Despite extensive damage to crops from record rainfall earlier this year in the southern Midwest and northern Mid-South and uneven conditions in the Midwest and Lake states, anticipated yields are up for corn and soybeans.

U.S. Federal Reserve System Districts

Lower farm income forecasts and expectations that grain prices may not improve significantly due to growing supplies, are raising caution flags in some key cropping regions. The Kansas City Fed reports signs of financial strain in Nebraska and other regions most dependent on crop production as prices have fallen, credit conditions worsened and cropland values softened. Similarly, capital spending and demand for farm equipment fell in Minneapolis, while Dallas District farmers managed costs in the face of low expected revenues. Isolated severe drought conditions developed in the Atlanta and Minneapolis Districts, and San Francisco reports serious concerns about drought and inadequate water resources affecting future harvests.

Prepared at the Federal Reserve Bank of Boston and based on information collected through August 24, 2015, 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 - Conditions have improved modestly in recent weeks. Corn harvesting is underway, although some crop yields in North Carolina are low due to dry weather conditions earlier in the season. Sod sales have increased since early July. Commodity prices remain low, while corn prices fell further. Input prices remain unchanged.

Atlanta - Areas affected by drought conditions expanded in the southeast since the last report. Most drought-affected areas were categorized as abnormally dry to moderate, but parts of southeastern Florida experienced severe to extreme drought conditions. All District states forecast lower cotton production than last year. Conversely, soybean and peanut production forecasts show a net production increase. The USDA reports year-over-year cropland values increasing everywhere in the District except Alabama which reported no price change. Pasture values rose in most states, but declined 1.9% in Georgia, and weakened modestly in Florida. 

Chicago - The condition of the corn and soybean crops is uneven across the Midwest, with record yields possible in some areas and low yields likely in others. Nationally, yield expectations moved higher, contributing to lower corn and soybean prices. Corn and soybean producers who locked in prices during the rally earlier in the summer should be able to break even on a portion of their output, but most others likely will not cover input costs if they sell their harvest at current prices. Wheat prices have also moved lower. Hog prices have been flat, dairy prices have moved up, and cattle prices have moved down. Poultry houses have started to receive birds to replace those culled due to the influenza outbreak earlier this year, but the recovery has been slow, so egg and turkey production are expected to remain lower than normal for the rest of the year. Egg prices rose.

St. Louis - Crop conditions have deteriorated slightly for corn and soybeans but improved for cotton and rice. The share of corn and soybean crops rated in good or excellent condition declined slightly since early July. However, close to 20% of the corn and soybean crops across Illinois, Indiana, and Missouri was rated in very poor or poor condition. The outlook for many row-crop farmers remains negative as a result of lasting damage from record rainfall. As of late July, approximately 20% of the Missouri sorghum and soybean crops remained unplanted. In contrast, since early July, there has been a slight increase in the percent of the region’s cotton and rice crops rated in good or excellent condition. Most of the improvement for the region’s cotton crop is due to improved conditions in Tennessee.

Minneapolis -  Conditions have improved for most of the region’s producers since early July. The majority of corn, soybean, and spring wheat acres were listed in good or excellent condition as of mid-August; progress on the spring wheat, oats, and barley harvests is well ahead of recent years. Though most of the region remains free from drought, federal disaster aid is now available to ranchers in 15 Montana counties stricken by severe drought. Low crop prices continue to depress farm finances. Three-quarters of respondents to the Minneapolis Fed’s July survey of agricultural credit conditions say that farm incomes and capital spending decreased in the previous three months, and a similar share expect them to continue to fall in the third quarter. Prices received by farmers in June fell from a year earlier for corn, soybeans, wheat, hay, hogs, milk, and chickens; prices increased for cattle, eggs, and turkeys.

Kansas City - Farm income remains subdued, and credit conditions have weakened since the last survey period. After rebounding briefly in June, crop prices fell sharply in July and early August due to improved growing conditions and expectations of a strong fall harvest. Although loan repayment rates declined slightly compared to a year ago, bankers report only minor loan repayment problems, and very few applications for operating loans were denied. Signs of financial strain were strongest in regions most dependent on crop production, such as Nebraska, Kansas, and western Missouri. Contacts are more optimistic in Oklahoma and Colorado, where farm income is being supported by profits in the cow-calf sector. Low crop prices, however, and expectations of reduced farm income are prompting further modest declines in cropland values. Non-irrigated cropland values declined almost 3%, on average, from last year. The declines were largest in Nebraska and Missouri, while values increased modestly in Oklahoma and the Mountain States

Dallas - East Texas has gotten dry again, but overall moisture conditions remain favorable for crop production and livestock grazing. The crop harvest is underway in some areas and yields have been good overall but quite variable based on when the crops were planted and how wet the fields were at planting. The cattle sector continues to benefit from good pasture conditions, low feed costs and high selling prices, which has prompted herd rebuilding. Grain prices have moved lower over and farmers are managing costs in light of lower expected revenues.

San Francisco - Agricultural activity grew slightly over the reporting period. Drought remains a serious concern in many areas, with uneven impacts across products. Wheat and potato output has grown modestly; however, harvests for nuts, grapes, and fruit trees occurred earlier and were smaller than anticipated. Higher prices have somewhat offset lower production in regard to farm revenue, but inadequate water resources continue to pose a significant challenge to future harvests. Dairy and other livestock producers are taking advantage of the ample supply of corn to reduce overall feed prices through substitution for more expensive feed products. ■

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Significant rainfall across many key cropping regions is causing crop damage in the Midwest and northern Mid-South. The heavy rains, along with the arrival of the El Niño ocean-atmosphere phenomenon, have helped push up prices of wheat, corn and soybeans in recent weeks as commodity investors, farmers and traders prepare for low crop yields.

High water levels on the Mississippi River have disrupted grain shipments. In the Plains, heavy rains have prompted lower expectations for the winter wheat harvest, although the rain also improved soil moisture for developing crops and pastures. Contacts in the Southern Plains report that rainfall has relieved drought and improved growing conditions. Drought continues in California, although agricultural output generally expanded over the May 22 to July 3 reporting period.

The Atlanta Fed reports soybean and cotton plantings are close to their five-year averages. Minneapolis notes crop progress is ahead of schedule and reports no new outbreaks of avian flu among poultry stock. The Chicago and San Francisco Fed Districts note the avian flu outbreak pushed up prices for poultry and eggs. The Kansas City Fed says beef cattle production is lower than last year, holding cattle prices high. The San Francisco Fed also mentioned low cattle supply as ranchers replenish herds.

Prepared at the Federal Reserve Bank of Atlanta and based on information collected through July 3, 2015, 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 business conditions have improved modestly stronger since June. Growers report said that seasonal planting of corn, soybeans, and cotton is nearly over. A farmer in western Virginia reports large yields of hay and higher hay prices. Sales of other agricultural products declined, however. A nursery executive in Virginia Beach notes that sales flattened seasonally. A farmer in North Carolina reports he had to replant crops damaged by dry weather. However some farmers had to destroy crops due to extremely low yields, with insufficient time to replant. Since the previous report which summarized conditions through May 22, commodity prices remain low, with the exception of hay prices. Input prices are slightly higher.

Atlanta – Parts of Alabama, Florida, Georgia, Mississippi, and Tennessee experienced drought conditions categorized from abnormally dry to some pockets of severe drought, the driest designations being in the southernmost tip of Florida and South Georgia. Soybean planting in Louisiana is on par with the five year average, while Mississippi and Tennessee are slightly behind. Cotton planting has been or is almost completed in Alabama, Georgia, Louisiana, Mississippi, and Tennessee and on par or slightly ahead of the five-year averages.

EL NIÑO ¡AY, CARAMBA!—Government forecasters have confirmed El Niño is back for the first time since the 2009-10 farming season. In the first week of July, heavy rains fell from the Southern Plains to the southern Corn Belt. Parts of the central and eastern Corn Belt had already received more than twice the normal precipitation in June, causing delays in late-spring fieldwork and deterioration of crop ratings. Illinois, Indiana and Ohio posted the wettest June on record dating back to 1895.

Chicago – Widespread rains have saturated fields across much of the Midwest, damaging crops and restricting fieldwork. Planting extended longer than normal and soybean emergence was behind the five-year average. In contrast, corn planting finished and plants emerged before the rains hit. High water levels on the Mississippi River stalled the loading and shipping of grain barges.

Both higher feed costs and lower prices for hogs, milk, and cattle have tightened margins for livestock producers. Egg prices remain elevated, as the fallout from bird flu continues to crimp production. In addition to the large number of deaths, poultry houses are taking longer than expected to clean facilities and prepare for replacement birds.

St. Louis – Crop conditions have deteriorated since late May due to persistent severe weather in the Midwest. About 59% of the southern Midwest and northern Mid-South regions’ corn crop remains in good or excellent condition, representing close to a 16-percentage-point decline since previous report. Notably, Illinois received a record amount of rainfall across the state, topping the previous record established in 1902. Even on farms with good drainage, farmers were challenged to clear flooded fields. The damage to field crops also extended to soybean fields, where 76% of the crop is rated in good or excellent condition, down 10 percentage points since the previous report. In contrast, the condition of cotton, rice, and sorghum crops improved moderately since late May.

Minneapolis – Conditions have improved slightly since late May. Crop progress is ahead of schedule in the six-state region, with most corn, soybean and spring wheat crops rated in good or excellent condition. While solid rains have left most of the district free from drought, farmers in some areas report that wet conditions are holding back hay and winter wheat harvests. No new outbreaks of avian flu have been reported in recent weeks. Prices received by farmers in May are down from a year earlier for corn, soybeans, wheat, hay, hogs, milk and chickens; prices increased for cattle, eggs and turkeys.

Kansas City - Farm production expectations have fallen slightly since the last survey. Heavy storms in late May reduced yield forecasts for the winter wheat harvest in Kansas and Oklahoma and also delayed soybean planting progress throughout the region. However, the substantial rainfall generally improved soil moisture for developing crops and pastures, and over half of the corn crop in Nebraska, Missouri, and Kansas was in good or excellent condition. With reduced production expectations, the price of hard red winter wheat rose modestly in June, and corn and soybean prices also increased slightly. In the livestock sector, beef cattle production through May was slightly lower than last year, holding cattle prices near historically high levels. Conversely, hog production over the same period grew modestly, placing downward pressure on hog and retail pork prices.

Dallas - Continued rainfall has caused some localized flooding, but overall it has improved growing conditions and lifted the four-state region out of a long drought. There has been a sufficient break in the wet weather for most producers to catch up on wheat harvesting and planting of cotton and grain crops.

The cotton crop is off to a good start, and above-average grain production is expected. Pasture conditions are better than they have been in several years, and cattle producers are continuing to  benefit from high prices.

California experienced its hottest June on record, further boosting irrigation demands. Isolated showers have provided only inconsequential relief from the four-year drought.

San Francisco – Agricultural output grew further over the May 22 to July 3 reporting period, but growth was uneven across sectors. High mortality rates from avian influenza dragged down the supply of poultry and pushed up prices. The overall supply of cattle remains low, as ranchers retain heifers from market to replenish herds. The supply of walnuts and almonds was held down by drought conditions in California, and contacts report that water-intensive crops more generally face a challenging outlook. ■

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Agricultural conditions have improved across most regions of the country, except for in California where drought conditions persist, according to the latest Fed Beige Book report.

Significant rainfall has eased drought conditions and improved growing conditions in much of the Southeast, central and southern Plains down into Texas. Overly wet areas in the Mid-Atlantic and southern Midwest/northern Mid-South regions dried enough for planting to move ahead. In South Texas, wet field conditions prevented some producers from planting crops in time. Crop planting was underway across all the U.S. and progressing at an above-average pace from the northern Plains down through the Midwest and Mid-South, and for soybeans in the Southeast.

Deteriorating financial conditions in the crop sector are pushing down non-irrigated and irrigated cropland values, but ranchland values remain strong amid positive profit margins for cow-calf operators. Contacts across several Fed districts report that crop prices for cotton, wheat, corn, and soybeans remain low and in some cases moved lower since early April, while cattle prices remain historically high.  The St. Louis, Minneapolis, and Kansas City Fed Districts report that farm income declined. Poultry flocks in the Midwest have been hit hard by avian flu. An outbreak in Minnesota is expected to cost state Minnesota producers more than $300 million.

Prepared at the Federal Reserve Bank of Dallas based on information collected through May 22, 2015, the Beige Book summarizes comments received from business and other outside contacts.

U.S. Federal Reserve System Districts

The following is a Fed region-by-region summary of farm sector economic conditions, starting in the Mid-Atlantic and moving west:

Richmond – Contacts report improved business conditions. Farmers in South Carolina, North Carolina and Virginia say that wet conditions from the late spring improved, and in some cases reversed to dry conditions. A nursery executive in Virginia notes that the late arrival of spring weather had a small negative effect on planting timelines, but his six-month outlook is positive. Planting has been underway for corn and soybeans, while hay harvesting has begun. Low crop prices persist for cotton, wheat and soybeans, while corn prices continue to decline.

Atlanta - Significant rain has eased drought conditions in much of the Southeast. Florida’s orange forecast is below both the previous month’s reading and last year’s production level, primarily due to citrus greening. Some Alabama producers are planting less cotton in favor of crops commanding better prices or crops that cost less to produce (such as soybeans and peanuts). By mid-May, soybean planting was ahead of the five-year average in Louisiana, Mississippi and Tennessee. Cotton planting in Alabama and Georgia and rice planting in Louisiana and Mississippi are short of their five-year averages.

Chicago - Corn and soybean planting has been proceeding rapidly, exceeding the pace of last spring. Crop emergence for corn and soybean is generally ahead of the five-year average. Although precipitation has been adequate for most of the Midwest, there are drought conditions in some central and northern parts of Wisconsin. The good start to the year has raised expectations of a big fall harvest and helped push corn and soybean prices lower. Strong production pushed milk prices lower, yet some dairy product prices were higher, especially butter. Hog prices have increased from their recent lows, as supplies tighten due to a seasonal production decline. Cattle prices remain high. Poultry flocks, especially egg layers in Iowa, have been hit hard by bird flu, and egg prices have risen in response.

St. Louis - Bankers look for farm income, capital spending, farmland values, and cash rents to decline on a year-over-year basis in the second quarter of 2015. As of early May, planting progress across the region had recovered from earlier weather-related delays. In particular, planting progress rates exceed the five-year average for corn, cotton, rice, sorghum and soybeans. Dark poultry meat exports were down substantially—a decline attributed to international fears resulting from instances of avian flu outbreaks in the Midwest.

Minneapolis - Conditions have been mixed. Crop planting progress is so far well ahead of the region’s five-year average. While dry conditions persist in some areas, drought conditions have abated in much of the upper Midwest owing to heavy recent rains. Nearly 80% of bankers report that farm incomes fell in the first quarter, with a similar pessimistic outlook for the second quarter. The outbreak of avian flu is expected to cost Minnesota turkey producers more than $300 million. Prices received by farmers in March decreased from a year earlier for corn, soybeans, wheat, hay, milk, chickens, and hogs; prices for eggs and cattle increased.

Kansas City- Farm income prospects continue to decline due to persistently low crop prices. Corn, soybean and wheat prices remain significantly below year-ago levels, dampening farm income expectations despite improved growing conditions due to timely rains. Tighter working capital and high input costs have boosted demand for new farm loans as well as renewals and extensions on already-existing loans. Bankers also report a slight rise in carry-over debt relative to last year. Although sufficient funds are available to meet increased loan demand, loan repayment rates fell and are expected to fall further in the next several months. Deteriorating financial conditions in the crop sector is pushing down non-irrigated and irrigated cropland values, but ranchland values remain strong amid positive profit margins for cow-calf operators.

Rains have boosted topsoil moisture and eased irrigation requirements, but in many states provided negligible relief from long-term, hydrological drought.

Dallas- Significant rainfall across most of the region has greatly improved soil moisture and pasture conditions, and helped replenish ponds and lakes. However, wet field conditions have prevented some producers in South Texas from planting crops by the insurance deadline, and heavy storms in North Texas damaged some of the wheat crop. Prospects for the 2015 crop year are nonetheless strong, with expectations for above-average yields. Grain prices have generally moved down and cotton prices remain below profitable levels for producers. The cattle sector continues to benefit from strong demand and historically high prices.

San Francisco – Farm sector output grew. Contacts report excess supply and low prices for some agricultural products, notably potatoes and dairy, reflecting global competition and an appreciated dollar that has reduced exports. In contrast, demand for livestock, notably cattle, has been strong, keeping prices and profitability high. Nut and raisin growers have also enjoyed strong demand for their crops, propelled in part by an increase in exports that occurred despite the elevated value of the dollar. However, drought conditions continue to strain water resources, and contacts express concern that this could lead to a decline in fruit and nut production during the harvest season. Capital investment in the agricultural sector is expanding at a modest pace, with most spending aimed at enhancing productivity. ■

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