February 21, 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:

Sixth District- Atlanta– “Drought conditions persisted in much of Georgia and parts of Alabama. High livestock feed costs were pressuring poultry producers but were being successfully passed on by cattle producers. Corn prices remained elevated and cotton prices paid to farmers increased modestly since the last report, although cotton futures prices have declined somewhat further in recent weeks. Agriculture contacts continued to report concerns over labor shortages and production issues that they tied to recently passed immigration laws in some states.”

Seventh District- Chicago– “Harvest conditions varied across the District. Some parts were experiencing a slower-than-usual harvest due to late planting or fall rains that degraded crop quality. Other portions of the District were experiencing a fairly normal harvest. Corn and soybean yields appeared to be lower and more variable than a year ago. Nonetheless, yields were adequate to replenish inventories to levels that eased worries about shortages. Inventories also were boosted over the summer by lower exports and reduced usage of crops for livestock feed. Corn and soybean prices did back off during the reporting period; however, a sizeable portion of the crop had been sold prior to this decline. Lower prices for feedstocks provided relief to livestock operators. Prices for milk and hogs declined while cattle price rose; all three remained above the levels of a year ago. Farmland values and cash rental rates continued to rise in the District.”

Eighth District- St. Louis– “The rates of completion for the cotton, soybean, and rice harvests in the District states were behind their 5-year average. In contrast, the corn harvest was at least 5 percent ahead of schedule in the majority of the District’s states. The fraction of corn, soybean and sorghum crops rated in fair or better condition declined by at least one percent in most states since the previous report. The fraction of pastures in fair or better condition increased or remained unchanged in most states, except Illinois and Missouri.”

Ninth District- Minneapolis– “Ninth District farmers are expecting smaller harvests this year, but prices remain elevated. An early frost in late September may reduce corn and soybean yields around the District. Recent dry weather has been a boon to wheat harvesters, but overall wheat production in District states is expected to be about 15 percent lower than last year, according to U.S. Department of Agriculture estimates. Prices for corn, soybeans, wheat, dairy products, poultry and hogs fell slightly since the last report; cattle prices increased recently. In spite of these recent declines, prices for many District agricultural commodities remained well above their year-earlier levels.”

Tenth District- Kansas City– “Agricultural conditions continued to vary across the District. Northern portions of the District, which received ample rain, expected bumper crops, while crops in the southern portions of the District continued to suffer under drought conditions. Most of the corn and soybean crops in Nebraska were rated in good or better condition as harvest began, while Kansas expected yields well below average due to drought. Winter wheat planting was delayed in some areas of Oklahoma as farmers waited for rain, but planting was on schedule in Kansas and Nebraska. Despite recent downturns in crop prices, farm income expectations remained strong. Robust export demand supported livestock prices, but high feed costs trimmed profit margins. Farm loan demand remained weak as capital spending slowed further and some producers paid cash for higher input costs. District contacts indicated that prices of farmland sold at auction continued to post record highs.”

Eleventh District- Dallas– “Drought in the Eleventh District remained severe during the reporting period, particularly in Texas where more than 85 percent of the state is in exceptional drought. Already poor grazing and stock water conditions deteriorated further, forcing many ranchers to sell off part or all of their herds. The drought caused low yields and record-high abandonment rates for some crops, including cotton. Export demand for beef continued to grow while the volume of exports for most crops was lower than six weeks ago. There was growing concern about continued drought conditions and the negative impact of low soil moisture on 2012 crop production.”


Farm Bill; Ag Economy; Regulations; and Trade

(Note: A correction was made to this update on Wednesday afternoon- see red strike through text below).

Farm Bill Issues

James Politi reported yesterday at The Financial Times Online that, “The most senior US lawmakers responsible for agricultural policy are seeking to limit any cuts to farm spending to $23bn over the next 10 years, in a rare bipartisan push to influence negotiations within a special deficit reduction committee of Congress.

“The move highlights acknowledgement by both Republicans and Democrats that government support for American farmers is bound to be curtailed at a time when the agriculture sector is posting record profits while the rest of the economy is struggling.”