The Federal Reserve’s December Beige Book of current economic conditions reports that farmland values continue to rise in most regions, though price increases are moderating.
Contacts reported strong crop yields, while agricultural commodity prices fell and drought conditions stabilized or improved. Richmond, Chicago, and Kansas City reported strong crop yields for fall harvests. Contacts in the Kansas City District noted decreases in farm incomes and increases in the demand for farm operating loans, as prices softened in response to rising yields. The Chicago, Kansas City, Dallas, and San Francisco Districts indicated strong demand and increased profitability in livestock due to lower feed costs. Atlanta contacts reported making investments in various types of agricultural equipment as a means to further improve production and contain costs. Farm prices for wheat, corn, and soybeans fell in the Southeast, Midwest and North Central regions. However, in Midwest, higher exports cushioned the decline. The Kansas City District indicated rising farmland values, although the rate of increase slowed.
Prepared by the Federal Reserve Bank of Cleveland and based on information collected through November 22, 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: Crop yields varied since the November report. Corn yields are above the 2012 record and on track for a strong finish this year. Cotton and peanut yields are steady in North Carolina, though below the 2012 record. South Carolina cotton declined moderately from the 2012 record, while peanut yields there are on par with year ago levels. In animal farming, a contact noted that poultry production was declining on the Eastern Shore of Virginia and Maryland due to regulatory changes and water pollution issues.
Atlanta: Drought conditions in Mississippi and Louisiana have eased while other areas in the Southeast continue to experience abnormally dry conditions. Since November, monthly prices paid to farmers for cotton, rice, and oranges have increased while prices for corn, soybeans, beef, hogs, and poultry have declined. The most recent crop production projections for corn and soybeans are up from last year while cotton, rice, and orange projections are down. Contacts reported making investments in irrigation equipment, grain storage, and replacing smaller equipment with larger, more modern units as ways to improve production and/or contain costs.
Chicago: Harvesting took longer this fall than a year ago, given the larger size of the crop and delays from precipitation. Crop yields are higher than expected across Indiana, Illinois, Iowa, Michigan, Iowa and Wisconsin, even in areas that experienced yield losses from drought. In general, farmers tended to sell soybeans and store corn. Pastures and winter wheat fields were in better shape than they were last year. Crop prices fell over the reporting period, though higher exports of corn, soybeans, and wheat cushioned the decline. Lower fertilizer prices relieved some concerns about 2014 crop production costs. Milk and cattle prices were a bit higher; hog prices fell, although they remained above the level of a year ago. The prospects for livestock producers improved due to reduced feed costs.
St. Louis: As of mid-November, over 90% of the northern Mid-South region’s corn, sorghum, and rice crops had been harvested, while harvest progress of cotton and soybean crops was 81% and 89% complete, respectively. Winter wheat planting was 87% complete, on average, across the District.
Minneapolis: The agriculture sector is experiencing a slight contraction. In the third quarter (October) survey of agricultural credit conditions, 28% of lenders reported that farm incomes decreased from the second quarter, while 15% reported increases; nearly half expect incomes to decrease in the final three months of 2013. October prices received by farmers are down from a year earlier for wheat, corn, soybeans, milk, eggs, turkeys and cattle; prices increased for chickens, calves, hogs and dry beans. An early-October blizzard in western South Dakota killed an estimated 15,000 cattle there. Drought conditions abated in most of the North-Central region in late fall.
Kansas City: A steep drop in crop prices, which partly reflect better-than-expected corn and soybean yields, lowered farm income in the Western Plains and boosted demand for farm operating loans since the last survey period. Some livestock operators in western Nebraska also faced significant herd losses due to a severe October snowstorm. Farm income is expected to remain weaker than last year despite support from crop insurance and a gradual improvement in livestock sector profitability, due to lower feed costs. With reduced incomes, agricultural bankers report the number of requests for loan renewals and extensions is edging up and demand for new farm operating loans is also increasing. Farmland values continue to inflate, but the pace of gains is moderating and most contacts expected values to hold steady through the end of the year.
Dallas: Drought conditions continue to ease, although the Texas panhandle area remains particularly dry. Corn and sorghum production is up, while cotton production is down. The livestock sector continues to benefit from improved pasture conditions, lower feed costs, and high selling prices for cattle. Contacts report that cattle prices hit record highs.
San Francisco: The agricultural sector continues to expand. Demand remains strong for most crop and livestock products, although weaker commodity prices caused some contacts to pare back their expectations for production activity in 2014. Water resources remain sufficient in most areas. ■