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Federal Reserve Beige Book: Observations on the Ag Economy- Feb ’15

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– “Drought conditions improved in parts of the District although there were still some areas reportedly affected by dry conditions. Florida citrus crop producers continued field practices to combat citrus greening while the USDA announced additional funding to help fight the disease. The most recent 2015 domestic production forecasts for rice, soybeans, peanuts, and cotton were unchanged from a month ago while beef, pork, and broilers production projections were up from the prior month.”

* Seventh District- Chicago– “Corn, soybean, and wheat prices were lower than during the previous reporting period, although they recovered some in recent weeks. Apart from fuel costs, input costs for spring planting have remained steady. Some farmers purchased lower quality seeds than last year to reduce their planting costs. Even though higher relative input costs were likely to shift acres toward soybean production and away from corn, there were reports that farmers were reluctant to plan major changes in crop rotations. Contacts also noted plans to return some marginal ground to pasture or hay production, instead of planting corn or soybeans this spring. Hog production was strong, with no major issues from diseases, which had cut production last year. This pushed down pork prices substantially, and consumers began substituting from beef to pork. However, somewhat lower cattle prices did not translate into lower retail prices for beef. Milk prices declined amid rising stocks of dairy products and stalled exports. The slowdowns at ports along the west coast hurt exports of many agricultural products.”

* Eighth District – St. Louis– “As of early February, close to 90 percent of the District winter wheat crop was rated in fair or better condition. Total District red meat production during 2014 was largely the same compared with 2013.”

* Ninth District- Minneapolis– “On balance, District agricultural conditions were down, with livestock and dairy producers faring better than crop farmers. According to preliminary results from the Minneapolis Fed’s fourth-quarter (January) survey of agricultural credit conditions, 70 percent of respondents said farm incomes had fallen from a year earlier, while 73 percent reported decreases in capital spending; the first-quarter outlook was similar. Land values and rents fell in 2014 in Minnesota and North Dakota, according to appraisers.”

* Tenth District- Kansas City– “District farm income weakened further since the last survey period, but cropland values generally held steady. Corn and soybean prices edged down in January and early February, and farm income remained well below year-ago levels even as profitability in the livestock sector remained relatively strong. After several years of herd culling, District cattle operators retained more replacement heifers compared with last year, indicating the potential for rebuilding herds in 2015. Following several years of strong gains, District non-irrigated and irrigated cropland values leveled off while ranchland values continued to rise due to strong demand for good-quality pasture. Lower farm income trimmed farm loan repayment rates and increased demand for new loans as well as loan renewals and extensions. Looking forward, District contacts expected modest declines in cropland values and further deterioration in farm loan repayment rates amid tighter profit margins for crop producers.”

* Eleventh District- Dallas– “Moisture conditions stabilized for a large portion of the District, but drought conditions persisted in some areas. Cotton prices are below profitable levels for most producers. Prices and export demand for sorghum is high, which may lead more farmers to favor sorghum over cotton when making planting decisions this spring. The strong dollar has slowed agricultural exports. Corn, cattle, wheat, soybeans and dairy prices declined over the reporting period.”

* Twelfth District- San Francisco– “Agricultural conditions in the District were mixed during the reporting period. Drought conditions and unseasonably warm weather in parts of the District contributed to lower yields, but the associated increases in many of the prices received by farmers resulted in slightly higher revenues. Farmers remain concerned that the drought will continue, requiring them to leave more acreage fallow. Numerous contacts reported that the labor disputes at West Coast ports reduced agricultural exports, as perishable products such as fruits wasted away in storage containers waiting for shipment. Contacts also stated that the stronger dollar limited exports.”

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