FarmPolicy

April 25, 2014

Federal Reserve Beige Book: Observations on the Ag Economy- January 2014

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- “Recent rains improved soil conditions in some areas of the District, while parts of Georgia, Alabama, Louisiana, and Florida experienced dry conditions. Monthly prices paid to farmers for rice and soybeans were up; prices for beef and broilers remained unchanged; and prices for corn, cotton, and hogs were down. The most recent domestic crop production projections for soybeans, corn, and rice were unchanged. Cotton and orange projections were down, although cotton was only down slightly. Similarly, projections for domestic beef and pork production rose, while broiler production remained unchanged.”

* Seventh District- Chicago- “Corn and soybean prices moved a bit higher over the reporting period, but remained well below their levels of a year ago. Current prices for corn will not cover expected costs for 2014 production, whereas soybean prices would. This may lead to increased soybean planting in the spring. Farmers continued to store crops in anticipation of future price increases. In some locations, however, there was an incentive to sell corn sooner, in part because of an increase in demand for ethanol production, which has returned to profitability. Hog prices moved lower, while cattle prices were little changed. Milk prices edged up, and there was evidence of some expansion in District dairy herds. Parts of the District remained in a drought, which makes the timing of spring precipitation more critical. In addition, there was less fertilizer application last fall due in part to cleaner water regulations.”

* Eighth District – St. Louis- “As of late November 2013, around 98 percent of the District’s winter wheat crop was rated in fair or better condition, as 89 percent of the winter wheat crop had emerged, on average, across the District states. This rate of progress was moderately faster than the average over the past five years. Year-to-date red meat production in the District for November 2013 increased by 0.5 percent compared with the same period in 2012. Arkansas experienced a noticeable 62.3 percent decline in red meat production over the same period; however, production in Arkansas accounts for less than one percent of total red meat production in the District.”

* Ninth District- Minneapolis- “Overall conditions for District farmers weakened, although livestock and dairy producers saw improvement. Annual production decreased from a year earlier in District states for wheat, soybeans, dry beans and sugar beets; District corn production increased, but price reductions likely outweighed the benefits to farmers. A farm equipment retailer saw a reduction in sales revenue sooner than expected, due to falling crop prices. District sugar beet farmers are facing steep losses this year due to a decline in sugar prices. December prices received by farmers fell from a year earlier for corn, soybeans, wheat, hay, hogs and chickens; prices increased for cattle, turkeys, eggs, milk and dry beans.”

* Tenth District- Kansas City- “Agricultural growing conditions improved in late November and December, but low crop prices limited farm income expectations. The winter wheat crop was rated in mostly good condition with winter storms providing soil moisture and protective snow cover. However, wheat prices fell slightly since the last survey period, and corn and soybean prices remained at their lowest levels since 2010. Some farmers were holding fall crop inventories rather than selling at current prices. Lower income prospects boosted demand for farm operating loans and dampened farm capital spending at year-end. In the livestock sector, weaker demand for pork from Asian markets placed downward pressure on hog prices. While cattle prices were relatively flat, profit margins for cattle producers may improve as better pasture conditions lessen the need for supplemental feed.”

* Eleventh District- Dallas- “Drought conditions in the District continued to ease slightly. The winter wheat crop has had a good start, with crop conditions in better shape than they were a year ago. Severe winter weather in many parts of the state in late November and early December slightly delayed some of the cotton harvest, but the moisture improved soil conditions. Cattle producers continued to benefit from low feed prices and high selling prices, prompting optimism for the industry outlook.”

* Twelfth District- San Francisco- “Output in agricultural and resource-related industries expanded on balance. Demand remained strong for most crop and livestock products. A healthy corn harvest in the District contributed to a decline in feed costs. Water resources were adequate in most areas.”

-kg

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