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.

EL NIÑO ¡AY, CARAMBA!—Government forecasters have confirmed El Niño is back for the first time since the 2009-10 farming season. In the first week of July, heavy rains fell from the Southern Plains to the southern Corn Belt. Parts of the central and eastern Corn Belt had already received more than twice the normal precipitation in June, causing delays in late-spring fieldwork and deterioration of crop ratings. Illinois, Indiana and Ohio posted the wettest June on record dating back to 1895.

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.

California experienced its hottest June on record, further boosting irrigation demands. Isolated showers have provided only inconsequential relief from the four-year drought.

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. ■

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Agricultural conditions have improved across most regions of the country, except for in California where drought conditions persist, according to the latest Fed Beige Book report.

Significant rainfall has eased drought conditions and improved growing conditions in much of the Southeast, central and southern Plains down into Texas. Overly wet areas in the Mid-Atlantic and southern Midwest/northern Mid-South regions dried enough for planting to move ahead. In South Texas, wet field conditions prevented some producers from planting crops in time. Crop planting was underway across all the U.S. and progressing at an above-average pace from the northern Plains down through the Midwest and Mid-South, and for soybeans in the Southeast.

Deteriorating financial conditions in the crop sector are pushing down non-irrigated and irrigated cropland values, but ranchland values remain strong amid positive profit margins for cow-calf operators. Contacts across several Fed districts report that crop prices for cotton, wheat, corn, and soybeans remain low and in some cases moved lower since early April, while cattle prices remain historically high.  The St. Louis, Minneapolis, and Kansas City Fed Districts report that farm income declined. Poultry flocks in the Midwest have been hit hard by avian flu. An outbreak in Minnesota is expected to cost state Minnesota producers more than $300 million.

Prepared at the Federal Reserve Bank of Dallas based on information collected through May 22, 2015, the Beige Book summarizes comments received from business and other outside contacts.

U.S. Federal Reserve System Districts

The following is a Fed region-by-region summary of farm sector economic conditions, starting in the Mid-Atlantic and moving west:

Richmond – Contacts report improved business conditions. Farmers in South Carolina, North Carolina and Virginia say that wet conditions from the late spring improved, and in some cases reversed to dry conditions. A nursery executive in Virginia notes that the late arrival of spring weather had a small negative effect on planting timelines, but his six-month outlook is positive. Planting has been underway for corn and soybeans, while hay harvesting has begun. Low crop prices persist for cotton, wheat and soybeans, while corn prices continue to decline.

Atlanta - Significant rain has eased drought conditions in much of the Southeast. Florida’s orange forecast is below both the previous month’s reading and last year’s production level, primarily due to citrus greening. Some Alabama producers are planting less cotton in favor of crops commanding better prices or crops that cost less to produce (such as soybeans and peanuts). By mid-May, soybean planting was ahead of the five-year average in Louisiana, Mississippi and Tennessee. Cotton planting in Alabama and Georgia and rice planting in Louisiana and Mississippi are short of their five-year averages.

Chicago - Corn and soybean planting has been proceeding rapidly, exceeding the pace of last spring. Crop emergence for corn and soybean is generally ahead of the five-year average. Although precipitation has been adequate for most of the Midwest, there are drought conditions in some central and northern parts of Wisconsin. The good start to the year has raised expectations of a big fall harvest and helped push corn and soybean prices lower. Strong production pushed milk prices lower, yet some dairy product prices were higher, especially butter. Hog prices have increased from their recent lows, as supplies tighten due to a seasonal production decline. Cattle prices remain high. Poultry flocks, especially egg layers in Iowa, have been hit hard by bird flu, and egg prices have risen in response.

St. Louis - Bankers look for farm income, capital spending, farmland values, and cash rents to decline on a year-over-year basis in the second quarter of 2015. As of early May, planting progress across the region had recovered from earlier weather-related delays. In particular, planting progress rates exceed the five-year average for corn, cotton, rice, sorghum and soybeans. Dark poultry meat exports were down substantially—a decline attributed to international fears resulting from instances of avian flu outbreaks in the Midwest.

Minneapolis - Conditions have been mixed. Crop planting progress is so far well ahead of the region’s five-year average. While dry conditions persist in some areas, drought conditions have abated in much of the upper Midwest owing to heavy recent rains. Nearly 80% of bankers report that farm incomes fell in the first quarter, with a similar pessimistic outlook for the second quarter. The outbreak of avian flu is expected to cost Minnesota turkey producers more than $300 million. Prices received by farmers in March decreased from a year earlier for corn, soybeans, wheat, hay, milk, chickens, and hogs; prices for eggs and cattle increased.

Kansas City- Farm income prospects continue to decline due to persistently low crop prices. Corn, soybean and wheat prices remain significantly below year-ago levels, dampening farm income expectations despite improved growing conditions due to timely rains. Tighter working capital and high input costs have boosted demand for new farm loans as well as renewals and extensions on already-existing loans. Bankers also report a slight rise in carry-over debt relative to last year. Although sufficient funds are available to meet increased loan demand, loan repayment rates fell and are expected to fall further in the next several months. Deteriorating financial conditions in the crop sector is pushing down non-irrigated and irrigated cropland values, but ranchland values remain strong amid positive profit margins for cow-calf operators.

Rains have boosted topsoil moisture and eased irrigation requirements, but in many states provided negligible relief from long-term, hydrological drought.

Dallas- Significant rainfall across most of the region has greatly improved soil moisture and pasture conditions, and helped replenish ponds and lakes. However, wet field conditions have prevented some producers in South Texas from planting crops by the insurance deadline, and heavy storms in North Texas damaged some of the wheat crop. Prospects for the 2015 crop year are nonetheless strong, with expectations for above-average yields. Grain prices have generally moved down and cotton prices remain below profitable levels for producers. The cattle sector continues to benefit from strong demand and historically high prices.

San Francisco – Farm sector output grew. Contacts report excess supply and low prices for some agricultural products, notably potatoes and dairy, reflecting global competition and an appreciated dollar that has reduced exports. In contrast, demand for livestock, notably cattle, has been strong, keeping prices and profitability high. Nut and raisin growers have also enjoyed strong demand for their crops, propelled in part by an increase in exports that occurred despite the elevated value of the dollar. However, drought conditions continue to strain water resources, and contacts express concern that this could lead to a decline in fruit and nut production during the harvest season. Capital investment in the agricultural sector is expanding at a modest pace, with most spending aimed at enhancing productivity. ■

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Agricultural conditions have worsened slightly since late February due to a variety of factors including wet fields, persistent drought, and a cold winter, according to the latest Fed Beige Book report.

In the Midwest, the value of "good" farmland fell 3% in 2014, the first annual decline since 1986, according a survey of bankers by the Federal Reserve Bank of Chicago. Half of the respondents expected farmland values to fall during the January through March period of 2015. Image: Chicago Fed

Prices for corn and soybeans fell. Contacts in the Federal Reserve districts of Chicago and St. Louis report that less corn will be planted this year, being replaced by soybeans. Kansas City district contacts note that feeder cattle prices have improved. Contacts in the Minneapolis Fed region say turkey producers are concerned about an outbreak of an extremely virulent strain of flu that has killed thousands of birds. Input prices for the upcoming spring planting season are reported as increasing in the Midwest. Drought conditions have improved, but still persist in some areas of the Atlanta, Dallas, and San Francisco districts, while wet field conditions have slowed planting in parts of Richmond, Chicago, St. Louis, and Dallas. Export demand for pork is declining, prompting lower pork prices and rising domestic supplies. Midwest contacts note that beef prices remain elevated, but off their highs, due to the rebuilding of cattle herds.

Prepared at the Federal Reserve Bank of Cleveland based on information collected through April 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 – Contacts report seasonal increases in agricultural activity, although adverse weather has caused some disruptions. Orders are up for sod, trees, and shrubs; however, wet weather has delayed harvesting to fulfill those orders. In South Carolina, the ground has been too wet to plant, potentially reducing crop yields in the fall. Crop prices are unchanged for sod, trees, and shrubs, and prices remain low for corn, cotton, wheat, soybeans, and peanuts.

Atlanta – Strong global demand for poultry coupled with lower corn and soy feed prices have allowed producers to experience favorable margins. Land rents are down from last year due to low commodity prices. The most recent USDA forecast for Florida orange production fell from the previous forecast. Dry conditions exist across much of Alabama, extreme northern Georgia, the panhandle and southern tip of Florida, as well as the southern portions of Mississippi and Louisiana.

Chicago – High stocks of corn and soybeans and slower export growth is putting downward pressure on most crop prices. Stockpiles of crops from last year’s good harvest have started moving for sale amid concern about low future prices. Wet fields in some areas and a cold winter have prevented most fieldwork from beginning. Still, generally favorable conditions should allow rapid planting once temperatures rise. Although higher input costs have prompted farmers to shift some acreage from corn to soybeans, corn still looks profitable in some parts of the Midwest, and many farmers continue to prefer normal crop rotations. Rising milk production is pressuring prices, leading many farmers to lock them in anticipation of further declines. Hog prices fell because so many have been brought to market, while cattle prices were up as herds are being rebuilt.

St. Louis - Farmers across the southern Midwest and northern Mid-South are expected to trim corn and cotton planting acres this year, and increase soybean and sorghum plantings. Arkansas and Mississippi farmers are significantly behind in their corn plantings as of late March due to very wet conditions. Persistent wet conditions may motivate farmers to switch additional plantings of corn to soybeans due to a later sowing window for soybeans. In western Arkansas, a contact notes that the ground is wetter than it has been in over 25 years.

Minneapolis – Agricultural conditions across the Northern Plains were weak overall going into the planting season. Crop farmers continue to feel the effects of lower prices, while conditions are better for livestock producers. Milk prices have fallen dramatically in recent months, but dairy producers are still benefiting from lower feed costs. Minnesota turkey producers are concerned about an outbreak of an extremely virulent strain of flu that has killed thousands of birds; the state is the nation’s largest producer of turkeys. Prices received by farmers in February are down from a year earlier for corn, soybeans, wheat, hay, milk, chickens, and hogs; prices increased for cattle, turkeys, and eggs. As farmer optimism over the economic outlook weakens, so have farm equipment sales. In South Dakota, a manufacturer of agricultural equipment plans to lay off more than 100 workers, and a North Dakota manufacturer of agricultural and construction equipment plans to lay off 80 workers.

Kansas City - Conditions also weakened in the western Plains somewhat in March, as growing conditions for wheat deteriorated, and profit margins narrowed for some livestock operations. Scattered showers have aided soil moisture in some areas, but more than half of the winter wheat crop in Kansas and Oklahoma is rated in fair to poor condition due to warm, dry weather. Although mild weather has aided spring fieldwork, farmers plan to plant slightly less corn and soybeans compared with last year, primarily due to lower crop prices. However, feeder cattle prices have edged up since the last survey, boosting profits for cow/calf producers, but reducing feedlot operator margins. Profit margins have also softened for hog producers as increased production and reduced export demand for pork have pressured hog prices.

Dallas - Rainfall has improved soil moisture and pasture conditions across much of the region, but severe drought persists in parts of Texas, particularly in the north. Wet field conditions have delayed planting in some areas of South and East Texas. Farmers are expected to shift some crop acreage from cotton to sorghum due to low cotton prices. Cotton prices are below break even levels, while cattle prices increased seasonally and remain very high.

San Francisco – The pace of output in the region’s agricultural sector is steady. However, drought conditions continue to challenge many farmers. Those with adequate access to water are benefiting from favorable weather conditions. Reduced water availability is affecting annual crop plantings such as rice, corn, and cotton. The need to purchase water or drill for water is putting upward pressure on crop production costs. Some farmers’ outlooks have deteriorated, given weakness in certain drought-related metrics, such as snow pack levels, recorded at only 8% of their historical average. Exports have increased somewhat since the labor disputes at West Coast ports were resolved. ■

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