Southwest Agricultural Loan Demand Declines Four Consecutive Years

DALLAS, TX – Bankers responding to the third-quarter survey reported overall weaker conditions across most regions of the Eleventh Federal Reserve District. The bankers from Texas, northern Louisiana, and southern New Mexico noted that poor rainfall in the quarter contributed to extremely dry conditions, affecting crop yields, particularly corn, cotton, and wheat. Prices continued to be weak. Demand for agricultural loans continued to decline, with the loan demand index registering its 16th consecutive quarter in negative territory. Loan renewals and extensions continued to increase, and the rate of loan repayment declined to its lowest level since the end of 2016. With the exception of operating loans, which were mostly flat, loan volume fell across all major categories compared with a year ago. Irrigated cropland values picked up notably, while dryland values were stable and ranchland values declined moderately. According to bankers who responded in both this quarter and third quarter 2018, nominal cropland and ranchland values increased year over year. The anticipated trend in farmland values index was flat for a fourth consecutive quarter, suggesting respondents expect farmland values to hold steady.