A Fed report on agricultural lending in the district made up by Texas and parts of Louisiana and New Mexico reports that persistent drought conditions have increased strain on ranchers in the region, where many are liquidating their cattle herds at a loss.
The wheat harvest in the region has been poor and most crops are suffering from heat and lack of moisture, according to the second quarter survey of agricultural lenders reported by the Dallas Federal Reserve Bank.
A higher share of bankers report lower incidence of loan repayment, increased collateral requirements and greater demand for loan renewals compared with last year. Many respondents reported growing concern about the future viability of some producers, especially dairy farmers.
Farmland sales in the region continues to weaken and a third of respondents expect a decline in demand for farm real-estate loans over the next three months.
Sluggish sales activity has slowed land price appreciation. Dryland values held steady while irrigated land prices fell in the second quarter.
Four-fifths of respondents expect farmland prices to remain stable in the near-term, while only 2.6 percent expect increases, which is the lowest share since 1991.
Soft demand for farm equipment has also contributed to a nationwide slump in sales for farm equipment manufacturers.