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Third Quarter 2006
Federal Reserve Bank of Dallas
The Third Quarter Survey shows
marginal improvement in the Eleventh District’s
agricultural conditions. Several regions received badly
needed rain in September, which helped enhance irrigated
crop yields, slightly improved cattle grazing conditions
and boosted soil moisture levels for winter wheat planting.
However, the rains were too late to salvage dryland
crops, and a large area of the district remains in drought.
Ranchers in Central, North Central and East Texas continue
to liquidate their breeding stock because of limited
forage availability and high supplemental feed costs.
Operating margins remain lackluster, and bankers say
the ongoing drought, along with high feed and production
costs, has increased demand for new loans and spurred
renewals of existing loans.
Here are additional details from
the survey:
- Land values continue to rise in most regions, largely
due to the sale of farmland for nonagricultural purposes,
such as investment and recreation. Dryland, irrigated
land and ranchland prices were up 3.9 percent, 2.4
percent and 7.1 percent, respectively, in the third
quarter. Bankers say the recent run-up in land values
has priced many agricultural producers out of the
market.
- The ongoing dry spell, coupled with higher interest
rates and production costs, has increased financial
strain on the district’s agricultural producers.
Seventeen percent of bankers saw a decline in the
rate of loan repayment, compared with 10 percent last
quarter and 6 percent a year earlier. Additionally,
18 percent of those surveyed cite an increase in loan
renewals or extensions, compared with 8 percent a
year ago.
- High production costs may have limited purchases
of farm machinery. Fewer bankers (only 4 percent vs.
17 percent last year) anticipate making more farm
machinery loans.
- Agricultural Credit Conditions
at Survey Banks in the Eleventh District [PDF]
- Rural Real Estate Values [PDF]
11th District Agricultural Land Values
Third Quarter 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
While too late for dryland
crops, the recent moisture helped fall crops and winter
wheat planting. More wheat is being planted. Land sales
for dairy sites and dairy-related forage production
are driving up irrigated farmland prices.
Our small- to medium-size farmers
are going out of business. We finance mostly large farmers
operating over 3,000 acres.
The silage harvest is complete.
The wheat looks good. The corn harvest is under way,
but the yields are off.
Recent rainfall has boosted all
crops except cotton and silage. Winter wheat planting
is in full operation, with prospects of wheat pasture
grazing looking good. Feeder cattle prices are near
break-even levels, while stocker cattle prices remain
high. However, profitability levels are strained. Prices
of land with recreational usage remain strong.
Region 2—Southern High
Plains
Rain has helped irrigated
crops and winter wheat planting. Dryland crops were
lost to drought. Input costs are higher than last year.
Rains were too late for the 2006
dryland cotton crop. Irrigated cotton appears headed
for a good harvest season. Net income will be down due
to high production costs.
Region 3—Northern Low
Plains
Our area received rain, and
farmers are able to sow rye and wheat for winter grazing.
Cotton crops will be short due to the earlier dry weather.
Irrigated cotton is below average. We are waiting on
insurance checks. The cotton harvest may be half of
last year’s. The cattle business is still good.
The drought has reduced demand
for feeder cattle loans. Hay is in high demand. Farmers
are trying to keep their cattle herds together. Recreational
use continues to drive land prices up. We received rain
last week but need more.
Region 4—Southern Low
Plains
Pastureland is selling for
nonagricultural purposes. The only three land sales
in the last six months were to outside investors.
Recent rains were too late for
the cotton crop. Pastures will need time to regrow before
the frost.
Region 5—Cross Timbers
As consumer spending and
the economy slow down, land prices should stabilize
or decline. Farming costs are high for the price of
wheat.
We received 2 to 3 inches of rain
in September, allowing farmers to sow wheat. More rain
is needed or the wheat grazing will be limited. Stock
tanks are low, so runoff water is critical.
Region 6—North Central
Texas
Land sales have increased
both in number and cost. Most sales are for 100 to 200
acres to people who are moving back after retiring.
Some farmers will have problems
refinancing in 2007 after a second year of increased
expenses and reduced yields resulting from the drought.
We had 3 to 4 inches of rainfall
this last month. We should be able to get a cutting
of hay before frost. Things are looking better, with
interest rates remaining stable and gas prices dropping
50 to 60 cents a gallon.
Drought conditions have made pastures
nonexistent and increased feeding costs. Ranchers are
selling their breeding stock. Cattle prices are good.
Our area has gone to five- to
10-acre tracts. The farm and ranch customers are being
replaced by city people.
Corn and grain sorghum crop yields
have been below average. For the first time in years,
corn and grain sorghum stalks have been baled and sold,
averaging $50 per bale. Hay is in short supply and selling
for $100 per round bale. Cotton yields were above average
despite the dry conditions. Tanks are dry, and producers
are relying on rural water or even hauling water. Herds
are being culled. Fortunately, prices have remained
strong. Land prices continue to increase in Williamson
County due to development by outside investors.
Dry weather persists. More cattle
are being sold due to feed costs. Prices remain stable,
but they will not hold unless rain is received soon.
Region 7—East Texas
Northeast Texas is experiencing
severe drought conditions, causing a sell-down of cattle
inventory and reduced crop yields. Agricultural purchasing
will be down into the first quarter of 2007 or until
weather conditions improve.
Because of the drought, operating
loan requests are up. However, land values continue
to increase despite the drought.
Region 8—Central Texas
There are more hay trucks
on the road than gravel trucks. Gas prices slowed some
people down. Real estate is starting to cool off. Borrowers
are not able to come up with cash down payments as before.
Some say this is the worst drought
since 1924. Many acres of winter pastures are being
planted. Old cows are being culled. Many producers anticipate
that heifers will be in demand next spring due to the
sell-off this year.
Ranchers have about one-third
the amount of hay needed to make the winter. Hay shipped
into this area is costing $70–$90 per roll, causing
an increase in cattle operating loans. Land prices have
become outrageous; local people can’t buy additional
property.
Region 9—Coastal Texas
Agriculture is in a crisis
as a result of low prices, high production costs and
lower subsidies. Young people can’t or choose
not to go into agriculture. Outside investors are buying
the land.
Conditions in the Texas Gulf Coast
are improving with recent rains. Crop results were fair
to poor for grains and fair to good for cotton. We receive
calls almost daily from cattle owners in Central South
Texas looking for hay to purchase.
All types of crops have had better
than average yields this year. The cotton crop looks
really good.
Region 11—Trans-Pecos
and Edwards Plateau
An overabundance of water
due to the recent rains is causing concern.
Recent rains have helped agricultural
producers, but the hot, dry summer hurt range conditions.
A wet fall and winter will be needed. Livestock prices
have remained good through this dry time.
Interest in agricultural-valued
properties for recreational use appears to coincide
with the hunting season.
Region 12—Southern New
Mexico
We have the best grazing
conditions in 20 years. Fuel costs are impacting operating
expenses. It is hard to find fuel-efficient farm and
ranch vehicles, making it very difficult to control
costs.
The price of grassland has been
affected by out-of-state buyers. Dairy expansion continues
to push up the price of irrigated land.
| 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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