October 22, 2019

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– “Recent weather conditions allowed farmers to make steady progress in harvesting and small grain planting throughout most of the District. The corn harvest was nearing completion in Virginia and was winding down in Maryland, with farmers in those states saying that yields remained mostly good. The cotton harvest was getting into full swing in North Carolina and was ahead of schedule in South Carolina. In addition, the apple harvest was completed in Maryland and nearly completed in Virginia. Farmers in the District were harvesting their early soybean crop, which was reported to be in fair-to-good condition. Small grains had been planted and were off to a good start in much of the District.”

Sixth District- Atlanta– “Contacts reported strong overseas demand for proteins and related feeds. Farm land values in the District were mixed; crop land values changed slightly, while pasture land declined in some areas. To varying degrees, drought conditions persisted in much of Georgia, Alabama, Louisiana, and the panhandle of Florida. In Georgia, Louisiana, Mississippi and Tennessee cotton harvesting was ahead of the five-year average, while Alabama was slightly below the average.”

Seventh District- Chicago– “The corn and soybean harvests were running ahead of pace in the District, though yields were coming in below trend. For the District as a whole, more bushels of corn were harvested than a year ago, but soybean production was down. Crop storage on farms increased, as many farmers are expecting to sell their crops for higher prices in the future. This higher farm storage has led to relatively lighter supplies at grain elevators for this time of year, and end users, including ethanol plants, faced the prospect of higher prices. Corn, soybean, and cattle prices were up from early October, while milk and hog prices were down. With the exception of soybeans, these prices were up from last year, boosting farm incomes. There was another surge in farmland values and cash rental rates for the District.”

Eighth District- St. Louis– “Winter wheat planting was ahead of its 5-year average completion rate in the Eighth District states, while the fraction of winter wheat crops rated fair or better was over 90 percent in all states except Mississippi. Monthly output of commercial red meat for September 2011 increased by 3.6 percent compared with September 2010. However, the total live weight and number of chickens slaughtered decreased by over 4 percent between August and September 2011.”

Ninth District- Minneapolis– “Agricultural conditions remained generally strong. Farm financial conditions were very strong due to high commodity prices. Prices for hogs, cattle, turkeys and eggs increased in October; prices for corn, soybeans and wheat declined, but remain substantially above their year-earlier levels. The harvest went quickly, thanks to recent dry weather. District corn production was roughly even with 2010; however, soybean production was down more than 12 percent. Wheat production was down dramatically in some areas of the District.”

Tenth District- Kansas City– “Agricultural activity varied across the District in October and early November. Northern portions of the District, which received ample summer precipitation, reported above average corn and soybean yields at harvest and the majority of Nebraska’s wheat crop emerged in good condition. In contrast, drought conditions severely cut crop production in the District’s southern regions, with Kansas and Oklahoma winter wheat crops in fair or poor condition. Robust export demand continued to boost crop and livestock prices. Farm income rose in areas with bumper harvests, while crop insurance was expected to mitigate losses in cases of poor yields or crop failure. Strong farm income boosted farm loan repayment rates and trimmed demand for operating loans. With rising farm income and strong demand from both farmers and non-farm investors, District farmland values posted another record high, with the strongest gains in the northern Plains.”

Eleventh District- Dallas– “The District remained in drought, although severity lessened slightly in parts of Texas and New Mexico that received some rain in recent weeks. Planting of winter wheat continued at a fairly normal pace but the crop was in poorer condition than last year due to very low soil moisture. Livestock sell-offs continued at a slower pace, as many producers have already liquidated much of their herds. Grain prices fell slightly over the reporting period, largely due to lower export demand. By contrast, cattle prices were higher than six weeks ago and beef exports remained very strong.”


Budget and the Farm Bill; Crop Insurance; Ag Economy; and Trade

Budget and the Farm Bill

The AP reported yesterday that, “The White House refused to say Tuesday whether President Barack Obama would agree to payroll tax cuts if they add to the nation’s deficit, as the top Senate Republican predicted lawmakers eventually would reach an agreement to prevent taxes from increasing on 160 million Americans.

“The tax cut is set to expire at the end of the year, raising taxes by about $1,000 on the average household unless Congress and Obama act. As the deadline approaches, political support is building for at least continuing the tax cut — and thereby heading off a politically bruising tax hike. But the holdup remains on how to offset the cost.

“Obama spokesman Jay Carney said the president prefers that lawmakers find a way to pay for the cuts that does not add to the federal debt.”

The AP article explained that, “Obama included the extension and expansion of the payroll tax cuts in the jobs bill he released in September. In pressuring Republicans to get behind that bill, Obama has been emphatic that every single provision, including the extension of the payroll tax cut, will be offset somewhere else so the enormous federal debt will not worsen.”

Yesterday’s article added that, “Republicans said that to pay for the extension, GOP leaders would consider using some of the savings discussed by Congress’ failed supercommittee, which tried to reach a bipartisan deal on deficit reduction.

That included savings from agriculture assistance, federal asset and broadcast spectrum sales, civil servants’ retirement benefits, and higher fees charged by Fannie Mae and Freddie Mac to guarantee mortgages, plus fees levied by the Transportation Security Administration.”