January 20, 2020

Federal Reserve Beige Book- Highlights on the Agricultural Economy

The Federal Reserve Board today released its latest Summary of Commentary on Current Economic Conditions report.  Commonly known as the Beige Book, today’s report included the following commentary on the U.S. agricultural economy.

Fifth District–Richmond: Rain and below-average temperatures hindered cotton planting in South Carolina and delayed corn and soybean planting in parts of Virginia and West Virginia. In contrast, cotton planting was almost complete in Virginia and planting of peanuts was progressing on schedule.

Sixth District- Atlanta: Much of the District experienced difficult weather conditions in April and May. An abnormally cold, wet spring and severe storms have delayed planting in some areas. Producers of poultry, cattle, and timber experienced losses as a result of the tornadoes as well. Many farmers in Mississippi and Louisiana are experiencing some degree of flooding from the Mississippi. Prices for many of the District’s agricultural products remained strong, particularly cotton, soybeans, and beef, although the recent record-high cotton prices have declined because of some pull back in global demand.

Seventh District- Chicago: Corn and soybean planting lagged the pace of last spring in the District, as excess precipitation and cool temperatures slowed field work. Planting conditions were best in Iowa and Illinois, where planted acres had caught up to five-year averages after a slow start. The emergence of corn and soybean plants was behind normal, except in Iowa. The poor start to the growing season reduces the yield potential of the District corn crop. Even so, there is still the chance of a very large crop. Agricultural commodity markets were choppy during the reporting period. After peaking earlier this year, corn, soybean, and wheat prices ended down. Cattle and milk prices edged lower, while hog prices edged up.

Eighth District- St. Louis: Heavy rain and flooding on the Mississippi River during April and early May slowed down field work and affected crop conditions in the District. The rates of completion for the planting of corn, cotton, rice, sorghum, and soybeans were behind their 5-year average in most District states; crop emergence was generally behind schedule as well. At least 67 percent of the winter wheat crop was rated in fair or better condition across the District states.

Ninth District- Minneapolis: District agricultural producers were hampered by continued poor weather conditions. Wet fields kept spring plantings of corn, wheat, soybeans and sugar beets well behind their five-year averages in late-May. Prices for most District agricultural commodities increased since the last report, including corn, wheat, cattle, hogs, eggs and soybeans. Poultry prices were flat, and dairy prices decreased slightly. Of respondents to the Minneapolis Federal Reserve’s first quarter (April) Agricultural Credit Conditions Survey, 83 percent reported increased farm incomes in the previous three months; 57 percent thought incomes would increase in the next three months.

Tenth District- Kansas City: Rising farm income spurred record high farmland values and cash rental rates. Crop prices rose further with higher export demand, especially from China. Record pork exports bolstered hog prices, but increased cow slaughter and weaker than usual demand for grilling cuts dampened cattle prices. Many producers used cash rather than debt to pay for higher input costs, and farm equipment sales remained robust. Agricultural growing conditions varied in May. Recent heavy rains held up the start of the winter wheat harvest with early reports of below-average yields in drought-stricken areas. Despite planting delays due to wet fields, the corn and soybean crops were progressing normally.

Eleventh District- Dallas: The entire Eleventh District is experiencing drought conditions, and the severity has progressed considerably. About half of the district is now in exceptional drought, the most severe drought classification, up from zero percent at the last report. The outlook for the wheat crop is poor and it is likely that the cotton harvest will be down from last year. Numerous wildfires have led to an estimated $20.4 million in agricultural losses.

Keith Good

Farm Bill; Food Safety; Ag Economy; and Trade Issues

Farm Bill Issues

DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “With budget-cutting in vogue, Sen. Charles Grassley is dusting off his long-time proposal to put a hard cap on farm-program payments.

“Grassley, an Iowa Republican, told reporters Tuesday that he is introducing ‘The Rural American Preservation Act’ that would put a $125,000 cap on farm payments for individuals and a $250,000 cap for married couples.

“‘We need to not subsidize big farmers getting bigger and driving up the costs of farmland and cash rents so younger, beginning farmers can’t get started,’ Grassley said.”

(Note that this Brownfield link contains an audio replay of Sen. Grassley remarks from yesterday).