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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:
Fifth District- Richmond- “Widespread precipitation since our last report helped revitalize crops and pastureland in many areas of the District. Rain in early August aided late summer peaches in Maryland and West Virginia, and soybeans were responding to improved weather conditions in Virginia. Cotton and peanut growers in the District are also having a great year. In South Carolina, the cantaloupe and watermelon harvest was virtually complete by early August. Results of our recent agricultural credit survey indicated that farmland values were above both the previous quarter and year-ago levels.”
Sixth District- Atlanta- “Recent rains improved conditions in many parts of the District. Compared with the same time last year, prices paid to farmers for soybeans, corn, oranges, beef, hogs, and broilers were up while cotton was down. Although beef prices have increased over the last year, contacts reported that both the drought and high feed prices have resulted in lower prices paid to farmers on a month-over-month basis.”
Seventh District- Chicago- “The drought has substantially reduced expected yields for corn and soybeans, although the impact varied considerably across the District. Scattered rains near the end of the reporting period helped revive soybeans to some degree; however, with the exception of some late- plantings, the precipitation was too late to improve yields for most of the corn crop. Crop insurance and higher prices will partially offset lost revenue. However, some farmers face the prospect of having to buy corn at market prices after selling ahead more than they will likely harvest. Livestock pastures are in poor shape as well, and fields with low corn yields were being chopped for silage to feed livestock. With feed costs high, livestock operations cannot cover their costs of production, and operators have reduced their herds accordingly. Hog and cattle prices were down from the prior reporting period, while dairy prices were up as milk production dipped.”
Eighth District- St. Louis- “Severe drought conditions have caused downgrades to forecasted crop production. Annual 2012 production of cotton, soybean, and corn in the District states is expected to fall from 2011 levels by 12 percent, 18 percent, and 24 percent, respectively. In contrast, annual production of rice and sorghum in the District states is expected to increase by at least 12 percent. The fraction of all crops rated in fair or better condition has fallen in all District states since the previous report. Similarly, the fraction of pasture rated in fair or better condition declined in all District states.”
Ninth District- Minneapolis- “The agriculture sector was mixed. Preliminary results from the Minneapolis Fed’s second-quarter (July) survey of agricultural credit conditions showed that nearly 90 percent of lenders said farm incomes increased or stayed the same in the past three months, with similar results for household and capital spending. While severe drought hit the Midwest, much of the District has been spared relative to other areas. Most of the corn, soybean and spring wheat crops in Minnesota and North Dakota were in good or excellent condition. South Dakota and Wisconsin fared somewhat worse. District cattle producers have been selling more animals because of high feed costs. Margins also tightened for dairy producers. Prices received by farmers in July increased from a year earlier for corn, wheat, soybeans, hay, dry beans, poultry, eggs, cattle and hogs; prices decreased for potatoes and dairy products.”
Tenth District- Kansas City- “Agricultural conditions deteriorated as crops withered under extreme drought. The majority of the corn and soybean crops were rated in fair or poor condition, cutting production estimates and sending crop prices to record highs. Drought strained profit margins for livestock producers as feed costs rose and further herd liquidations dampened cattle prices. Escalating production costs were expected to boost farm loan demand in the coming months. Agricultural bankers indicated ample funds were available for farm loans at historically low interest rates. Loan repayment rates were expected to hold near year-ago levels due in large part to crop insurance and higher land lease revenues for mineral rights. While still well above year- ago levels, farmland values rose less rapidly and were expected to hold steady during the rest of the growing season.”
Eleventh District- Dallas- “Drought conditions improved slightly due to scattered rainfall in July. Crops remained mostly in fair to good shape, with the exception of dryland cotton crop in the Texas High Plains region which suffered due to lack of moisture. Overall, crop conditions were much better than a year ago. Drought in the Midwest has caused grain prices to climb sharply, squeezing margins for ranchers by driving up feed costs for livestock.”
Twelve District- San Francisco- “The persistent drought in parts of the country has raised grain and feed prices, prompting District cattle ranchers to reduce herd sizes.”
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Posted by Keith Good • August, 29, 2012 • 1:29 pm 
