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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– “Varying levels of drought conditions had expanded through much of the District resulting in stress to some crops. However, the June tropical storm helped some areas. Compared with last year, June’s prices paid to farmers were down for cotton and corn while prices for oranges, beef, and soybeans increased.”

Seventh District- Chicago– “Extreme heat and drought conditions spread across most of the District, stressing both crops and livestock. Forecasts made in June called for possibly record crops of corn and soybeans; now it appears the District’s harvest will likely be below average, with little prospect for improvement and plenty of downside risk. The corn crop is in the most danger of further damage, as plants entered a critical stage of development with insufficient moisture. Corn and soybean prices moved sharply higher, and wheat prices also rose. Hog prices were higher, cattle prices were little changed, and milk prices moved lower. With higher costs and the outlook for a decline in revenue, insurance coverage may provide an important safeguard for many farmers this year. Insurance coverage is widespread for corn and soybeans, but is less prevalent for some other products. Furthermore, several years of higher-than-usual farm income have left many operations in a better position to absorb losses this year.”

Eighth District- St. Louis– “As of the end of June, the majority of cotton, corn, soybean, sorghum, and rice crop conditions were rated as fair or better in all District states with the exception of sorghum crop conditions in Illinois. Winter wheat harvests were either complete or close to completion, and more than 88 percent of the crop conditions were rated as fair or better. However, the fraction of pasture and range in good condition or better decreased in all District states since the previous report.”

Ninth District- Minneapolis– “District farmers mostly continued to benefit from favorable weather conditions. Drought that was threatening corn and soybean production throughout the Midwest has not had much effect on Minnesota and North Dakota, where most of those crops were rated in good or excellent condition. However, crop quality was somewhat weaker in Wisconsin and in South Dakota, where drought conditions were more prevalent. Prices received by farmers in June—prior to drought damage in other parts of the Midwest—increased from a year earlier for soybeans, hay, dry beans, poultry, and cattle; prices decreased for corn, wheat, hogs, and dairy products.”

Tenth District- Kansas City– “Agricultural growing conditions deteriorated substantially since the last survey period as drought spread across the District. Extremely hot, dry weather hindered crop development and more than half of the District’s corn and soybean crops were rated in fair or worse condition. Crop prices rose sharply as intensifying drought and few prospects of precipitation cut corn and soybean yield forecasts. The winter wheat harvest was nearly complete with better than expected yields in some regions. To preserve drought-stressed pastures, some cattle ranchers were considering selling feeder calves early, especially with high feeder cattle prices. Losses mounted for feedlot operators as feed costs soared. Rising export demand enticed some hog producers to expand production. Strong farm and nonfarm investor demand drove farmland prices higher.”

Eleventh District- Dallas– “Agricultural conditions deteriorated slightly due to hot and dry weather. Planting neared completion and crops were mostly in fair to good shape, with conditions much better than a year ago. Since the last report, livestock producers have seen pastures dry out, cattle prices fall, and feed costs increase. Crop prices generally increased over the past six weeks, particularly for corn, although cotton prices fell sharply.”