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.

U.S. Federal Reserve System Districts

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.  ■

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Despite extensive damage to crops from record rainfall earlier this year in the southern Midwest and northern Mid-South and uneven conditions in the Midwest and Lake states, anticipated yields are up for corn and soybeans.

U.S. Federal Reserve System Districts

Lower farm income forecasts and expectations that grain prices may not improve significantly due to growing supplies, are raising caution flags in some key cropping regions. The Kansas City Fed reports signs of financial strain in Nebraska and other regions most dependent on crop production as prices have fallen, credit conditions worsened and cropland values softened. Similarly, capital spending and demand for farm equipment fell in Minneapolis, while Dallas District farmers managed costs in the face of low expected revenues. Isolated severe drought conditions developed in the Atlanta and Minneapolis Districts, and San Francisco reports serious concerns about drought and inadequate water resources affecting future harvests.

Prepared at the Federal Reserve Bank of Boston and based on information collected through August 24, 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 - Conditions have improved modestly in recent weeks. Corn harvesting is underway, although some crop yields in North Carolina are low due to dry weather conditions earlier in the season. Sod sales have increased since early July. Commodity prices remain low, while corn prices fell further. Input prices remain unchanged.

Atlanta - Areas affected by drought conditions expanded in the southeast since the last report. Most drought-affected areas were categorized as abnormally dry to moderate, but parts of southeastern Florida experienced severe to extreme drought conditions. All District states forecast lower cotton production than last year. Conversely, soybean and peanut production forecasts show a net production increase. The USDA reports year-over-year cropland values increasing everywhere in the District except Alabama which reported no price change. Pasture values rose in most states, but declined 1.9% in Georgia, and weakened modestly in Florida. 

Chicago - The condition of the corn and soybean crops is uneven across the Midwest, with record yields possible in some areas and low yields likely in others. Nationally, yield expectations moved higher, contributing to lower corn and soybean prices. Corn and soybean producers who locked in prices during the rally earlier in the summer should be able to break even on a portion of their output, but most others likely will not cover input costs if they sell their harvest at current prices. Wheat prices have also moved lower. Hog prices have been flat, dairy prices have moved up, and cattle prices have moved down. Poultry houses have started to receive birds to replace those culled due to the influenza outbreak earlier this year, but the recovery has been slow, so egg and turkey production are expected to remain lower than normal for the rest of the year. Egg prices rose.

St. Louis - Crop conditions have deteriorated slightly for corn and soybeans but improved for cotton and rice. The share of corn and soybean crops rated in good or excellent condition declined slightly since early July. However, close to 20% of the corn and soybean crops across Illinois, Indiana, and Missouri was rated in very poor or poor condition. The outlook for many row-crop farmers remains negative as a result of lasting damage from record rainfall. As of late July, approximately 20% of the Missouri sorghum and soybean crops remained unplanted. In contrast, since early July, there has been a slight increase in the percent of the region’s cotton and rice crops rated in good or excellent condition. Most of the improvement for the region’s cotton crop is due to improved conditions in Tennessee.

Minneapolis -  Conditions have improved for most of the region’s producers since early July. The majority of corn, soybean, and spring wheat acres were listed in good or excellent condition as of mid-August; progress on the spring wheat, oats, and barley harvests is well ahead of recent years. Though most of the region remains free from drought, federal disaster aid is now available to ranchers in 15 Montana counties stricken by severe drought. Low crop prices continue to depress farm finances. Three-quarters of respondents to the Minneapolis Fed’s July survey of agricultural credit conditions say that farm incomes and capital spending decreased in the previous three months, and a similar share expect them to continue to fall in the third quarter. Prices received by farmers in June fell from a year earlier for corn, soybeans, wheat, hay, hogs, milk, and chickens; prices increased for cattle, eggs, and turkeys.

Kansas City - Farm income remains subdued, and credit conditions have weakened since the last survey period. After rebounding briefly in June, crop prices fell sharply in July and early August due to improved growing conditions and expectations of a strong fall harvest. Although loan repayment rates declined slightly compared to a year ago, bankers report only minor loan repayment problems, and very few applications for operating loans were denied. Signs of financial strain were strongest in regions most dependent on crop production, such as Nebraska, Kansas, and western Missouri. Contacts are more optimistic in Oklahoma and Colorado, where farm income is being supported by profits in the cow-calf sector. Low crop prices, however, and expectations of reduced farm income are prompting further modest declines in cropland values. Non-irrigated cropland values declined almost 3%, on average, from last year. The declines were largest in Nebraska and Missouri, while values increased modestly in Oklahoma and the Mountain States

Dallas - East Texas has gotten dry again, but overall moisture conditions remain favorable for crop production and livestock grazing. The crop harvest is underway in some areas and yields have been good overall but quite variable based on when the crops were planted and how wet the fields were at planting. The cattle sector continues to benefit from good pasture conditions, low feed costs and high selling prices, which has prompted herd rebuilding. Grain prices have moved lower over and farmers are managing costs in light of lower expected revenues.

San Francisco - Agricultural activity grew slightly over the reporting period. Drought remains a serious concern in many areas, with uneven impacts across products. Wheat and potato output has grown modestly; however, harvests for nuts, grapes, and fruit trees occurred earlier and were smaller than anticipated. Higher prices have somewhat offset lower production in regard to farm revenue, but inadequate water resources continue to pose a significant challenge to future harvests. Dairy and other livestock producers are taking advantage of the ample supply of corn to reduce overall feed prices through substitution for more expensive feed products. ■

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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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