Prices for high-quality cropland remain stable across most regions, despite lower prices for many crops since last month’s Beige Book report. Crop prices are falling due to early reports of very strong crop yields and expectations for high yields in regions where harvest is just getting underway. This higher production is expected to offset some of the effect of lower prices on farm incomes. Federal Reserve Districts in Chicago, St. Louis, and Kansas City report very good crop conditions at the beginning of harvest. Chicago and Minneapolis expect large corn and soybean harvests. Drought conditions persisted in parts of the Atlanta, Dallas, and San Francisco Districts, but have improved with recent rains. Atlanta, Chicago, Minneapolis, and Dallas note that livestock, poultry, and dairy producers are benefiting from increased output prices and lower feed costs.
Prepared by the Federal Reserve Bank of Minneapolis and based on information collected through October 6, 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 — Corn prices declined further over the past six weeks. Soybean prices also fell, while cotton prices were unchanged. A West Virginia farmer stated that grain prices declined after seven years of above-average prices. Farmers’ input prices were unchanged in South Carolina and Virginia. In South Carolina, corn harvesting is complete and peanut harvesting is underway. In West Virginia, crop planting, reseeding, and harvesting are on schedule.
Atlanta —Parts of Alabama, Florida, and Georgia have experienced abnormally dry-to-severe drought conditions, but conditions have improved across the region following recent rains.
Lower corn prices continue to benefit poultry and livestock producers that rely on corn for feed. USDA has announced new financial assistance for Florida citrus growers to help with the removal and replacement of stock affected by citrus greening.
Chicago — Overall crop conditions were very good at the start of the harvest. The Midwest should see record corn and soybean harvests. Early results suggest yields for corn and soybeans will range from above-average to record-high levels. The huge anticipated harvests have pushed down corn and soybean prices. Crop income is lower than a year ago as higher yields will be insufficient to offset lower prices. Crop insurance will cover some of the lost income, but farmers already are planning to trim costs for next year, particularly on farm equipment and other capital purchases. Corn farmers helped bid up cattle prices, with the intention of using the abundant harvest as feed for their own cattle production rather than selling it. Hog and milk prices were higher as well, contributing to production expansions in pork and dairy products.
St. Louis — As of late September, about 75% of the District’s corn, rice, and soybean crops was rated in good or excellent condition. Similarly, about 60% of pastureland was rated in good or excellent condition; Kentucky’s pastureland, in particular, has improved significantly since the previous report. Harvest completion rates across the southern Midwest and northern Mid-South region have lagged behind their five-year averages.
Minneapolis — Agricultural conditions remain mixed. The most recent USDA forecast calls for substantially increased production of corn and soybeans this year in District states compared with 2013. Livestock and dairy producers continue to benefit from lower feed costs and high output prices. Most of the district’s crops are in good or excellent condition despite late planting; however, an early frost damaged soybeans in some parts of Minnesota and South Dakota. Relative to a year earlier, prices received by farmers in September were lower for corn, soybeans, and wheat; prices increased for hay, cattle, hogs, poultry, and milk.
Kansas City — Despite expectations of above-average yields, further declines in crop prices continue to weigh on farm income prospects in the region. However, crop insurance and some pre-selling of this year’s crop at higher prices earlier in the year may help mitigate the effect on overall farm incomes of recent spot price declines. The corn and soybean crops are mostly rated in good to excellent condition as harvest gets underway. Cattle prices have risen since month, while hog prices have fallen due to increased production, due to higher carcass weights. Demand for farm operating loans has risen substantially from last year as more crop producers borrow to cover operating costs. Bankers also report a rise in requests for agricultural loan renewals and extensions and note that loan repayment rates have edged down from the high levels seen the past few years. Despite the sharp drop in crop prices, farmland values are typically holding at high levels.
Dallas — Drought conditions eased slightly over the past six weeks, although more than half of Texas remains in a drought that has plagued the state since the end of 2010. Harvesting of row crops like cotton and corn continues, and crop conditions are slightly better than last year. Cattle prices continue at a record high while feed prices have fallen, boosting profitability for cattle producers. Domestic and export beef demand remain strong despite retail beef prices reaching a record high in August. Improved moisture conditions overall have increased optimism for winter crops and expanded prospects for cattle herd rebuilding.
San Francisco — Conditions are mixed. Continuing droughts in California and parts of Washington and Idaho have increased water costs and crimped production of cotton and various grains, vegetables, nuts, and legumes. Farmers have increased the number of acres lying fallow and reduced herd sizes. However, low corn prices and stable fertilizer and machinery prices are benefiting dairy and feedlot operations. Milk prices have increased, and export demand for hay from the West Coast reached an historical peak. Agricultural land prices remain relatively high. ■