields from the last six years.
Region 5—Cross Timbers
Land sales have slowed, but prices have remained stable. Most transactions (75 to 80 percent) are completed with cash or a 1031 tax-deferred exchange.
It is extremely dry in our area. Ranchers are selling cattle because of the lack of stock-tank water and hay.
Region 6—North Central Texas
Producers are realizing that this drought, which started in May 2008 and has continued through September 2009, may rival the legendary drought of the 1950s. Cattle herd liquidation is in high gear. Crop yields are less than 50 percent of original projections, and farmers are still waiting for 2008 USDA Farm Service Agency (FSA) government disaster payments.
Ag producers are going to need disaster money!
The drought has had a devastating effect on our local farmers, causing a very poor harvest for our corn farmers. Local cattle raisers are running short on water, and the hay harvest has been very limited. Many are selling off part of their herds, with a few completely liquidating. A late freeze diminished the wheat harvest.
This area has received good rainfall, and pastures are improving. Cattle prices need to improve.
There have not been any recent land sales in the area.
Please send rain! Our farm ponds are drying up, and we have no hay in one area. Cattle are being sold as a result of these conditions.
Region 7—East Texas
Dairy farmers continue to struggle, even with interest-only loans and extended payment plans. This is the worst cycle for dairy farmers, in my experience, reaching back to the 1970s. This problem is also affecting support businesses that deal with dairy farmers.
Region 8—Central Texas
Recent rains have allowed for grass going into the winter. Winter forage is being planted for the first time in three years. The grains market is increasing, but the seasonal cattle market is decreasing, which is untimely.
We have still not had rains that would help our area’s ag customers. The local cattle auction barn set new records for the number of cattle that were sold in August. Pasture conditions continue to deteriorate, and cattle are starting to show signs of stress as well. We have seen little or no activity regarding real estate pricing over the past few months. Though some listings have been reduced, there are still no buyers.
The drought has resulted in a spotty dryland cotton crop. Low milk prices continue to force dairies out of operation.
Rice farmers have been notified by LCRA (Lower Colorado River Authority) that water will not be available if we do not receive adequate rainfall to supply the lakes in the next five months.
Region 11—Trans-Pecos and Edwards Plateau
Though dry conditions were the norm for South Texas and the south central Texas area this summer, some areas of the Edwards Plateau and West Texas have actually received timely and unusual rainfall. Range conditions in Kerr, Mason, Gillespie, Kimble, Menard, Sutton and Crockett counties are actually better than they were last year. Livestock prices have held pretty well despite lots of selloff in South Texas due to the drought.
Pasture conditions are fair to good with good grass coverage. Recent moisture has been intermittent and rather light. Recreational ag property sales are slow, with real estate sales for true ag operation being almost nonexistent. Deer hunting leasing, which has been good for several years, has seen a pullback, with some places going unleased to date.
Region 12—Southern New Mexico
Pasture and range conditions are extremely dry for most of New Mexico. The chili crop is excellent.
| 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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