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Agricultural Survey

Second Quarter 2017

Survey Highlights

Bankers responding to the second-quarter survey noted moisture conditions are generally good, although there were some scattered reports of very dry conditions across a couple of regions. Reports on wheat yields varied by region, but prices remained low. Cotton and corn crops were planted this quarter and are in good condition. Respondents noted that cattle and other livestock prices stabilized or improved slightly.

Demand for agricultural loans overall decreased for a seventh consecutive quarter. Loan renewals and extensions continued to increase, albeit at a slower pace. The rate of loan repayment stabilized after declining for two years. Overall, the volume of non-real-estate farm loans was lower than a year ago, as was the volume of farm real estate loans. The volume of operating loans increased; all other loan categories’ volumes fell year over year this quarter (Figure 1).

Real district ranchland and dryland values increased this quarter, while irrigated cropland values were largely unchanged on balance. Dryland values rose 2.1 percent from last quarter, while ranchland values increased a slight 0.4 percent (Figure 2). According to bankers who responded in both this quarter and second quarter 2016, nominal district land values all increased year over year (Table 1).

After seven consecutive negative quarters, the anticipated trend in the farmland values index turned positive this quarter, suggesting respondents expect farmland values to trend up in the upcoming months. The credit standards index indicated continued tightening of standards (Figure 4).

Agricultural Survey is compiled from a survey of Eleventh District agricultural bankers, and data have been seasonally adjusted as necessary. Data were collected June 6–14, and 129 bankers responded to the survey.

Quarterly Comments

Regions of the Eleventh
Federal Reserve District

District bankers were asked for additional comments concerning agricultural land values and credit conditions. These comments have been edited for publication.

Region 1—Northern High Plains

  • Demand for irrigated farmland is strong with increasing prices primarily based upon limited acres on the market. Moisture conditions are below normal, and high temperatures are stressing summer crops.
  • Significantly higher cotton acres were planted compared to previous years. These acres came at the expense of corn acres. Cattle values are stabilizing, so at least the losses may slow down in that sector.
  • The outlook for dryland crops started out the year on a favorable note due to late winter and early spring rains. However, since then, things look very dicey for dryland crops due to lack of rainfall at planting time.

Region 2—Southern High Plains

  • Recent rains have helped our area. Hopefully prices will continue to hold for all ag-related commodities.
  • Most crops are planted, irrigated and are up and growing. Some dryland spots are up, and others have been planted to meet the insurance deadline. Underground moisture seems to be good; we just need a rain to get the rest of the crop up. We have had spotty rains that have been very beneficial, but other areas still need moisture.

Region 3—Northern Low Plains

  • All stocker cattle had to be shipped early, by April 15, due to early maturing wheat and poor quality. Gains were off the normal average. Wheat harvest is over, and the price is below breakeven. Crop insurance will have to make up the difference. Cattle prices are the only bright spot in our area.

Region 5—Cross Timbers

  • We have continued good moisture conditions—generally the third year in a row of good rains. Area lakes and tanks are full or nearly full. Grazing conditions and forage yields are good. There is an abundance of hay carried over after a mild winter. Some producers are planning to just make one cutting of hay instead of two or three as they normally do. Cow-calf producers are benefiting from good prices for yearlings; dairy farmers are doing OK with decent milk prices and cheaper forages and feed.
  • Moisture conditions are good at this time due to recent rains. Cattle prices have improved over the past few months.

Region 6—North Central Texas

  • Wheat yields are average, but low prices—which are worse because of the protein discount—make the crop breakeven for most producers. Corn and cotton crops look fine at this time.
  • Input prices are too high compared to grain prices—something has to change.
  • Farmers in our area have had two bad years in a row, with either too much or too little rain. Calf and cow prices are starting to come back somewhat but may take years to reach their past record highs. Trade with China should help our farmers more than anything besides the weather. We’ve had a wet spring, which should make for a good hay crop in our area.

Region 7—East Texas

  • Cattle prices have slowly increased from breakĀ­even to a profitable level.

Region 8—Central Texas

  • Local real estate markets are driving land values for property in the 10- to 125-acre range. Demand is for hobby and retirement property and will likely increase for the foreseeable future, given projected population growth in the triangle between Houston, Dallas and Austin.
  • Cattle prices have firmed up at higher levels than the previous reporting period. The market appears to have found a bottom—waiting on export numbers and especially the upcoming possible trade deal with China that could be very beneficial to American cattlemen. Recent rains and lower than normal temperatures have kept grasses green and growing. Corn pollination is basically finished, with average yields expected on late corn and above average yields on some early corn. Not much hay is being made at this time due to the heavy carry-over from last year. The real estate market is taking a break at this time as investors and potential owners are taking more time to weigh their options and offering lower prices in some areas, with sellers hanging on for better offers.
  • Cattle pricing is holding up, giving producers adequate returns. Moisture, though spotty, is also adequate; however, not much hay is being baled yet.

Region 9—Coastal Texas

  • Crops and pastures had some dry time during the past 45 days with high heat and winds. Recent rains in past 15 days were very helpful to many of the crops and pastures. Cotton had very good growth during the heat due to having established a good root system. The corn that was planted later had issues with moisture and filling out ears. The early corn filled out well, but there may be concern on bushel weights. Grain sorghum in general is still doing fairly well. Wheat has been harvested with yields in the favorable range but prices still being at less than desirable positions. Cotton prices slipped slightly in the last 60 days; grain prices have made some progress in upward trend. Cattle and pastures had some downturn with the dry times, where additional feeding was taking place. Cattle prices have been on a good upward trend in small jumps. There is still some restocking and replacements being kept in order to keep herd numbers in place to have adequate animal units on leased pasture. Most of the pasture rates have gone up due to increased cattle numbers. This has put some pressure on landowners to lease in order to generate additional income above hunting leases.

Region 11—Trans-Pecos and Edwards Plateau

  • Pastureland is starting to look very stressed with most of the area badly in need of rain. Most operators are reporting that cattle are still holding up in suitable condition.
  • Recent ample rains have given producers in the Edwards Plateau a leg up in preparing for the typical hot, dry summer months. Good soil moisture is key to growing the summer grasses, which will dictate livestock conditions for the next several months. Cattle, sheep and goat prices are all fairly strong at this time, and most of our producers are pretty positive about the year. Predators continue to plague our sheep and goat raisers, but that isn’t likely to change given the amounts of land taken out of production by recreational purchasers.
  • Pasture conditions are very good due to recent rains. Cattle prices have strengthened some, and sheep and goat prices remain good.
  • Recent rains certainly came at the right time to keep pasture conditions good ahead of the coming summer conditions. Overall, most ranchers remain moderately stocked, with some marginally increasing livestock numbers. Sheep and goat prices remain good to very good, with hair sheep continuing to show the most expansion. Increased cattle prices have helped the optimism of producers, though few operators are substantially increasing their cattle numbers. Some did take advantage of the pullback in the cost of replacements, anticipating calf prices will remain somewhat above historic levels.

Region 12—Southern New Mexico

  • Weather variability is impacting cropping patterns in our area. Some have had ample moisture to plant and others seem to be extremely dry. Livestock prices continue to climb, making yearling and cow-calf producers and feeders feel better about projected profit margins. Both irrigated and dryland crop producers are still struggling with budgets and net projected margins. Small grains don’t seem to offer much in the way of positive returns. Corn silage margins are thin but still have some profit margin.
  • Spring rainfall has been spotty, and areas without are becoming exceedingly dry. Forage commodity prices remain lower than 12 months ago. Vertical integration and expansion of dairy farms is impacting non-dairy farmers’ cash receipts significantly.

 

Figures

Figure 1
Farm Lending Trends
What changes occurred in non-real-estate farm loans at your bank in the past three months compared with a year earlier?
  Index Percent reporting, Q2
  2017:Q1 2017:Q2 Greater Same Less
Demand for loans* –5.3 –3.8 12.4 71.4 16.2
Availability of funds* 5.7 7.2 11.6 84.0 4.4
Rate of loan repayment –7.1 –0.8 7.1 84.9 7.9
Loan renewals or extensions 6.3 3.9 11.0 81.9 7.1

Farm Lending Trends

What changes occurred in the volume of farm loans made by your bank in the past three months compared with a year earlier?
  Index Percent reporting, Q2
  2017:Q1 2017:Q2 Greater Same Less
Non-real-estate farm loans –4.7 –7.8 10.1 72.1 17.8
Feeder cattle loans* –18.9 –9.9 7.0 76.1 16.9
Dairy loans* –9.6 –8.2 3.5 84.8 11.7
Crop storage loans* –4.0 –3.4 2.5 91.6 5.9
Operating loans 0.0 4.8 14.4 76.0 9.6
Farm machinery loans* –19.1 –18.3 2.6 76.5 20.9
Farm real estate loans* –17.2 -8.3 10.5 70.7 18.8
*Seasonally adjusted.

NOTE: Survey responses are used to calculate an index for each item by subtracting the percentage of bankers reporting less from the percentage reporting greater. Positive index readings generally indicate an increase, while negative index readings generally indicate a decrease.

Figure 2
Real Land Values

Real Land Values

NOTE: All values have been seasonally adjusted. Real values are created by deflating the nominal values using the implicit price deflator for U.S. gross domestic product.
Figure 3
Real Cash Rents

Real Cash Rents

NOTE: All values have been seasonally adjusted. Real values are created by deflating the nominal values using the implicit price deflator for U.S. gross domestic product.
Figure 4
Anticipated Farmland Values and Credit Standards
What trend in farmland values do you expect in your area in the next three months?
  Index Percent reporting, Q2
Anticipated trend in farmland values* 2017:Q1 2017:Q2 Up Stable Down
-2.8 7.0 11.4 84.2 4.4
What change occurred in credit standards for agricultural loans at your bank in the past three months compared with a year earlier?†
Credit standards 2017:Q1 2017:Q2 Tightened Same Loosened
15.0 10.9 10.9 89.1 0.0

Anticipated Farmland Values and Credit Standards

*Seasonally adjusted.
†Added to survey in second quarter 2011.

NOTE: Survey responses are used to calculate an index for each item by subtracting the percentage of bankers reporting less from the percentage reporting greater. Positive index readings generally indicate an increase, while negative index readings generally indicate a decrease.

Tables

Table 1
Rural Real Estate Values—Second Quarter 2017
    Banks1 Average value2 Percent change in value from previous year3
  Cropland—Dryland  
  District* 102 1,840 4.3
  Texas* 89 1,862 3.8
1 Northern High Plains 13 892 2.5
2 Southern High Plains 13 691 5.4
3 Northern Low Plains* 8 840 3.1
4 Southern Low Plains* 7 1,215 –0.7
5 Cross Timbers 6 1,608 –6.1
6 North Central Texas 14 2,714 4.7
7 East Texas* 6 2,613 6.1
8 Central Texas 9 3,833 1.7
9 Coastal Texas 5 2,570 1.9
10 South Texas n.a. n.a. n.a.
11 Trans-Pecos and Edwards Plateau 6 1,992 27.3
12 Southern New Mexico 4 356 2.7
13 Northern Louisiana 9 2,600 15.5
  Cropland—Irrigated  
  District* 78 2,497 5.3
  Texas* 63 2,212 3.3
1 Northern High Plains 13 2,073 1.9
2 Southern High Plains 13 1,592 4.7
3 Northern Low Plains* 5 1,772 15.8
4 Southern Low Plains 7 1,543 –3.4
5 Cross Timbers n.a. n.a. n.a.
6 North Central Texas 4 3,113 –6.8
7 East Texas 3 3,550 26.0
8 Central Texas 4 3,900 7.8
9 Coastal Texas 3 2,950 2.8
10 South Texas 3 2,883 –1.6
11 Trans-Pecos and Edwards Plateau 6 3,142 3.8
12 Southern New Mexico 6 4,117 13.7
13 Northern Louisiana 9 3,639 6.5
  Ranchland  
  District* 109 1,736 3.7
Texas* 96 2,064 3.6
1 Northern High Plains 12 704 2.3
2 Southern High Plains 8 606 4.3
3 Northern Low Plains 8 894 5.9
4 Southern Low Plains* 7 1,167 –13.4
5 Cross Timbers 6 1,767 0.0
6 North Central Texas 15 2,827 7.7
7 East Texas 9 2,772 0.6
8 Central Texas 10 5,505 9.0
9 Coastal Texas 4 2,775 5.4
10 South Texas 4 2,350 3.8
11 Trans-Pecos and Edwards Plateau 13 1,723 1.8
12 Southern New Mexico 5 315 9.1
13 Northern Louisiana 8 2,150 2.1
*Seasonally adjusted.
1 Number of banks reporting land values.
2 Prices are dollars per acre, not adjusted for inflation.
3 Not adjusted for inflation and calculated using responses only from those banks reporting in both the past and current quarter.
n.a.—Not published due to insufficient responses but included in totals for Texas and district.
Table 2
Interest Rates by Loan Type
    Feeder cattle Other farm operating Intermediate term Long-term farm real estate
Fixed (average rate, percent)
  2016:Q2 6.08 6.19 6.07 5.82
  Q3 5.98 6.07 5.96 5.72
  Q4 5.98 6.11 6.03 5.72
  2017:Q1 6.19 6.24 6.21 5.95
  Q2 6.05 6.17 6.05 5.89
Variable (average rate, percent)
  2016:Q2 5.73 5.80 5.68 5.32
  Q3 5.60 5.63 5.64 5.36
  Q4 5.65 5.65 5.63 5.29
  2017:Q1 5.73 5.74 5.80 5.47
  Q2 5.75 5.81 5.74 5.47
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Questions regarding the Agricultural Survey can be addressed to Amy Jordan at amy.jordan@dal.frb.org.

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