Crop conditions are promising in many Fed bank districts, but low commodity prices continue to pressure agricultural incomes, according to the latest Fed Beige Book report. Favorable weather has gotten the growing season off to a solid start in the St. Louis and Minneapolis Fed District regions and improved production prospects in the Dallas Fed District. However, wet, cool weather in the Chicago District has put planting behind last spring’s pace, and rain has also delayed planting and harvesting in the Richmond District.

U.S. Federal Reserve System Districts

In contrast, parts of the Atlanta District have been experiencing abnormally dry to moderate drought conditions. Though prices for soybeans and hogs have increased recently from their low points, most crop and animal product prices remain below year-earlier levels. Chicago, St. Louis, and Kansas City note that prices are below profitable levels for some producers

Prepared at the Federal Reserve Bank of Minneapolis and based on information collected through May 22, the Beige Book summarizes comments received from business 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 – Agricultural activity increased modestly since the April 7th Beige Book report. Cotton, corn, and peanut planting are underway. However, Virginia and North Carolina farmers report delayed planting and harvesting due to protracted rains. South Carolina planters continue to report more labor-intensive field prep work due to last year’s flooding. Input prices have remained unchanged while crop prices and beef prices have fallen slightly.

Atlanta – Most of the region remains drought free. However, parts of Georgia, Tennessee, and Alabama are experiencing abnormally dry to moderate drought conditions. Farmers continue to focus on efficient production and controlling input costs to optimize income in a low commodity price environment. Low feed prices are benefiting poultry and other protein producers who rely on grain for feed. On a year-over-year basis, monthly prices paid to farmers for corn, cotton, rice, soybeans, beef, broilers, and eggs declined, although on a month over month basis prices rose for soybeans, beef, and broilers.

Chicago – The growing season across most the Midwest is expected to get off to a decent start, even though wet, cool weather has put both the planting and emergence of corn and soybeans behind the pace of last spring. Corn and soybean prices rose since early April, but soybean prices rose more, which is expected to prompt farmers to plant more soybeans at the expense of corn. At current prices, farmers can generally cover this year’s costs for soybean production but not for corn. Many farmers took advantage of the price rally and have boosted their working capital by selling stored grain from last year and locking in prices on new crops. Milk and dairy product prices have moved lower, as production remains strong. Cattle prices are down as well. Hog prices have increased, helped by solid demand from China.

St. Louis – The row crop outlook across the southern Midwest and northern Mid-South has slightly improved: Corn, cotton, rice, and soybeans were, as of early May, ahead of their respective five-year average levels of planting progress, and crop prices have risen from their lows. However, even with a near-perfect year in the field, most row crop farmers will struggle to break even, absent a significant and sustained crop price rebound.

Minneapolis – Agricultural conditions remain weak, despite favorable weather going into the growing season. Nearly all respondents to the Minneapolis Fed’s first quarter survey of agricultural credit conditions report that farm incomes are down from a year ago, and more than 80% expect them to fall further in the second quarter. Planting progress and early emergence for corn, soybeans, sugar beets, and small grains as of mid-May were well ahead of five-year averages in most of north central region. Farmer prices for corn, wheat, soybeans, hay, hogs, cattle, chickens, eggs, and milk were lower in March versus a year ago; turkey prices were higher.

Kansas City – Farm sector credit conditions deteriorated further, with weak farm income and low commodity prices. Despite a moderate increase in soybean and hog prices in May, contacts report that most commodity prices remain below levels considered to be profitable, and generally at or below year-ago levels. Low commodity prices and low farm income are weighing on credit conditions. Bankers report further reductions in loan repayment rates and a significant increase in the number of farm borrowers with increased carry-over debt. Contacts expect demand for short-term financing to remain strong amid a relatively pessimistic outlook for farm income. Alongside low farm income, farmland values and cash rents also fell slightly from a year ago.

Dallas – Favorable weather and good soil moisture have improved production prospects for 2016 crops. Above-average yields would help offset some of the negative impact of low crop prices on farm income. Cattle prices fell sharply in April, partly due to higher beef production, but recovered some of the loss in early May as retail beef demand increased in anticipation of the Memorial Day holiday. Milk prices have plummeted from already-low levels over the past six weeks, putting further pressure on dairies’ profit margins.

San Francisco – Activity expanded somewhat as domestic demand and sales continue to grow for a wide variety of crops. A surplus of potatoes from the 2015 harvest has created excess inventories and led some growers to switch planting plans to wheat. The strong dollar continues to crimp agricultural exports in general, although overseas sales of pork products continue to post strong growth. Demand for poultry exports has been robust as pent-up demand from last year’s avian flu outbreak persisted and lower input feed prices help exporters remain competitive globally. ■

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Agricultural economic conditions have been flat to moderately down across the Federal Reserve Districts since mid-January. Low commodity prices and weak global demand continue to pressure farm income. The Federal Reserve Bank of Minneapolis reports weaker farm incomes and lower prices for all commodities except turkeys.

Farmers in the Chicago District are adjusting to the dip in commodity prices by turning to cheaper seed varieties and selling equipment. Kansas City reports weakening credit conditions and modest declines in farmland values amid tighter profit margins for crop and livestock producers. In the Richmond, Dallas, and San Francisco Districts, agricultural exports are slowing alongside the strengthening dollar.

In agricultural production, Richmond reports limited activity due to typical seasonal slowdowns, while St. Louis reports an increase in red meat production compared with the previous year. Growing conditions in the Dallas District are improved from the previous year due to increased soil moisture, and most of the Atlanta District was drought free by mid-February. However, San Francisco farmers and ranchers continue to struggle with persistent drought, despite above-average winter rainfall.

U.S. Federal Reserve System Districts

Prepared at the Federal Reserve Bank of Kansas City and based on information collected through February 22, the Beige Book summarizes comments received from business 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 – Underlying agribusiness conditions are unchanged since the January report, even as contacts cite a typical seasonal slowdown. Farmers reported limited planting and harvesting in the past six weeks. Most sources note that input prices are unchanged. However dairy farmers say that input prices continue to decrease. Commodity prices remain depressed.

Atlanta – With the exception of Florida, where rainfall has been much above normal, the southeastern U.S. saw January rainfall totals ranging from near average to below average. However, by mid-February the region was drought free with only a small portion of Georgia characterized as abnormally dry. In parts of Florida where rainfall was excessive, there were reports of flooding, damaged fields, and delayed fieldwork. Florida’s orange forecast remains unchanged from January and down from last season. On a year-over-year basis, monthly prices paid to farmers for corn, cotton, rice, soybeans, beef, broilers, and eggs have declined.

Chicago – Midwest crop farmers continue to cut capacity following another year of low incomes coupled with unexpectedly small declines in input costs. There were reports of major downsizings of large operations and of some farms going out of business. Farmers are also cutting capacity by purchasing cheaper but lower-yielding seeds and by selling machinery. Correspondingly, prices for used farm machinery are low because of plentiful supply. Corn, soybean, and wheat prices moved higher during the reporting period, but remain quite low compared to their five-year averages. Dairy, egg, hog, and cattle prices were up from the prior reporting period, but also remain low.

St. Louis – As of the end of January, almost 93% of the southern Midwest and northern Mid-South region’s winter wheat crop was rated fair or better. Red meat production in 2015 was 6% higher than in the previous year, an increase that has been explained, in part, by lower feed costs, although meat prices also fell during the year.

Minneapolis - District agricultural conditions remain weak. A majority of respondents to the Minneapolis Fed’s fourth quarter (January) survey of agricultural credit conditions reported that farm incomes and capital spending fell in the previous three months compared with a year earlier. An animal feed dealer reported that after several years of strong sales, its revenue outlook was flat due to recent livestock price declines. Prices received by farmers fell in December from a year earlier for corn, wheat, soybeans, hay, hogs, cattle, chickens, eggs, and milk; prices for turkeys increased from a year earlier

Kansas City – Farm income weakened further since the last survey period, and cropland values fell modestly. Persistently low crop prices and sharp declines in cattle prices are cutting farm income in all District states. District cropland values continue to decrease slightly, while pasture values have leveled off. Similarly, cash rental rates on all types of farmland moderated and are expected to fall further in the next three months. Alongside lower farm income, farm loan repayment rates weakened further, and demand increased for new loans as well as loan renewals and extensions. Looking forward, District contacts expect modest declines in cropland values as well as continued pressure on credit conditions amid tighter profit margins for crop and livestock producers.

Dallas – Soil moisture conditions remain healthy, with only 2% of Texas considered abnormally dry in February.  A year ago, 56% of Texas was in some level of drought. While prospects for 2016 crop production are strong, farmers face low prices and downward pressure on exports due to the strong dollar. Industry contacts say many producers will not be able to cover their production costs at current crop price levels, and some have received calls from their lenders voicing concern. Cotton—Texas’ top crop—has seen prices fall even lower with risks to the downside. Contacts report that low prices and weakening demand will likely result in fewer cotton acres planted this year. Milk prices continue to drift unprofitably low, despite the supply disruption in the wake of winter storm Goliath, which killed roughly 30,000 dairy cows in West Texas and New Mexico. Cattle prices were lower than the record levels posted a year ago but are still relatively high.

San Francisco – Farm sector activity is unchanged since the reporting period. Continued dollar appreciation has slowed agricultural exports in general, although exports of pork products increased as demand from Asia strengthened. Contacts report that domestic demand from restaurants slowed for some vegetable products. Despite an unusually wet winter, overcoming prior drought conditions remains a costly challenge for growers and ranchers in much of the region. Contacts expect conditions in the agriculture sector to remain roughly the same over the coming year as commodity prices remain soft and exports continue to be subdued. ■

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Federal Reserve bank districts report that agricultural sectors have weakened overall since November, and that farm incomes are stressed. Flooding and drought in various regions are aggravating the effects of already low and falling prices for farm commodities, caused in part by weak global demand and the strong dollar.

U.S. Federal Reserve System Districts

With few exceptions, commodity prices for crops and livestock have remained low or have fallen since November. Regional Fed banks in Chicago, Kansas City, and Dallas report that conditions are not profitable for some producers, as farm input prices have not fallen as fast. These three Districts also cite large harvests as a factor in keeping commodity prices low, while Kansas City and San Francisco reported that weak global demand and the strong dollar held down livestock exports. Drought remains a problem in parts of the San Francisco District for some producers, while heavy rain and flooding impacted harvests in the Richmond, Atlanta, St. Louis, and Dallas Districts.

Prepared by the Federal Reserve Bank of Philadelphia and based on information collected through January 4, the Beige Book summarizes comments received from business 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 – Agribusiness activity remains soft. Farmers in Virginia, North Carolina, and South Carolina continue to report delayed harvesting from the wet fall, and more South Carolina contacts report poor crop quality as a result of flooding. Some South Carolina farmers have reported ruined cotton crops. Moreover, continued rain following the floods in South Carolina left other establishments unable to harvest soybeans for animal feed. A South Carolina sod farmer said he had only one week of good harvest days during the past month. In contrast, a Maryland contact report that farming was stable across the state, with continued strength in the poultry sector. Cotton prices decreased and farm input prices were unchanged since the December report.

Atlanta – Most of the District is drought free, but as a result of excessive rain, winds, and flooding earlier in the year, the U.S. Dept. of Agriculture declared several counties in Alabama, Florida and Georgia as natural disaster areas. Florida’s orange forecast was down both from last month’s forecast and last season’s production. On a year-over-year basis, prices paid to farmers for cotton, rice, soybeans, beef, and broilers have declined while corn’s price rose slightly.

ChicagoFarm incomes declined as the large harvest pushed product prices down faster than input costs. Most contacts expect that Midwest farmers will face tighter (and possibly negative) margins this year. Many farmers are holding on to much of their corn and soybean harvest, hoping that prices will go up before they need to sell them to fund 2016 operations. Many are also waiting on purchasing inputs, anticipating that seed and fertilizer prices may decline further. One contact reported that more farmers are testing fields for nutritional deficiency before applying fertilizer to reduce input costs. Dairy, egg, hog, and cattle prices moved lower, although cattle prices rallied some toward the end of the reporting period.

St. Louis – As of late November, the region’s winter wheat crop was roughly 95% planted, which is consistent with recent history. More than 94% of the winter wheat crop is rated fair or better. However, due to warmer weather about 86% of the crop had already emerged—a proportion that is notably higher than recent averages. Moreover, late December flooding has led to concerns about significant crop damage.

Minneapolis – Agricultural conditions softened since the December report. Crop prices remain low, and farm incomes for 2015 are expected to be at their lowest levels in a decade. District sugar beet growers are concerned about reduced demand, as candy producer Hersey Co. switched last year to cane sugar due to consumer concerns about genetically modified ingredients. Several District cattle producers reported that a sharp drop in prices late in the year substantially downgraded their financial outlook. Prices received by farmers fell in November compared with a year earlier for wheat, soybeans, hay, milk, chickens, hogs, and cattle; corn prices were unchanged, while prices increased for eggs and turkeys.

Kansas City – Agricultural commodity prices generally remained low since November, keeping farm income expectations subdued. Although crop prices increased slightly in December, a strong fall harvest kept corn prices near year-ago-levels, with soybean prices significantly less than a year ago. Wheat prices also remain lower than year-ago levels alongside solid winter growing conditions throughout the west central Plains region. In the livestock sector, both cattle and hog prices are significantly below year-ago levels in the face of increasing supplies and relatively weak global demand. Both crop and livestock prices remain below the cost of production for some producers, continuing to strain farm income and cash flow. District contacts expect income to remain relatively soft in the coming months.

Dallas – The region continues to receive ample rainfall, keeping drought conditions at bay and providing good soil moisture going into the spring planting season. Last year’s crop harvest was above the five-year averages for most crops. However, crop prices are generally low, even sub-profitable for some producers, and much of the cotton crop has been discounted further because of damage from excess rain. The low prices are leading to some financial stress among agricultural producers. Cattle prices are well below year-ago levels but are still quite strong historically.

San Francisco – Activity in the agriculture sector has been flat since November. Despite an unusually wet early winter, drought conditions remain a challenge for growers and ranchers in much of the region. Shortages in water reserves have reduced the size and weight of some nut harvests and raised production costs by forcing producers in parts of California to pump more water. Inventories for dairy products and beef cattle rose as the elevated dollar held down exports. By contrast, dollar effects on exports of pork products were partially offset by rising demand from East Asia. ■

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