Growing conditions and farm output are solid in some Districts, but drought in the South and excessive moisture in the Mid-Atlantic and Mid-South have hampered production. Lower crop and livestock prices continue to raise concerns that farm income will weaken.
Drought conditions exist in parts of the Atlanta and Dallas Districts, and excessive rainfall occurred in the Richmond and St. Louis Districts. Corn and soybean crops are in excellent shape in the Chicago, Minneapolis and Kansas City Districts, and the San Francisco District reports that grain yields have been excellent.
Prepared by the Federal Reserve Bank of New York and based on information collected through October 5, 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 – Corn harvesting is finished. However, farmers report that dry conditions earlier in the season have resulted in low, and in some cases zero, corn crop yields. Cotton and peanut harvesting are underway. In early October, extended rainfall in South Carolina caused severe flooding in some areas. One peanut farmer says that he expects much of his crop is affected by mold due to the flooding. A sod farmer reports he will have to replant a recently sown crop. Cotton prices have been decreasing since the last report. Farmers’ input prices are unchanged.
Atlanta - Drought conditions expanded in the District since the last report. Most drought-affected areas were categorized as abnormally dry to severe, and parts of Mississippi experienced extreme drought conditions. Mississippi’s rice harvest is well underway although slightly behind its five-year average, while in Louisiana, the harvest was almost completed and on par with its five-year average. Both Louisiana and Mississippi’s soybean harvests were well underway and ahead of their five-year averages. Cotton and peanut harvesting were in the early stages throughout the District.
Chicago - The condition of the corn and soybean crops improved over the August 24 – October 5 reporting period. Relative to last year, crop conditions are better in Iowa and Wisconsin, mixed in Michigan, and worse in Illinois and Indiana. Harvesting is somewhat behind the normal pace, especially for corn, which is maturing late. Overall, yield reports suggest that the corn harvest won’t reach last year’s record level, while the soybean harvest may surpass last year’s record. Corn prices have moved up and were higher than a year ago, while soybean prices have drifted down and were lower than a year ago. Because of a wide range in yields and differing rental arrangements, the profitability of crop operations ranges from substantial losses to just break-even.
This month, rural bankers reported that annual cash rental rates across 10 mostly Midwest and Plains states averaged $229 per acre, well below rents recorded six months ago, according to a survey by Creighton University.
Wheat prices recovered some, as did milk prices. Hog and cattle prices were lower. Poultry operators continue to rebuild from the avian influenza outbreak, and egg prices have eased as production recovered. Producers, however, are concerned about a repeat outbreak as the fall migration of wild birds began.
St. Louis - Row crop yields are expected to be about 10% below 2014 levels due to extensive wet weather. Many contacts believe that crops with earlier planting seasons, such as corn, will suffer yield cuts up to 30% in the most rain-ridden areas. With the recent decline in crop prices and stickiness of some input prices, production levels are not expected to be high enough to prevent a decline in net farm income. While most livestock-related prices are also trending downward, the recent bird flu outbreak has had a mixed impact on poultry prices.
Minneapolis - While growing conditions have been good, the income outlook for agricultural producers remains weak. District crops have been in mostly good or excellent condition, with wheat and small grains harvests progressing well ahead of average; record corn and soybean yields are expected in some areas. The prospects of a very good production year will help make up for low prices, but break-even will be a stretch for many, notes a banker. Prices received by farmers fell in August compared with a year earlier for soybeans, wheat, hay, milk, chickens, hogs, and cattle. Prices increased for corn, eggs, calves, and turkeys. In other news, Syngenta announced a $20 million expansion to its seed research facility in Goodhue County, Minnesota.
Kansas City - Farm income expectations remain subdued as low crop prices have persisted and livestock prices declined since the last survey period. With corn and soybean crops in good-to-excellent condition throughout most of the District, expectations of a large harvest have kept prices near last year’s level and slightly less than year-ago levels this past summer. In addition to strong production expectations, sluggish export demand for agricultural products has put further downward pressure on crop and livestock prices, as both fed and feeder cattle prices decreased significantly in September. The cow-calf sector is an exception, where calf prices and profits remain strong. Weaker farm income and reduced cash flow continue to drive demand for additional short-term financing.
Dallas - Drought conditions have worsened in East Texas and northern Louisiana over the August 24 – October 5 reporting period. Texas wheat production was average this year, and wheat prices continue to slide, largely due to weak global demand. While the El Nino weather pattern—expected this winter—would be good for 2016 wheat crop production, prices are below break-even for producers. The latest estimates for Texas cotton production are lower than expected due to weak yields. Cotton export sales are weak, with demand from China—a major importer of Texas cotton—down year over year. Cattle prices dropped sharply over the last six weeks, causing Texas feedlots to lose money.
San Francisco - Agricultural activity expanded slightly during the reporting period. Contacts note that grain yields have been excellent, although ample supply has held down profits for individual growers. Higher-than-normal temperatures helped boost potato yields but cut crop quality somewhat. Some contacts cite concern that the strong dollar has been restraining agricultural exports, and producers have not yet adjusted crop plans to account for slower demand growth from China. ■