Despite late planting in many areas, most fall crops are in good or better condition than last month, and expectations of strong production this year continue to weigh on crop prices. With the correlation of land values to crop prices typically 90% or higher, look for continued downward price pressure on land tracts growing crops such as corn, with burdensome supply outlooks.
Growing conditions vary with precipitation levels. Heavy rains have improved soil moisture levels in the Atlanta, Chicago, Minneapolis, Kansas City, and Dallas Districts, though there are isolated reports of hail and flood damage. However, recent rains were too late to aid the development of the winter wheat crop and actually delayed the harvest in the Kansas City and Dallas Districts, leading to expectations for below-average yields. Persistent drought in the San Francisco District is prompting some producers to curb new planting to conserve water for permanent crops.
Prepared by the Federal Reserve Bank of Kansas City and based on information collected through July 7, 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 – Replanting of crops due to extended winter weather has been completed and wheat harvesting is finished up in the Carolinas. Overall, fertilizer prices remain steady, while agricultural chemical prices and crop seed prices have increased slightly. Some agribusiness owners report lower commodity prices compared to last year. However, a sod company report higher prices as planting and harvesting increased due to high demand and low inventory. Cotton prices have stabilized.
Atlanta – Much of Tennessee, southwest Louisiana, and the southernmost tip of Florida continue to experience abnormally dry conditions. Some other areas have received excessive rain causing delays in production although recent, dryer weather conditions have allowed planting to continue. Producers are benefiting from higher prices for many of their agricultural products, lower costs for feed and fertilizer, and fuel costs are leveling off. Growing international demand and tight domestic supplies are driving recent record-high cattle and hog prices.
Chicago – The District’s corn and soybean crops made up ground after a late start to planting as favorable weather helped plants emerge more quickly than the five-year average. The consensus among contacts is that the corn and soybean crops are in excellent shape, but are unlikely to set harvest records because of late plantings. Corn, soybean, and wheat prices have moved down since last month’s report. More farmers than a year ago have taken advantage of the spring rally in crop prices to lock in a profit on a larger portion of their expected harvest. Hog prices have risen as disease affected supplies. Farmers are receiving lower prices for milk and cattle, yet these prices remain well above production costs.
St. Louis – District farmers wrapped up corn, cotton, and rice plantings in late June. In contrast, soybean and sorghum plantings are behind the five-year average rate of progress in Tennessee, Arkansas, Mississippi, and Kentucky. Over 90% of the region’s corn, cotton, rice, sorghum, and soybean crops are rated in fair or better condition. The winter wheat harvest is behind its five-year average rate of progress for all states in this region.
Minneapolis – Crop producers have made progress catching up on the late spring, but flooding due to heavy rains has led to crop losses in some areas. Corn and soybean emergence rates are consistent with five-year averages, and most crops are in good or excellent condition. District producers have planted fewer acres of corn and more soybeans this year, in line with expectations. The USDA forecasts solid harvests and a slight reduction in crop prices by year end. Prices received by farmers fell in June from a year earlier for corn, soybeans, wheat, and hay; prices increased for cattle, hogs, poultry, eggs, and milk.
Kansas City – Heavy summer storms in June improved soil moisture for developing crops and pastures but also caused some wind, hail and flood damage. Wet fields have delayed the winter wheat harvest in Oklahoma and Kansas, and yields will depend on the extent of drought, freeze and hail damage. Despite expectations of a poor wheat harvest in much of the region, wheat prices have fallen since the last survey period. The corn and soybean crops are in good condition overall, and improved growing conditions have led to a drop in prices for both crops. Cattle prices continue to rise, but feeder cattle prices have recently increased much faster than fed cattle prices and narrowed margins for feedlot operators. The cumulative effect of reduced piglet numbers due to porcine epidemic diarrhea virus and strong export demand for pork is supporting further gains in hog prices, even though pork production forecasts have been raised due to heavier dressed weights and higher than expected slaughter in the second quarter.
Dallas – Drought conditions have eased since June. Widespread rains have greatly improved prospects for row crops, especially cotton, but arrived too late to aid the Texas wheat crop, which is expected to be down 20% this year. Most crop prices have fallen over the past six weeks due to expected stronger U.S. production. Pasture conditions have improved and cattle prices continue to set new historical highs. Domestic demand for beef remains very strong despite record prices, while international demand for cotton remains low.
San Francisco – Drought conditions are crimping production of some agricultural and resource-related goods. Contacts cite ongoing concerns about water costs and availability. They also mention that it will be challenging for regulatory agencies to address issues related to pricing and prioritizing limited water supplies if low levels of rainfall and snow pack persist next year. Producers are reducing livestock herd sizes and plantings of annual crops, such as tomatoes and rice. Most permanent crops, including nut and fruit trees, have not been affected yet, but some farmers may choose to reduce new plantings or remove less productive orchards. Farmers in Idaho anticipate high yields of grains, wheat, and potatoes this year. Dairy operations continue to benefit from low feed costs. ■