FarmPolicy

July 19, 2019

Food Price Update (March CPI)

The Department of Labor noted this week, that food prices increased by 0.4% in March. Drought in Brazil and the U.S., particularly in California, have put a dent in output. Prices for producer products are set to increase as well. And on the East Coast, cold temperatures and rain have also negatively impacted spring crops.

kg

Ag Economy; Biotech; Regulations; and, Immigration

Agricultural Economy

Yesterday, the Federal Reserve Board released its Summary of Commentary on Current Economic Conditions. Commonly referred to as the “Beige Book,” the report included several observations with respect to the U.S. agricultural economy.

The Chicago District indicated that, “The slow arrival of spring-like weather delayed fieldwork. However, concerns about a delayed start to planting were muted, especially in Illinois and Indiana where 2013 crops performed well after being planted late. The mood among farmers improved as crop prices increased enough from winter lows that breakeven outcomes now seem possible. Hence, there has been more forward contracting of crops than a year ago to manage risk. Higher soybean prices still support a shift in planting intentions toward soybeans and away from corn, but not as much as earlier this year. Fertilizer costs decreased from a year ago, and seed costs were flat. The livestock sector moved further into the black, as milk, hog, and cattle prices increased. Given lower numbers of hogs and cattle available to market, animals were fed longer in order to gain additional weight. Although hog operations were still battling a virus that killed many piglets, there were signs that the worst had past.”

While the Kansas City District noted that, “Crop growing conditions remained dry in March, while livestock prices increased further since the last survey period. The winter wheat crop was in need of moisture and rated in mostly fair to poor condition. Spring fieldwork began, and District farmers followed national trends by intending to plant slightly more soybeans and less corn. With crop prices still lower than a year ago, farm operating loan demand rose this year as farmers financed a larger portion of crop input costs. However, global supply concerns supported strong exports, and crop prices rose to a six-month high during the reporting period. Low cow inventories kept feeder cattle prices elevated, and strong export demand supported higher fed cattle prices. In addition, hog prices surged as the on-going swine virus cut inventories further.”

(more…)