February 24, 2020

Federal Reserve Beige Book: Observations on the Ag Economy

Today the Federal Reserve Board released its Summary of Commentary on Current Economic Conditions.  Commonly referred to as the “Beige Book,” the report included the following observations with respect to the U.S. agricultural economy:

Fifth District- Richmond: “Scattered precipitation over the last two months promoted crop growth in many sections of the District, but more recently crops along the coast were damaged by Hurricane Irene. Rain in early August aided late summer peaches in West Virginia and soybean harvests in Virginia. Virginia growers were also busy cutting hay and preparing for the corn harvest and the flue-tobacco harvest was in full swing. Ninety-six percent of the corn crop in South Carolina had matured and was forty percent harvested up to the hurricane. However, post-hurricane inspections by state officials in North Carolina revealed widespread damage to field crops, poultry and other agricultural businesses. Moreover, agricultural agents in that state reported damage to greenhouses, grain storage facilities and aquaculture operations. Fortunately, cotton bolls had not been stripped from their plants by high winds, and tobacco farmers may have been saved by rushing their crops to curing barns before the storm stuck, according to the agricultural agents.”

Sixth District- Atlanta: “While most of the District continued to experience varying degrees of drought conditions, recent rains have provided relief to some of the region’s stressed pastures and crops. Cotton prices were up compared with last year but have fallen from record highs. Peanut producers expect prices to increase as supply from areas outside of the District becomes constrained as a result of adverse weather.”

Seventh District- Chicago: “Corn and soybean crop conditions declined markedly in the primary production areas of the District due to hot temperatures and a lack of precipitation during July and August. Reports that lower quality corn was being used to produce biofuel despite its higher production costs were indicative of just how low stocks have fallen. Cash prices for corn, soybeans, and wheat rose during the reporting period. Ethanol plants were pushing up the bidding for corn to be used in fall production. Hot weather stressed animals, lowering the output of meat and dairy products. Hog prices set nominal records, while milk and cattle prices moved up as well. Sale prices for farmland continued to move higher.”

Eighth District- St. Louis: “The fraction of pastures in fair or better condition has declined in most District states except Mississippi since the previous report. Crop production has been mixed in the District. Corn, cotton, and sorghum production increased from 2010 to 2011, while rice and soybean production fell by at least 5.7 percent. The fraction of corn, sorghum, and soybean crops rated as fair or better has fallen, while the fraction of cotton and rice crops similarly rated has risen since the previous report.”

Ninth District- Minneapolis: “Ninth District agricultural production is expected to decrease from last year, while prices remain strong. Montana and North Dakota durum wheat production estimates for 2011 were down a combined 57 percent from 2010, according to the U.S. Department of Agriculture. Spring wheat and soybean production estimates for District states were down 18 percent and 10 percent, respectively. In contrast, District corn production estimates increased about 5 percent over last year. Prices for many District agricultural commodities increased since the last report, including corn, soybeans, wheat, dairy, cattle and hogs; poultry prices decreased recently.”

Tenth District: Kansas City: “Extreme weather and rising input costs dampened farm income expectations since the last survey period. Drought continued to stress crops in Kansas and accelerated feedlot placements in Oklahoma due to poor pasture conditions. In contrast, most of the corn and soybean crops in Nebraska were in good or better condition with isolated reports of storm damage from high winds and hail. Farm capital spending waned as producers paid higher prices for production inputs such as fuel, fertilizer, and feed. Rising input costs strained profit margins, despite a modest rise in commodity prices. Loan repayment rates eased with weaker farm income. Farmland values rose further, but the pace of appreciation slowed.”

Eleventh District- Dallas: “Drought conditions remain severe and agricultural losses in the state have reached $5.2 billion, surpassing the 2006 record of $4.1 billion, according to Texas AgriLife Extension Service estimates. Dry weather and high temperatures have reduced yields and increased abandonment of crops. The livestock sector has also suffered greatly, with very poor grazing conditions necessitating costly supplemental feeding and in many cases the selling off of herds. An increase in the number of cows and calves being sold has dampened cattle prices. Grain prices have generally increased since the last report, partly driven by lower production expectations. Strong export demand for beef has benefitted the district’s livestock sector.”


Farm Bill; Regulations; Trade; and the Ag Economy

Farm Bill: National Cotton Council Perspective

On yesterday’s AgriTalk Radio Program with Mike Adams, Dr. Mark D. Lange, the President and Chief Executive Officer of the National Cotton Council (NCC) explained the organization’s recent decision regarding its proposed 2012 Farm Bill recommendations.

An audio replay of this portion of yesterday’s AgriTalk program is available here,(MP3- 10:41), while an unofficial transcript of the conversation can be read here.

In part, Mr. Lange indicated that, “[T]he first thing the cotton growers were looking at was the expectation that either through action of this Super Committee or other deficit reduction action there was going to be quite a reduction in the amount of money available for direct payments in a 2012 Farm Bill.”

Mr. Lange went on to explain that, “So what our producers began looking at is if there’s reduced funding available for direct payments, and if the countercyclical program is being challenged, has been successfully challenged, in fact, by the Brazilians in the WTO case, again, particular to cotton, then an alternative should be considered. And they looked at quite a few and have essentially decided that if we have to face the significant budget reduction in the deal with our international obligations, an area-wide revenue product such as a GRIP type of program, delivered through crop insurance, could be created that would essentially be sort of a shallow loss program that would essentially ride on top of existing crop insurance.

So we’re not recommending any changes to existing crop insurance programs that are available to cotton producers or other agricultural producers anywhere in the U.S. We’re saying this could be a program that could ride on top of those and provide some losses. When you’re taking, say, ten to 20% loss in revenue, this has the possibility of providing some offset to some of those. We looked at it from an area- wide standpoint because the area-wide policies tend to be a little bit cheaper.

Again, a GRIP type program, generally based on the county, rather than the individual losses, whether the county takes losses on average to trigger payments. And again, it would be provided through crop insurance, so it’s not a mandatory program. If a producer doesn’t want to buy, the producer doesn’t buy it. We think that’s probably the best opportunity to provide the kind of safety net support that we were able to previously generate for cotton from the direct and countercyclical programs.”