Federal Reserve contacts report that agricultural conditions continue to soften. The Kansas City Fed notes that farmland price appreciation is moderating from the rapid pace seen in the past few years. Farm-level crop prices fell from a year earlier for corn, wheat, soybeans, hogs, and chickens; prices increased for cotton, rice, oranges, cattle, milk, eggs, and turkeys.
Severe winter weather affected several regions with some crop damage reported by the Richmond and Atlanta Fed districts, while the Chicago Fed notes disruptions in the flow of agricultural products. Both the Kansas City and Dallas Fed districts cite dry conditions adversely affecting wheat crops, while San Francisco reports concerns about water shortages and water costs.
Prepared by the Federal Reserve Bank of Atlanta and based on information collected through February 24, the Beige Book summarizes comments received from businesses and other outside contacts.
The following is a Fed region-by-region summary of farm sector economic conditions, starting in the Mid-Atlantic and moving west:
Richmond: Agriculture contacts reported crop price declines in recent weeks. Falling feed costs and higher cattle prices led contacts to believe it will be a good year for livestock producers. Also, farmers expect an increase in poultry production. However, a North Carolina respondent was concerned about an increase in swine virus in his region. A Virginia nursery owner stated that recent cold weather damage, if any, will not be known for a month or two; even so, he expects a 10% increase in year-over-year sales this spring. A North Carolina agri-business contact reported that tobacco and vegetable producers in his region were cautiously optimistic for the year ahead. In South Carolina, recent ice storms have caused timber damage that is still being assessed.
Chicago: Severe winter weather disrupted the flow of agricultural products between farms and markets during the Jan. 7 – Feb. 24 reporting period. Crops that were sold stayed on farms longer than intended as transportation problems delayed shipments. Contacts also reported shortages of trucks and drivers to deliver inventories from the large harvest last fall. Demand for crops has been better than expected, particularly for corn, pushing inventories lower and prices higher. Soybean prices drifted up as uncertainty regarding the harvest in South America weighed on markets. Concerns about high costs for land rentals were widespread. Livestock producers reported improving bottom lines driven by higher prices for milk, hogs, and cattle combined with lower feed costs. However, some hog farms reported losses of young pigs because of disease. Dairy producers have seen a boost in demand from exports. Contacts report that banks are helping farms restructure costs for the coming season to shore up margins. In some cases, troubled farmers were forced to search for new lenders when denied credit.
St. Louis: Red meat production in the southern Mid-West/northern Mid-South region for 2013 was 1.2% higher than in 2012. The production increase was driven by the District’s largest producers in Illinois, Indiana, and Missouri.
Minneapolis: Conditions continued to soften for area farmers, while livestock and dairy producers remained in better shape. More than half of respondents to the Minneapolis Fed’s fourth quarter (January) Survey of Agricultural Credit Conditions said farm incomes decreased in the last three months of 2013, and two-thirds expected incomes to fall in the first quarter of this year. Cattle and hog producers continued to benefit from high prices and falling feed costs, as did dairy producers, according to survey comments. Informal survey results suggest that farmers are reacting to falling corn prices and intend to plant fewer acres of corn and a potentially record high acreage of soybeans this coming spring. January prices received by farmers fell from a year earlier for corn, wheat, soybeans, hogs and chickens; prices increased for cattle, milk, eggs and turkeys.
Kansas City: Crop growing conditions deteriorated, while livestock prices strengthened since the last survey period. Slightly more than half of the winter wheat crop was rated in fair to poor condition as scattered snowfalls provided only marginal soil moisture. Crop prices edged up from recent lows due to an uptick in export demand and concern that South American corn and soybean production would be lower than previously expected. Feeder cattle prices rose further with historically low cow inventories, and strong export demand supported higher fed cattle prices. Hog prices rose amid an intensifying swine virus outbreak that was expected to constrain pork supplies. In addition, production costs for livestock feeders edged down due to lower feed prices. Agricultural bankers indicated that farmland price appreciation moderated from the rapid pace seen the past few years, and most expected values would level off in 2014.
Dallas: After gradually easing throughout the fall, district drought conditions worsened slightly in January and early February. Wheat crop and pasture conditions deteriorated somewhat due to lack of sufficient rainfall. Cotton prices have rallied since December, which may lead more farmers to favor cotton over other row crops when making planting decisions this spring.
San Francisco: Agricultural production expanded on balance. Demand was stable for most crop and livestock products. Concerns about water costs and availability may cause farmers in the California Central Valley to scale back planting. Contacts expect growers to allocate water to more permanent plantings, such as almond and walnut orchards, before allocating water to annual crops, such as corn. In addition, dairy and meat producers may face higher feed costs due to water shortages. ■