December 9, 2019

U.S. Federal Reserve- Beige Book Summary- Agricultural Economy

The U.S. Federal Reserve released its January Beige Book report today, which contained a brief economic summary of current economic conditions by Federal Reserve District.

With respect to agriculture, yesterday’s report included the following summaries.

Sixth District- Atlanta– “Most of the Southeast continued to experience varying degrees of prolonged drought. Reports also indicated that both the lack of rain and colder-than-average temperatures have presented challenges to Florida citrus growers. The drought has reduced the physical size of the fruit slightly, and the recent cold snaps have affected young new plantings. Supplies of both cotton and soybeans continue to be tight with strong global demand keeping prices high.”

Seventh District- Chicago– “Net farm income was higher than a year earlier. Crop insurance helped stabilize revenues in areas where there had been disappointing yields. There were, however, reports that some farmers were taking losses because they earlier had oversold their crop production on futures markets at lower prices. Agricultural land values and farmland cash rental rates for the next growing season increased sharply. Demand for crops remained strong in December, with a notable boost from increased exports to Asia. Crop inventories remained low compared with the high level of demand. Prices for corn, soybeans, and wheat rose during the reporting period. Input costs for crop farms were steady so that margins continued to improve. Hog and cattle prices also increased; while milk prices were generally lower, pressuring the margins of dairy producers.”

Ninth District- Minneapolis– “Since the last report, agricultural output prices strengthened, but large snowfalls hampered some ranchers. Prices for most District agricultural commodities increased since the last report, including corn, soybeans, wheat, steers and hogs. Snow cover was relatively modest in Montana and South Dakota, but deep snow impeded ranchers in North Dakota and Minnesota.”

Tenth District- Kansas City– “Agricultural growing conditions deteriorated since the last survey period, but rising crop prices supported farm income gains. Continued dry weather across the Southern Plains intensified drought concerns and could affect winter wheat development, especially in Oklahoma and Kansas. Crop prices rose further at year-end, boosting farm incomes. Strong export demand for beef supported an uptick in cattle prices, but hog prices fell with bigger supplies and softer demand for pork. With rising incomes, farm loan repayment rates improved, farm loan renewals and extensions fell, and farm capital spending remained robust. Even with a modest increase in the number of farms for sale, strong demand pushed farmland values higher.”

Eleventh District- Dallas– “Drought conditions became prevalent in the District in December, with more than 85 percent of Texas classified as abnormally dry or worse. Ranchers felt the immediate impact of the drought, as poor pasture and range conditions necessitated costly supplemental feeding for livestock. Dry land winter wheat was in need of rainfall, and 2011 crops could be adversely affected if soil moisture levels remain low going into spring planting. Demand for agricultural commodities remained above average, and export activity continued to rise for cotton, beef and grains. Prices were strong for most crops, with cotton, wheat and corn prices increasing further. The overall outlook for demand and prices for agricultural commodities is very optimistic.”

Keith Good

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