Federal Reserve contacts report that agricultural conditions have improved in recent weeks in the Midwest, but weakened across the Richmond, Atlanta, St. Louis, and Minneapolis Fed Districts. Weather disruptions are delaying crop plantings and commodity shipments. A deadly pig virus is impacting hog growers across the Richmond, Chicago, Kansas City, and San Francisco Districts. Prices of beef and pork rose.

Adverse weather is affecting several districts. Winter wheat is suffering due to dry conditions in the Kansas City District, and drought conditions continue to worsen in the Dallas Fed region. In contrast, wet field conditions are delaying planting in the Richmond and Atlanta Districts. Additionally, the Chicago Fed reports that the slow arrival of spring-like weather also is delaying fieldwork, although in some areas, crops perform well after late planting. The Minneapolis and San Francisco Feds report that winter weather disrupted transportation of some crops. Crop prices have increased in recent weeks but remain below year-ago levels across most of the country. Higher soybean prices have shifted planting intentions away from corn. Dairy demand is booming in the Dallas Fed region, especially for export, and prices for dairy products have hit record highs. Hog operations in a few Districts are battling porcine epidemic diarrhea virus, which is fatal to young pigs, and pork prices continue to rise. Beef prices have reached record highs.

Prepared by the Federal Reserve Bank of Richmond and based on information collected through April 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 – Persistent cold temperatures and wet field conditions have delayed row-crop planting in some locations. Contacts report slower small grain growth and some freeze damage to fruit trees. A South Carolina agribusiness reports that winter weather pushed back some of their harvesting timelines, although demand levels remain solid. Beef prices remain high and pork prices have risen due to the spread of porcine epidemic diarrhea virus. The virus appeared in the U.S. for the first time in April and has killed thousands of piglets. The disease is cutting into pork supplies and prompting some traders to wager that hog prices could set records this year.

Atlanta – Sufficient rainfall has left only small pockets of dry conditions across the six-state (Ala., Fla., Ga., La., Miss. and Tenn.) region, some growers have delayed spring planting due to too much precipitation. Florida’s citrus growers continue to seek ways to mitigate the effects of citrus greening and contacts are hopeful that new research funding included in the recently approved Farm Bill will help find a solution to this problem.

Chicago – The slow arrival of spring-like weather is delaying fieldwork. However, concerns about a late start to planting are muted, especially in Illinois and Indiana where 2013 crops performed well after being planted late. The mood among farmers improved as crop prices increased enough from winter lows that breakeven outcomes now seem possible. Hence, there has been more forward contracting of crops than a year ago to manage risk. Higher soybean prices still support a shift in planting intentions toward soybeans and away from corn, but not as much as earlier this year. Fertilizer costs are lower than a year ago, and seed costs are flat. The livestock sector moved further into the black, as milk, hog, and cattle prices increased. Given lower numbers of hogs and cattle available to market, animals were fed longer in order to gain additional weight. Although hog operations are still battling porcine epidemic diarrhea virus, but there are signs that the worst has past.

St. Louis – Farmers in the southern Midwest and northern Mid-South are expected to plant 4% fewer acres of corn this year. In contrast, District farmers are expected to plant 2% more acres of soybeans and 38% additional acres of rice this year than in the previous year.

Minneapolis – Agricultural conditions are mixed, with livestock and dairy producers performing well, and crop producers in worse shape. While crop prices increased slightly in March from the previous month, they remain significantly below the strong levels of recent years. March farm commodity prices fell from a year earlier for corn, wheat, soybeans and chickens; prices increased for cattle, hogs, milk, eggs and turkeys. A freight rail backlog is causing significant shipping delays for dry bean producers and will also likely delay getting the winter wheat harvest to market. District farmers intend to plant fewer acres of corn and significantly more acres of soybeans and wheat in 2014 compared with last year.

Kansas City – Crop growing conditions remained dry in March, while livestock prices increased further since the Feb. 24th survey period. The winter wheat crop is in need of moisture and rated in mostly fair to poor condition. Spring fieldwork has begun, and District farmers are following national trends by intending to plant slightly more soybeans and less corn. With crop prices still lower than a year ago, farm operating loan demand is up as farmers finance a larger portion of crop input costs. However, global supply concerns continue to support strong export prospects, and crop prices rose to a six-month high during the reporting period. Low cow inventories are keeping feeder cattle prices elevated, and strong export demand supports higher fed cattle prices. In addition, hog prices surged as the on-going swine virus cut inventories further.

The Southern Plains is emerging from one of its driest winters on record. Since January 1st, the area considered in extreme drought has more than doubled in Texas, tripled in Oklahoma, and expanded more than six-fold in New Mexico. Source: NIDIS

Dallas – Drought conditions worsened in March, particularly in the Texas panhandle which is where much of the state’s cotton is grown. Winter wheat crop conditions deteriorated somewhat. Farm commodity prices rose over the reporting period, with across-the-board increases in crop prices and particularly strong gains in livestock prices. Beef prices rose to record highs in March in light of strong exports and stable domestic demand coupled with tight cattle supplies. Dairy demand boomed—especially exports—and prices for dairy products moved to record highs. The rise in prices has allowed all segments of the livestock industry to be profitable, an occurrence not all too common.

San Francisco – Demand for most agricultural goods is largely stable, but the supply was somewhat constrained as several weather-related factors crimp production. Demand was stable or up for crop and livestock products, and particularly robust for dairy items. However, storms in parts of the District disrupted transportation of winter vegetables. Contacts’ concerns about water costs and availability mounted, and limited water for irrigation contributed to decreased yields of annual crops, including tomatoes, greens, and onions, in California’s Central Valley. Water shortages led some farmers to reduce cattle herd sizes as well. Pork production fell as some hogs in the District contracted a fatal diarrhea virus. ■

 

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With the California wine market on a cyclical upswing, Harvard Management Company, the Boston-based investment shop for Harvard University’s $33 billion endowment, is quietly assembling a Central Coast vineyard play. The area—located between San Francisco and Los Angeles—is rising in stature as a wine grape-growing region, with Wine Enthusiast magazine dubbing the Paso Robles American Viticultural Area as last year’s “Wine Region of the Year”.

The region is in the cross-hairs of numerous investors. Last November, Hancock Agricultural Investment Group paid $44 million for two Monterey County vineyards totaling 1,582 acres. Hancock, a Boston-based unit of Canadian insurer Manulife Financial Corp., overseas $2.1 billion of farm real estate.

Mercator Research believes Harvard is making its Central Coast purchases via Brodiaea Inc.—a Delaware domiciled entity formed in June 2012. Last month, Brodiaea paid $10.1 million or $1,322 per acre for a 7,622-acre cattle ranch in northeast Santa Barbara County. Brodiaea has spent $61 million so far to acquire 10,176 acres in Santa Barbara and San Luis Obispo Counties, estimates David Hamel, an appraiser in Santa Maria.

Brodiaea’s investment’s are being assembled and managed by Grapevine Capital Partners, a San Luis Obispo venture launched in 2012 by James Ontiveros and Matt Turrentine. Mr. Turrentine declined to identify the funding source for Brodiaea.

Andrew Wiltshire, Harvard Management’s alternative assets manager, also declined to comment on the investment. In January, Harvard secured 125 investors to enable Brodiaea to qualify as a Real Estate Investment Trust. A REIT structure would make it easier for additional investors to join or exit the venture, and could also pave the way for an eventual public stock offering.

Between July 2012 and February 2014, Harvard representatives have knocked on doors and quietly spent $61 million for 10,176 acres in Santa Barbara and San Luis Obispo Counties.

The Brodiaea purchases have attracted local attention for both the market-leading prices paid for properties, and Grapevine Capital’s approach of methodically soliciting sales of unlisted properties. Near Shandon, a farming town in proximity to several large vineyard plantings, Brodiaea paid an estimated $40,366 per plantable acre. That works out to premiums of $5,000 to $10,000 per acre based on historical sales in Shandon. “The sales weren’t making any sense when they came across,” notes an area appraiser.

Though Brodiaea was aggressively bidding at the top of the market, the purchases could pay off if the vineyards can produce big crops and ride the recovering wine grape cycle.

Some market observers have wondered if Brodiaea was a well-timed water play in light of the region’s worsening groundwater shortage. Last August, the San Luis Obispo County Board of Supervisors adopted an “urgency” ordinance that prohibits any new development or new irrigated crop production unless the water it uses is offset by an equal amount of conservation. Water levels in the Paso Robles Groundwater Basin have fallen sharply in recent years—two to six feet a year in some areas—causing wells to go dry and forcing many vineyards and rural residents to drill deeper wells, according to local accounts. The irrigation development restriction remains in place through August 26, 2015. The basin supplies water for 40% of the county’s agriculture sector.

Brodiaea’s managers are now busy ripping out old vines on the San Luis Obispo tracts and redeveloping the properties. Development studies are still underway for the Santa Barbara ranch.

Brodiaea’s purchases followed a 2009 Harvard Business School case study which focused on water resources and farming in California’s Central Valley. Mr. Ontiveros says the timing of Brodiaea’s irrigated land purchases in San Luis Obispo County and the subsequent moratorium on new irrigation development was “pure coincidence.”

Harvard’s California farmland investments are just one of numerous bets in the agriculture and timber sectors that are spread across New Zealand, Romania, Latvia, Argentina, Brazil, Chile, Ecuador and Panamá. The university continues to expand its near six-year old Dairy Farms Partnership, a New Zealand venture in Central Otago, which has grown from 1,125 dairy cattle in 2009 to 7,803 head in 2013.

Harvard bought New Zealand's Big Sky Dairy out of bankruptcy in 2010.

For the year ended June 2013, Harvard valued its New Zealand farm land holdings at $42.8 million, up 49% from the prior year total of $28.7 million, according to a company filing. The venture’s dairy cattle were valued at an additional $11.1 million.  Dairy Farms Partnership also holds stock in New Zealand-based global milk processer and marketer Fonterra Group Co-op Ltd. valued at $10.7 million, and smaller stakes in five fertilizer, farm supply, genetics and irrigation companies. Harvard Management jump-started Dairy Farms Partnership in 2010 by buying the 3,451-acre Big Sky Dairy Farm out of receivership for NZ$34.2 million (Farmland Investor Letter, Dec. 2010). The university made a “bolt-on” acquisition in June 2012 by paying NZ$2.5 million for a nearby 3,415-acre dairy. The deal included NZ$1.2 million for shares of Fonterra.

The Harvard dairy venture reported a $2.9 million operating loss for its fiscal year ended last June, versus a $1.7 million profit in 2012. However, after booking a $3.6 million 2013 paper gain in the value of its farmland holdings, the dairy reported a $4.9 million overall profit. Prospects are looking up this year on expanding global demand for dairy products.  The U.S. Dept. of Agriculture expects the U.S. farm price for milk to average $21.20 per hundredweight this year, versus the $12.83 farmers received in 2009. ■

© 2014 Farmland Investor Letter All rights reserved.

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Federal Reserve contacts report that agricultural conditions continue to soften. The Kansas City Fed notes that farmland price appreciation is moderating from the rapid pace seen in the past few years. Farm-level crop prices fell from a year earlier for corn, wheat, soybeans, hogs, and chickens; prices increased for cotton, rice, oranges, cattle, milk, eggs, and turkeys.

Severe winter weather affected several regions with some crop damage reported by the Richmond and Atlanta Fed districts, while the Chicago Fed notes disruptions in the flow of agricultural products. Both the Kansas City and Dallas Fed districts cite dry conditions adversely affecting wheat crops, while San Francisco reports concerns about water shortages and water costs.

Prepared by the Federal Reserve Bank of Atlanta and based on information collected through February 24, 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: Agriculture contacts reported crop price declines in recent weeks. Falling feed costs and higher cattle prices led contacts to believe it will be a good year for livestock producers. Also, farmers expect an increase in poultry production. However, a North Carolina respondent was concerned about an increase in swine virus in his region. A Virginia nursery owner stated that recent cold weather damage, if any, will not be known for a month or two; even so, he expects a 10% increase in year-over-year sales this spring. A North Carolina agri-business contact reported that tobacco and vegetable producers in his region were cautiously optimistic for the year ahead. In South Carolina, recent ice storms have caused timber damage that is still being assessed.

Chicago: Severe winter weather disrupted the flow of agricultural products between farms and markets during the Jan. 7 – Feb. 24 reporting period. Crops that were sold stayed on farms longer than intended as transportation problems delayed shipments. Contacts also reported shortages of trucks and drivers to deliver inventories from the large harvest last fall. Demand for crops has been better than expected, particularly for corn, pushing inventories lower and prices higher. Soybean prices drifted up as uncertainty regarding the harvest in South America weighed on markets. Concerns about high costs for land rentals were widespread. Livestock producers reported improving bottom lines driven by higher prices for milk, hogs, and cattle combined with lower feed costs. However, some hog farms reported losses of young pigs because of disease. Dairy producers have seen a boost in demand from exports. Contacts report that banks are helping farms restructure costs for the coming season to shore up margins. In some cases, troubled farmers were forced to search for new lenders when denied credit.

St. Louis: Red meat production in the southern Mid-West/northern Mid-South region for 2013 was 1.2% higher than in 2012. The production increase was driven by the District’s largest producers in Illinois, Indiana, and Missouri.

Minneapolis: Conditions continued to soften for area farmers, while livestock and dairy producers remained in better shape. More than half of respondents to the Minneapolis Fed’s fourth quarter (January) Survey of Agricultural Credit Conditions said farm incomes decreased in the last three months of 2013, and two-thirds expected incomes to fall in the first quarter of this year. Cattle and hog producers continued to benefit from high prices and falling feed costs, as did dairy producers, according to survey comments. Informal survey results suggest that farmers are reacting to falling corn prices and intend to plant fewer acres of corn and a potentially record high acreage of soybeans this coming spring. January prices received by farmers fell from a year earlier for corn, wheat, soybeans, hogs and chickens; prices increased for cattle, milk, eggs and turkeys.

Kansas City: Crop growing conditions deteriorated, while livestock prices strengthened since the last survey period. Slightly more than half of the winter wheat crop was rated in fair to poor condition as scattered snowfalls provided only marginal soil moisture. Crop prices edged up from recent lows due to an uptick in export demand and concern that South American corn and soybean production would be lower than previously expected. Feeder cattle prices rose further with historically low cow inventories, and strong export demand supported higher fed cattle prices. Hog prices rose amid an intensifying swine virus outbreak that was expected to constrain pork supplies. In addition, production costs for livestock feeders edged down due to lower feed prices. Agricultural bankers indicated that farmland price appreciation moderated from the rapid pace seen the past few years, and most expected values would level off in 2014.

Dallas: After gradually easing throughout the fall, district drought conditions worsened slightly in January and early February. Wheat crop and pasture conditions deteriorated somewhat due to lack of sufficient rainfall. Cotton prices have rallied since December, which may lead more farmers to favor cotton over other row crops when making planting decisions this spring.

San Francisco: Agricultural production expanded on balance. Demand was stable for most crop and livestock products. Concerns about water costs and availability may cause farmers in the California Central Valley to scale back planting. Contacts expect growers to allocate water to more permanent plantings, such as almond and walnut orchards, before allocating water to annual crops, such as corn. In addition, dairy and meat producers may face higher feed costs due to water shortages. ■

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The Federal Reserve’s January Beige Book of current economic conditions reports that that while crop yields and growing conditions were generally strong and improving at the close of last year, corn and soybean prices remain very low across the country. Because land values are highly correlated to crop prices, we expect cropland prices to soften if grain prices remain weak.

The projected average farm price for the recently harvested U.S. corn crop is $4.40 per bushel—36% under last year’s $6.89 per-bushel estimated average, and the lowest in four years.

Contacts report that an increased number of farmers in the Midwest and western Corn Belt are holding on to their fall crop rather than sell at current prices. Farm conditions are reported as mixed in the Southeast, and weaker in the Upper Midwest.

Prepared by the Federal Reserve Bank of Boston and based on information collected through January 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:  Agricultural reports were generally positive in recent weeks. A few sod and seed companies reported a decline as a result of poor weather conditions. A vegetable farmer in North Carolina said that the excessive rain this season was less destructive than expected, and with increased demand, the year ended better than anticipated. Additionally, a Maryland fruit farmer reported excellent fruit yields due to the cold weather. Another Maryland contact remarked on this season’s increase in corn sales, and added that corn was the leading export crop in his region this year. Reports regarding input and output prices were mixed.

Atlanta: Recent rains improved soil conditions in some areas, while parts of Georgia, Alabama, Louisiana, and Florida experienced dry conditions. Monthly prices paid to farmers for rice and soybeans were up; and prices for corn and cotton were down. The most recent domestic crop production projections for soybeans, corn, and rice were unchanged. Cotton and orange projections were down, although cotton was only down slightly.

Chicago: Corn and soybean prices moved a bit higher over the reporting period, but remained well below their levels of a year ago. Current prices for corn will not cover expected costs for 2014 production, whereas soybean prices would. This may lead to increased soybean planting in the spring. Farmers continued to store crops in anticipation of future price increases. In some locations, however, there was an incentive to sell corn sooner, in part because of an increase in demand for ethanol production, which has returned to profitability. Hog prices moved lower, while cattle prices were little changed. Milk prices edged up, and there was evidence of some expansion in Midwest dairy herds. Parts of the region remained in a drought, which makes the timing of spring precipitation more critical. In addition, there was less fertilizer application last fall due in part to cleaner water regulations.

St. Louis: As of late November 2013, around 98% of the region’s winter wheat crop was rated in fair or better condition, as 89% of the winter wheat crop had emerged, on average, across the region. This rate of progress was moderately faster than the average over the past five years.

Minneapolis: Overall conditions for farmers weakened, although livestock and dairy producers saw improvement. Annual production decreased from a year earlier for wheat, soybeans, dry beans and sugar beets; Corn production increased, but price reductions likely outweighed the benefits to farmers. A farm equipment retailer saw a reduction in sales revenue sooner than expected, due to falling crop prices. Sugar beet farmers are facing steep losses this year due to a decline in sugar prices. December prices received by farmers fell from a year earlier for corn, soybeans, wheat, hay, hogs and chickens; prices increased for cattle, turkeys, eggs, milk and dry beans.

Kansas City: Agricultural growing conditions improved in late November and December, but low crop prices limited farm income expectations. The winter wheat crop was rated in mostly good condition with winter storms providing soil moisture and protective snow cover. However, wheat prices fell slightly since the last survey period, and corn and soybean prices remained at their lowest levels since 2010. Some farmers were holding fall crop inventories rather than selling at current prices. Lower income prospects boosted demand for farm operating loans and dampened farm capital spending at year-end. In the livestock sector, weaker demand for pork from Asian markets placed downward pressure on hog prices. While cattle prices were relatively flat, profit margins for cattle producers may improve as better pasture conditions lessen the need for supplemental feed.

Dallas: Drought conditions continued to ease slightly. The winter wheat crop has had a good start, with crop conditions in better shape than they were a year ago. Severe winter weather in many parts of the region in late November and early December slightly delayed some of the cotton harvest, but the moisture improved soil conditions. Cattle producers continued to benefit from low feed prices and high selling prices, prompting optimism for the industry outlook.

San Francisco: Agricultural output expanded. Demand remained strong for most crop and livestock products. A healthy corn harvest in the region contributed to a decline in feed costs. Water resources were adequate in most areas. ■

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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. ■

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The Federal Reserve’s October Beige Book of current economic conditions reports that demand for quality farmland tracts remains strong despite a continued deterioration in farm sector income prospects.

Heavy rains hurt agriculture in the Richmond, Atlanta, and Kansas City Districts, even resulting in declarations of some natural disaster areas. At the other extreme, some portions of the Chicago, Minneapolis, and Dallas Districts experienced drought conditions, although they eased in some areas over the reporting period. Harvests were reported as behind their normal pace. Nonetheless, crop yields were higher than expected in the Chicago District and about average in the Kansas City District. Strong fruit output was noted in the Richmond, Chicago, and Minneapolis Districts. Cotton output was mixed across the South. Prices fell for corn, soybeans, wheat, hay, cotton, hogs, broilers, turkeys, and eggs, but rose for rice, citrus, grapes, milk, cattle, and dry beans. Livestock producers benefited from lower feed costs, as well as higher beef exports according to the Dallas District. San Francisco reported demand remained strong for most crop and livestock products.

Prepared by the Federal Reserve Bank of Chicago and based on information collected through October 7th, 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: Fruit and peanut yields have been excellent, while cucumber production was reduced this autumn as a result of too much rain. Cotton and soybean harvests are also expected to be low this year because of excess summer rains.

Atlanta: Excessive rain and flooding has heavily damaged some crops. USDA declared most counties in Alabama and many in Georgia, Florida, and Tennessee as natural disaster areas. Since late August, average monthly prices paid to farmers for corn, cotton, soybeans, hogs, and broilers have declined but are higher for rice, citrus, beef, and milk. Lower corn prices benefited livestock producers that rely on corn for feed. Compared to August, cotton estimates for September indicated reduced production in Florida, Mississippi, and Tennessee; higher production in Alabama and Louisiana; and unchanged production in Georgia.

Chicago: Though drought muted production, corn and soybean yields in parts of Michigan, Indiana, Illinois, Iowa and Wisconsin were higher than expected in September. One contact reported that the local harvest would be the best in four years. Soybean yields were more variable than—and not as favorable as—corn yields. In the areas affected by drought, subsoil moisture and genetic advances in seeds reduced yield losses. Rains in September slowed the harvest, even damaging some crops that were mature. Crops harvested and sold early brought a premium due to low crop stocks prior to harvest. Since then, corn prices have dropped relatively more than soybean prices. With much of the harvest still unsold, farmers will store more of the crop in the hope of better selling opportunities over the winter. Milk and cattle prices increased from the previous reporting period, while hog prices decreased. Livestock producers continued to benefit from lower feed costs. Fruit crops bounced back strongly from last year’s devastating freeze, leading to lower prices.

St. Louis: Crop conditions across the southern Midwest and northern Mid-South regions are relatively unchanged from late August. On average, 89% of the region’s corn, cotton, sorghum, and soybean crops were rated in fair or better condition. Similarly, about 80% of the states’ pastureland was rated in fair or better condition. Harvest progress in the region lagged behind the five-year average for all five major crops. Corn, cotton, and rice harvests were 19%, 14%, and 18% behind their five-year averages, respectively. Sorghum and soybean crops fared slightly better at 9% and 8% behind their five-year averages, respectively.

Minneapolis: Agricultural conditions have deteriorated since late August. Drought conditions returned to the eastern part of the District in late summer, with parts of eastern North Dakota and central Minnesota seeing severe drought conditions in early September. Crop progress remains behind average due to late spring planting, and yields are likely to be affected. While much of the region’s corn and soybean crops remain in good or excellent condition, overall quality has fallen in recent weeks. However, in Minnesota, apple growers are expecting a strong harvest. Prices received by farmers in September increased from a year earlier for hogs, cattle, milk, dry beans and chickens; prices for corn, wheat, soybeans, hay, eggs and turkeys fell from a year earlier.

Kansas City: Crop production expectations are little changed from late August, but falling prices have lowered farm income expectations. With most of the corn and soybean crops still in relatively good condition, overall District yields were expected to be about average. As harvest began, however, a greater probability of near-record corn and soybean production nationally led to a drop in prices, cutting farm income expectations. Meanwhile, heavy rainfall in Colorado and flooding along the South Platte River affected some agricultural lowlands. Scattered storms slowed harvest activity and winter wheat planting, but helped soil moisture conditions. Lower feed prices have narrowed losses for cattle feedlot operators and improved profitability for hog producers. Weaker farm income prospects are expected to curtail farm household and capital spending, but demand for quality farmland remains strong.

Dallas: The District remains largely in drought, although the severity lessened in late September in Texas due to good rainfall and the excessive heat tapering off. The harvest has been progressing normally for row crops, and conditions have been mostly fair to good. Improved moisture conditions have increased optimism for the winter wheat crop. Beef exports increased over the reporting period.

San Francisco: Agricultural sales and production activity expanded in the District. Demand remains strong for most crop and livestock products. Competition for grapes in the California wine industry has pushed up grape prices, which has passed through to raisin prices, reducing sales and increasing inventories of raisins. Water availability was adequate on net, but limited in some areas. ■

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The Federal Reserve’s September Beige Book of current economic conditions reports that despite weaker farm income prospects, farmland values continued to set records, with demand for farmland driven in part by high levels of wealth in the farm sector.

Demand for agricultural products expanded during the reporting period, although production activity was limited by extreme weather in some areas. Droughts or dry weather in the Chicago, Kansas City, and Dallas Districts constrained farming activity, but some growing areas within the Chicago and Dallas Districts were relieved by much-needed rainfall. By contrast, extremely wet conditions led to delayed planting and reduced yields for some crops in the Richmond and Atlanta Districts. Kansas City noted that wheat production was below average and corn crops were threatened by disease, and Atlanta and Dallas indicated that the cotton crop was smaller than anticipated. Chicago noted that, despite the dry weather, corn and soybean crops were in better condition than they were during the drought last year. Meanwhile, the St. Louis District anticipates robust production activity, with corn crop yields expected to increase substantially over last year. San Francisco noted that demand was generally strong for most crop and livestock products, and Atlanta found that poultry farming and fruit production were robust.

Prepared by the Federal Reserve Bank of San Francisco and based on information collected through August 26th, 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: Farmland values have remained relatively constant since the beginning of this year, according to our recent agricultural credit survey. Heavy rains in the Mid-Atlantic delayed the harvest of some grains and hay cutting, particularly in the lowlands of the Carolinas. According to one source, cotton, peanuts, and soybeans might be damaged by the unusually high levels of precipitation. Another contact in South Carolina noted that some late crops could not be planted and root systems of plants in the ground have not developed well because of the rain. He added that cotton and tobacco crops “do not look good at all.” A number of contacts noted that corn prices had risen and were expected to remain high for some time. Prices of beef and pork were also up, according to sources. Poultry farming and fruit production were strong in recent weeks.

Atlanta: Since the last report, most of the District received ample or, in some cases, excessive rain. These rains have resulted in problems with pesticide efficacy, delayed planting, and damage or reduced yield for some crops. On a year-over-year basis, prices paid to farmers were elevated for meat protein (beef, hogs, and broilers), corn for grain and cotton saw price reductions, and soybean prices remained unchanged.

Chicago: Dry weather affected crop conditions in much of the Midwest during the reporting period, lowering expectations for crop yields. Soybeans especially needed rain in order to fill out pods. Some of Iowa once again faced drought conditions. Nonetheless, corn and soybean conditions remained much better than they were during the drought last year. There were even parts of the Midwest that received adequate moisture and should have above normal yields. Indeed, corn and soybean prices decreased on both spot and futures markets. There were also reports that less of this year’s harvest than usual was pre-sold. Milk, hog and cattle prices declined from the prior reporting period, with livestock producers benefiting from falling feed costs. District milk production once again outpaced the levels of a year ago.

St. Louis: Farmers in the District expect that the corn crop in 2013 will produce, on average, 59% more corn than last year. In contrast, the District cotton crop is expected to fall short of 2012 levels both in terms of acres harvested and production. Across the District states, 92% of the corn crop was rated in fair or better condition; the sorghum and soybean crops were similarly rated, with 93% and 91% in fair or better condition, respectively.

Minneapolis: Conditions for District agricultural producers improved since the last report. While progress remains slower than average, recent warm and dry weather has helped crops catch up, as the majority of the corn, soybean and spring wheat crops are listed in good or excellent condition in all District states. According to the Minneapolis Fed’s July survey of agricultural credit conditions, 90% of respondents said farm incomes increased or held steady over the previous three months, with similar results for household and capital spending. Despite the wet beginning to the growing season, USDA estimates indicate that acres of corn and soybeans planted in District states saw only a small decline compared with last year. North Dakota wheat acreage fell nearly 1 million acres, or 12%, from last year. Prices received by producers increased in July from a year earlier for cattle, hogs, milk, eggs, chicken, hay and potatoes; prices for corn, wheat, dry beans and turkeys fell, while soybean prices were flat.

Kansas City: Despite weaker farm income prospects, farmland values continued to set records, with demand for farmland driven in part by high levels of wealth in the farm sector. Farm income prospects dimmed as drought persisted and crop prices fell. While yields varied, winter wheat production was below average across the District. In some areas without irrigation, dry weather hindered corn development and weakened plants against disease. Much of the District’s corn crop was considered in fair condition although the soybean crop was still rated in mostly good condition. Crop prices fell in August on higher global production estimates. Even with a drop in feed prices, losses continued for most feedlot operators as cattle prices moved lower. In contrast, a rebound in hog prices returned profits to some hog producers. Demand for farm operating loans strengthened with high input costs and reduced farm income.

Dallas: Drought conditions continued to affect most of the district, although the severity in several areas was eased by unusually good July rainfall. Farmers began harvesting row crops, and conditions were mostly fair to good. The cotton crop is expected to be smaller than previously anticipated, causing cotton prices to improve slightly. Feeder cattle prices rose over the reporting period because of tight supplies and lower feed costs.

San Francisco: Sales of agricultural items and resource-related production activity expanded in the District. Demand was generally strong for most crop and livestock products. However, relatively light traffic at fast-food restaurants limited sales of some vegetables. In addition, some grain producers expect slightly lower profits due to price declines. ■

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The pace of farmland price appreciation across the Mid-South and Southeast U.S. continued to flatten in the second quarter, according to the latest Farmland Market Survey by Farmland Investor Letter.

Non-irrigated cropland values rose at an estimated 6.3% year-over-year pace, down from 7% in the first quarter. Irrigated tracts increased at an 8.2% annual pace, unchanged from the previous quarter. Pasture values were up 2.4% from a year ago, also virtually even from the 2.5% 12-month rate through the first quarter.

The survey, conducted from June 15, 2013 through August 14, 2013 was based on 102 responses from appraisers, property managers, lenders, real estate brokers and landowners located in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Missouri and Tennessee. Farmers and investors expect cropland values to remain stable through the third quarter, despite declining crop commodity prices. Low interest rates continue to support land values. However, with the Federal Reserve expected to begin tapering 10-year Treasury note purchases in coming months, mortgage rates are already starting to notch up. A sustained increase in interest rates would put pressure on further land price appreciation. In addition, strong returns from the stock market—the S&P 500 Index has generated an 18.3% total return year to date—continue to compete for the attention of investors.

Farmland Values

Survey participants estimated that non-irrigated cropland across the region was worth an average $3,141 per acre in the second quarter of 2013. Irrigated cropland values averaged $4,477 per acre. Pasture values averaged $2,239 per acre. On an individual state basis, non-irrigated cropland values ranged from a high of $4,925 per acre in Missouri to a low of $2,479 per acre in Georgia. Irrigated cropland values ranged from a high of $6,833 per acre in Missouri to $3,556 per acre in Alabama. Pasture values ranged from a high of $2,900 per acre in Florida to $1,771 per acre in Arkansas.

Cash Rents

Cash rent increases for cropland and pasture continue to lag land price inflation across the region. Rents on non-irrigated cropland averaged $114 per acre, ranging from an average $69 per acre in Georgia to $213 per acre in Missouri. Irrigated cash rents averaged $199 per acre across the region, and ranged from an average $135 per acre in Alabama to $328 per acre in Florida. Pasture rents averaged $36 per acre, ranging from $24 per acre in Florida to $78 per acre in Tennessee. Rent income yields, which are calculated by dividing gross cash rent by land value, offers insights into the relative pricing of land tracts regionally. Across the Mid-South/Southeast, non-irrigated tracts are estimated to be generating a 3.6% rent income yield; irrigated tracts 4.4% and pasture 1.6%.

Market Outlook

With farm crop prices continuing to contract, survey panelists remain cautious in their outlook for both cropland and pasture values, forecasting that prices would remain stable though the third quarter. Respondents are most optimistic for irrigated cropland tracts, where 35% expect prices to increase, while 64% look for no change. Buyer demand for irrigated tracts appears strongest in Missouri and Louisiana where 67% and 60%, respectively, of respondents look for irrigated land values to continue rising. Interest in non-irrigated tracts appears strongest in Missouri, where 80% of respondents forecast higher prices. ■

© 2013 Farmland Investor Letter All rights reserved.

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The Federal Reserve’s July Beige Book of current economic conditions reports that cropland prices moved higher but are expected to hold steady during the growing season.

Reports from the 12 Federal Reserve Districts indicate that agricultural conditions varied across the Districts because of differing weather conditions. Crop conditions improved in the Chicago and St. Louis Districts, while agricultural production increased in the San Francisco District and is expected to improve in the Kansas City District. Extremely wet conditions delayed planting and even resulted in some farmers in the Richmond and Minneapolis Districts planting soybeans instead of corn. Excessive rains in the Richmond District also damaged the wheat crop in some areas. Contacts note persistent drought conditions in some areas of the Kansas City and San Francisco Districts and in most of the Dallas District. Winter wheat harvest yields were highly variable because of crop damage from freezing and drought in the Dallas and Kansas City Districts. The condition of pastureland in the Atlanta and St. Louis Districts has improved since the previous report.

Prepared by the Federal Reserve Bank of St. Louis and based on information collected through July 8th, 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: The effect of continued heavy rainfall on agriculture was mixed, slowing planting or damaging some crops while bolstering others. While a South Carolina farm loan banker reported that the wet weather earlier in the year “started the crop season off in a positive light,” other reports from South Carolina and Virginia indicated that the rains delayed planting and even resulted in one farmer planting soybeans and cotton instead of corn. In addition, a South Carolina contact noted that heavy rains had damaged the regional wheat crop to the extent that sprouts were unacceptable for export. A North Carolina source also noted a recent shift to cotton over corn, due to declining corn prices. Nevertheless, another source remarked that agricultural lending was “booming” and demand for wood products continued to rise.

Atlanta: Soil conditions improved across much of the District, thanks to more favorable, drier weather. Pasture conditions improved as well.  Monthly prices paid to farmers were up for cotton, soybeans, corn for grain, rice, citrus, hogs, and broilers. During this same period, beef prices were down slightly, but still moderately higher than this time last year.

Chicago: Crop conditions improved over the course of the reporting period, with crops ending the period in better shape than a year ago. District farmers managed to get their crops in the ground despite additional planting delays caused by the unseasonably wet weather. Only a small percentage of acres will not grow a crop, where water pooled in low-lying areas and replanting was not possible. Fruit crops could produce record yields this year, in sharp contrast with the large losses seen a year ago. With stocks of corn and soybeans expected to remain at very low levels until the fall harvest, corn and soybean prices moved higher. Crop prices are expected to decline following an anticipated record fall harvest. The first cutting of hay was mostly complete and was much better than last year. Supported by rejuvenated pastures, milk output also increased. Milk prices were roughly unchanged during the reporting period, while hog prices surged, and cattle prices were lower.

St. Louis: At the end of June, the condition of over 90% of the cotton, corn, soybeans, sorghum, and rice crops was rated as fair or better in all the District states. Furthermore, at least 70% of total pastureland across the District states was rated in good or excellent condition. The winter wheat harvest was behind its five-year average and behind the progress made by the same time last year.

Minneapolis: The agricultural sector weakened since June. District farmers made progress after a late spring, but remain behind the five-year average for corn and soybean plantings due to recent heavy rains. In some areas, farmers are expected to switch from corn to soybeans due to the weather. Prices increased from a year earlier for wheat, corn, soybeans, chickens, milk, hogs, cattle and eggs; prices fell for turkeys and dry beans. The late plantings, along with concerns about warmer and drier weather later this summer, caused the USDA to increase its corn price forecast slightly, though prices are still expected to decrease from current levels.

Kansas City: Agricultural production expectations improved somewhat with recent rains, but varied regionally. Summer storms eased dry conditions in eastern parts of the District, though drought persisted in western regions. The winter wheat harvest was underway or complete in Oklahoma and Kansas with highly variable yields depending on the extent of drought and freeze damage. Despite expectations of a poor wheat harvest in some areas, wheat prices fell since the last survey period. The corn and soybean crops, however, were rated in mostly good or better condition with the improved soil moisture. Although corn and soybean prices remained historically high, improved growing conditions led to a drop in expected harvest prices for both crops. Feedlot operators struggled with high input costs and falling cattle prices, but losses narrowed for hog producers after a rebound in hog prices. Cropland values moved higher but were expected to hold steady during the growing season.

Dallas: Much of the Eleventh District remained in severe drought, with conditions little changed from the last reporting period. Row crop farmers completed planting, and crop conditions were mostly fair to good, according to respondents. The wheat harvest continued, but production was sharply reduced as a very large share of the acres planted was abandoned because of drought and freeze damage.

San Francisco: Agricultural sales and production activity expanded. Demand was strong for most crop and livestock products. However, some contacts expressed concern about the lack of availability of manual laborers. Insufficient water also was a concern in parts of the District, with this year’s rain and snow pack levels running well below seasonal norms. ■

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As expectations grow that the American economy will continue to recover, investors are now focusing on when the Federal Reserve will begin tapering its bond-buying operations.

Fed Chairman Ben Bernanke says the central bank could begin trimming bond purchases in the coming months, and completely end the program by the middle of next year.

The Fed buys $85 billion in bonds a month in its bid to stimulate the economy.

Following the central bank’s June policy-setting meeting, the Fed upgraded its assessment of the economy and Chairman Ben Bernanke said the central bank could begin trimming bond purchases in the coming months, and completely end the program by the middle of next year as the jobless rate reaches a projected 7%.

Mr. Bernanke added that winding down the program is contingent on the steady growth the Fed has been seeing and that there is no trigger for a reduction in purchases. Mr. Bernanke also said the Fed could ramp up its buying, even after cutting, if conditions warrant.

Mortgage rates tend to track yields on 10-year Treasury notes, which have jumped as anxious investors sell off Treasury securities. On June 19, the yield on the 10-year Treasury spiked to 2.325%, the highest level in 14-months, up from a low of 1.62% at the beginning of May. The average rate on Federal Agricultural Mortgage Corporation farm mortgage products is up a quarter of a percentage point from a month ago, says Larry Jones a relationship manager in Washington, D.C.

For more analysis on farm mortgage rate trends, visit our Farm Mortgage Rate Watch page.

 

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