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.
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.
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. ■