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Federal Reserve Bank of Dallas Third-Quarter Agricultural Credit Survey

The Federal Reserve Bank of Dallas recently released its Quarterly Survey of Agricultural Credit Conditions for the third-quarter of this year, which stated in part that, “Bankers responding to the third-quarter survey continued to report concern for producers’ financial positions due to low commodity prices.  Low prices for crops and livestock were the chief concerns among bankers. Farmland conditions varied by region, with most in good shape due to summer rains but some suffered from excessive rain.

“Demand for agricultural loans decreased for a fourth consecutive quarter. Loan renewals and extensions continued to increase as loan repayment rates continued to decline. Overall, the volume of non-real-estate farm loans was lower than a year ago. Operating loans continued to increase year over year; all other loan categories fell in volume year over year in the third quarter.”

The report from the Dallas Fed also indicated that, “District land values increased in the third quarter. Real irrigated land values rose the most, up 7.2 percent over the previous quarter. Real ranchland values were up 6.5 percent, and real dryland values were up 5.6 percent (Figure 2). According to bankers who responded both in third quarter 2016 and in third quarter 2015, ranchland and dryland values increased year over year, while irrigated land values were mostly unchanged from a year ago.

Figure 2

The anticipated trend in the farmland values index remained negative for a fth consecutive quarter, suggesting respondents expect farmland values to trend down in the upcoming months. Comments from bankers point to poor crop production, low commodity prices and concern about the economy as causing slowing land sales and depressing values. The credit standards index indicated continued tightening of standards (Figure 4).”

Figure 4

Additional comments from District Bankers were also included in the Dallas Fed Survey, including the following:

“- 2016 is shaping up to be financially challenging for ag producers. Low grain and cattle prices will place many producers in a position of large equity losses and partial fixed asset liquidation to remain in business.”

“- Due to weather-related issues and low commodity prices, we are expecting some producers to fall short of paying off operating lines for 2016. There is an increased concern for the upcoming crop year with overall low commodity prices and possibly higher debt carry by producers.”

The Dallas Fed Survey also included this graph related to cash rents: