January 17, 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– “Agricultural conditions prior to Hurricane Sandy remained favorable. Strong income boosted farm loan repayment rates. Lenders reported a drop in the number of loan renewals and extensions, even as spending for agricultural equipment rose. During October, beef prices rose as farmers struggled with higher feed costs―some producers culled herds, including breeding stock. More recently, Hurricane Sandy’s damage was minimal and localized mainly in coastal areas. In Maryland, an analyst reported that small grain emergence may be affected by standing water and salt water flooding. Snow and cold temperatures in North Carolina hindered farm activity and livestock producers were forced to begin feeding hay due to snow covered pastures; fruit production was not affected. In contrast, most farmers in Virginia were relieved that Hurricane Sandy brought much needed rain without significant damage to the corn and soybeans still in the field.”

* Sixth District- Atlanta– “Much of Georgia continued to experience varying degrees of drought conditions, while the rest of the region enjoyed normal conditions. Some agriculture contacts reported labor shortages. Compared with last year, prices paid to farmers for grain corn, rice, soybeans, beef, and broilers were up while cotton prices were down.”

* Seventh District- Chicago– “The corn harvest was completed ahead of last year’s pace, while the soybean harvest was proceeding more quickly than typical. Much of the District reported higher yields than had been expected during the previous reporting period, reflecting in part timely local rains, later planting, and irrigation. Nonetheless, the drought still cut the District’s output of corn and soybeans substantially relative to last year. Concerns about crop quality due to the drought seemed to diminish, although there were some reports of deliveries rejected for crop diseases. Corn and soybean prices—and with them livestock feeding costs–fell further, though they remained elevated from the levels of a year ago. Milk, hog, and cattle prices edged up from the prior reporting period, which also helped the cash flow of livestock operations. Sugar beet output in Michigan was higher than a year ago, and sugar prices were higher as well. Farmland values continued to rise despite the drought. Moreover, there seemed to be more farmland available to buy, partly due to uncertainty about future tax rates.”

* Eighth District- St. Louis– “As of early November, the rice crop in the District states was fully harvested; similarly, over 90 percent of the corn, cotton, sorghum, and soybean crops have also been harvested. Harvest completion rates were 3 to 12 percentage points higher than their 5-year averages. Planting of winter wheat across the District states was 8 percent ahead of its 5-year average, while over 90 percent of all winter wheat was rated in fair or better condition.”

* Ninth District- Minneapolis– “District crop producers remained in mostly good shape, despite this year’s drought. Farm incomes were bolstered by high crop prices, and farmers were looking at record harvests in areas less affected by drought. However, livestock and dairy producers continued to suffer from higher input costs. Reports of ranchers culling herds due to low hay production and increased feed prices continued to surface. After years of delays, a South Dakota beef slaughter and processing plant began operations in October. Prices received by farmers for wheat, corn, soybeans, beef, dairy products and chicken increased in October from a year earlier; hog, dry bean, turkey and egg prices decreased.”

* Tenth District- Kansas City– “High input costs reduced farm profitability and boosted farm loan demand since the last survey period. Demand for farm operating loans rose as surging feed costs cut livestock operator incomes and crop producers paid higher fuel costs to run irrigation and harvest equipment. With reduced incomes, especially for livestock producers, farm loan renewals and extensions edged up and loan repayment rates eased from recent peaks. Still, bankers reported that sufficient funds were available to meet short-term financing needs. Low soil-moisture levels hindered winter wheat emergence, raising concerns that persistent drought could strain U.S. crop production, keep crop and feed prices high, and force further livestock herd liquidations. Farmland values, however, continued to set new record highs in the District.”

* Eleventh District- Dallas– “The District remained largely in drought, although dry conditions eased in some areas. The crop harvest generally progressed at a good pace. Winter wheat crop conditions were much better than last year, when the drought was more severe in the District. Grain prices trended down over the reporting period but were still at relatively high levels. Cotton prices remained weak and may lead to fewer cotton acres being planted next year. Cattle prices were still higher than normal but contacts noted that high feed costs were keeping producers from expanding their operations and were creating negative margins for feedlots.”

* Twelfth District- San Francisco– “Agricultural producers saw further sales gains, and extraction activity of natural resources used for energy production continued to expand. Contacts noted that the agricultural sector appears to be immune from factors that have restrained growth in other sectors of late: production activity and sales of most crop and livestock products have been growing at a solid pace, as has investment spending on new production equipment.”


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