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First Quarter 2007
Federal Reserve Bank of Dallas
The first quarter survey showed
continued improvement in Eleventh District agricultural
conditions. A slightly higher percentage of bankers
reported healthy availability of funds, expanding loan
volumes and stable loan repayment rates compared with
the previous quarter. Strong winter rains stimulated
pasture growth and boosted soil moisture levels, reducing
the need for supplemental feeding and improving the
outlook for the 2007 crop year. Field work for spring
crops moved ahead at a rapid pace, and the wheat crop
made good progress. Grain, corn and cattle prices remained
favorable, and cattle herd reduction declined further.
Despite the overall improvement
in agricultural conditions, some signs of concern remain.
Bankers said the Farm Credit System is squeezing lending
margins. More rain is needed to replenish stock ponds
and spur crop and forage growth. Hay shortages and high
feed costs continue to strain revenue streams for dairy
farmers and livestock producers, while rising fuel prices
pushed up fertilizer costs and were precluding some
producers from fertilizing the hay crop.
Following are additional details:
- Demand for farmland for recreational use and development
continues to bid up land prices. Dryland and ranchland
prices edged up 1.1 percent during the quarter, while
irrigated land prices rose 1.8 percent. Moreover,
38 percent of respondents anticipate a further increase
in farmland values, up from 28 percent last quarter.
- Lack of rental farmland and higher production costs
weighed down farmland cash rents. Rents for dryland
and irrigated land fell 4.5 percent in the quarter,
and rents for ranchland declined by nearly 6 percent.
- Bankers reported an increase in loan demand. Twenty-six
percent indicated higher demand for loans, up from
18.8 percent last quarter. Furthermore, a greater
percentage of bankers expect the volume of non-real
estate farm loans, operating loans and farm machinery
loans to increase over the next three months, compared
with last quarter.
11th District Agricultural Land Values
First Quarter 2007
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
The outcome for farming in
2007 remains favorable based on increased grain prices
and improved moisture conditions. The economics of livestock
production are being negatively impacted by higher feed
costs.
Field work for the summer crops
is in full swing. Increased corn prices are creating
some excitement. Wheat looks good due to excellent winter
moisture.
The Farm Credit System poses a
problem with its aggressive pricing.
Region 2—Southern High
Plains
We need to have good rainfall
this year and profitable prices for our products.
Most of our farm operating loans
are already set up for 2007. Prospects are looking excellent
with the recent moisture. Everyone is anxiously awaiting
results of the new farm bill debate. The disaster payment
provision for 2006 is still needed by many dryland cotton
farmers.
Region 3—Northern Low
Plains
All ranchland sales are being
made to recreational buyers. Ranchland will sell for
more than good cultivated land.
Region 4—Southern Low
Plains
Recent rains have helped
the small grains. Pastures are greening up as well.
Region 5—Cross Timbers
Hay shortage, coupled with
high grain prices, is really hurting the dairy industry
in this area. Government-subsidized ethanol is not the
answer.
The wheat crop looks good. Cattle
prices are good. We need stock water.
We received 1.25 to 2.25 inches
of rain over the weekend, which was our first real amount
of moisture in five to six months. Tanks and lakes are
critically low, and pasture conditions remain poor.
We could possibly harvest some wheat if we can get a
couple more timely rains.
Region 6—North Central
Texas
Corn planting is off to a
rapid start because of the dry weather. Two inches of
rain recently should solve the immediate problems. Shortages
of milo, corn and hay seed are unprecedented in recent
years.
Everything depends on spring rainfall.
January looked good, but February was very dry. If we
don’t get measurable rain in March and April,
I expect our drought situation will be right back where
it was last year. We are already paying close to $3
per gallon for gas and diesel.
Farmers are planning on planting
more corn in 2007, with prices at $4 a bushel. Crops
are about 80 percent planted, and we just received about
3 inches of rain. Things couldn’t look much better
right now. Most livestock producers are out of hay and
are looking forward to spring with some green grass.
Land prices continue to increase due to growth in the
county. California investors are buying properties for
development. Some large tracts are selling at prices
as high as $4,000 to $5,000 per acre; 1031 exchanges
are common.
We received much-needed rain in
March. The corn prospects now look a lot brighter. Cattle
prices have remained steady. We are still losing a lot
of good farmland to development and recreation.
The area recently received good
rains.
Pastures and crops look good following
the recent 4 inches of rain. All ponds are full.
Region 7—East Texas
Prospects for the spring
will depend on the amount of rainfall we receive.
Region 8—Central Texas
Recent rains are worth lots
of dollars to regional agricultural producers and to
the economy as a whole.
Land prices took off in the first
quarter with fewer listings and more buyers. Recent
rains have helped winter pasture conditions, but more
rain is still needed. Quality hay, when available, continues
to sell at a rapid pace. Due to the past drought conditions,
cows have been coming into the local auction barns.
Most are in poor to fair shape; 60 percent have been
slaughtered, with the remainder being moved south, where
pasture conditions are better.
Credit conditions are good. We
have received good rains recently, and we are not anticipating
any more wholesale cattle sell-offs. Fuel and fertilizer
costs could hinder credit conditions.
Even if we have normal rainfall
this spring, there will still be a shortage of hay in
our area because we skipped a year of hay production.
Many producers are not even fertilizing hay crops because
of the outrageous price of fertilizer.
Region 9—Coastal Texas
Land values are increasing
from investors buying property for nonagricultural purposes.
Region 11—Trans-Pecos
and Edwards Plateau
Farm Credit is making many
of the long-term rangeland loans at greatly reduced
rates. We are seeing the largest percentage of nonagricultural
buyers. Most sales of rangeland are nonagricultural
purchases.
Ranchland prices are stable. Ranch
real estate sales have slowed as a result of a small
inventory on the market. Most of the ranches are priced
too high for agricultural use. The region has received
good winter moisture, which has helped early spring
forage growth.
Heavy demand for recreational
land continues to be the norm in South Central and Southwest
Texas. This continues to take agricultural land out
of production and keeps land prices rising. Conditions
are still dry, but prices for livestock remain good.
A wet spring would cure lots of agricultural ills.
Region 12—Southern New
Mexico
Land values continue to increase.
Demand for ranch property is strong from both local
and nonlocal buyers. Prices being paid are not relative
to agricultural production value.
We continue to see an interest
in the farmland Conservation Reserve Program. Interest
in grassland availability is coming primarily from out-of-state
buyers.
| 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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