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Ag Economy Provisions of the Fed’s Beige Book Report

Today the Federal Reserve Board released its latest Summary of Commentary on Current Economic Conditions.  Commonly referred to as the “Beige Book,” today’s report included the following information about the U.S. Agricultural Economy.

Sixth District- Atlanta: “While most of the District continued to experience drought conditions, recent rains have provided relief to some of the District’s stressed pastures and crops. Based on results of a recent state survey, a contact reports concerns that farm labor shortages has had a negative impact on Georgia’s fruit and vegetable production.”

Seventh District- Chicago: “There were mixed changes in crop conditions throughout the District. A small percentage of acres along the Missouri River were lost to flooding. Though there was some concern about recent above-average temperatures, contacts still see the potential for good to excellent corn and soybean yields this fall, contingent upon favorable weather for the rest of the summer. Historically low stocks of corn and soybeans have put a premium on delivery commitments before harvest. On balance over the reporting period, cash prices for corn, wheat, and cattle were down while prices for soybeans, milk and hogs prices moved higher; all of these prices, however, remained above the levels of a year ago. Livestock operations faced margin pressure from high feed costs. Some elevators were under financial pressures due to expanded margin calls on their contracted positions as well as higher costs for planned input purchases for next year’s crop.”

Eighth District- St. Louis: “The majority of the corn, soybean, sorghum, rice, and cotton crops in the Eighth District are currently in fair or better condition. Winter wheat harvests are either complete or close to completion in all District states, and the production of winter wheat and the area harvested for the crop increased from 2010 to 2011. Finally, the fraction of pastures in good or better condition has declined in most District states since our previous report.”

Ninth District- Minneapolis: “Agriculture was mixed. While production in western portions of the District was hampered by severe flooding, prices for agricultural outputs remained strong. Preliminary estimates suggest that 6.3 million acres in North Dakota may have gone unplanted due to flooding. Contacts suggested that impacts on hay and feed crops could increase costs for some cattle producers, but a bank director noted that overall hay production in Montana and the Dakotas will be very strong due to moisture conditions. In other parts of the District, crop progress has fared better recently than early-season indicators suggested, but is still behind last year’s pace. Prices for some District agricultural commodities increased since the last report, including corn, soybeans and dairy products; however, cattle and wheat prices decreased recently.”

Tenth District- Kansas City: “Agricultural conditions varied with weather and input costs. Poor pasture conditions due to drought in the Southern Plains prompted increased placements of cattle in feedlots. However, initial reports on wheat yields in drought areas of Kansas and Oklahoma were poor but better than expected. The corn and soybean crops were progressing normally and generally rated in good or better condition, especially in Nebraska. Agricultural commodity prices remained high but volatile in recent weeks, shifting with export and production forecasts. Rising feed costs trimmed margins for livestock producers. Higher prices for fertilizer, fuel, and feed boosted farm loan demand. Elevated crop prices fueled further gains in District cropland values.”

Eleventh District- Dallas: “Drought conditions worsened, with about three-quarters of the district now in the most severe drought classification. Most Texas counties were designated natural disaster areas in June because they lost at least 30 percent of crops and pasture to drought. President Obama signed a disaster declaration in July for 45 counties in Texas that were heavily impacted by wildfires, which allows federal aid to help with recovery efforts. Crop conditions continued to deteriorate, causing low yields and complete crop losses in some instances. Farmers will depend heavily on crop insurance payments this year. Ranchers continued to cull herds due to very poor grazing conditions, limited hay supply and costly supplemental feeding.”

Keith