Agricultural economic conditions have been flat to moderately down across the Federal Reserve Districts since mid-January. Low commodity prices and weak global demand continue to pressure farm income. The Federal Reserve Bank of Minneapolis reports weaker farm incomes and lower prices for all commodities except turkeys.

Farmers in the Chicago District are adjusting to the dip in commodity prices by turning to cheaper seed varieties and selling equipment. Kansas City reports weakening credit conditions and modest declines in farmland values amid tighter profit margins for crop and livestock producers. In the Richmond, Dallas, and San Francisco Districts, agricultural exports are slowing alongside the strengthening dollar.

In agricultural production, Richmond reports limited activity due to typical seasonal slowdowns, while St. Louis reports an increase in red meat production compared with the previous year. Growing conditions in the Dallas District are improved from the previous year due to increased soil moisture, and most of the Atlanta District was drought free by mid-February. However, San Francisco farmers and ranchers continue to struggle with persistent drought, despite above-average winter rainfall.

U.S. Federal Reserve System Districts

Prepared at the Federal Reserve Bank of Kansas City and based on information collected through February 22, 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 – Underlying agribusiness conditions are unchanged since the January report, even as contacts cite a typical seasonal slowdown. Farmers reported limited planting and harvesting in the past six weeks. Most sources note that input prices are unchanged. However dairy farmers say that input prices continue to decrease. Commodity prices remain depressed.

Atlanta – With the exception of Florida, where rainfall has been much above normal, the southeastern U.S. saw January rainfall totals ranging from near average to below average. However, by mid-February the region was drought free with only a small portion of Georgia characterized as abnormally dry. In parts of Florida where rainfall was excessive, there were reports of flooding, damaged fields, and delayed fieldwork. Florida’s orange forecast remains unchanged from January and down from last season. On a year-over-year basis, monthly prices paid to farmers for corn, cotton, rice, soybeans, beef, broilers, and eggs have declined.

Chicago – Midwest crop farmers continue to cut capacity following another year of low incomes coupled with unexpectedly small declines in input costs. There were reports of major downsizings of large operations and of some farms going out of business. Farmers are also cutting capacity by purchasing cheaper but lower-yielding seeds and by selling machinery. Correspondingly, prices for used farm machinery are low because of plentiful supply. Corn, soybean, and wheat prices moved higher during the reporting period, but remain quite low compared to their five-year averages. Dairy, egg, hog, and cattle prices were up from the prior reporting period, but also remain low.

St. Louis – As of the end of January, almost 93% of the southern Midwest and northern Mid-South region’s winter wheat crop was rated fair or better. Red meat production in 2015 was 6% higher than in the previous year, an increase that has been explained, in part, by lower feed costs, although meat prices also fell during the year.

Minneapolis - District agricultural conditions remain weak. A majority of respondents to the Minneapolis Fed’s fourth quarter (January) survey of agricultural credit conditions reported that farm incomes and capital spending fell in the previous three months compared with a year earlier. An animal feed dealer reported that after several years of strong sales, its revenue outlook was flat due to recent livestock price declines. Prices received by farmers fell in December from a year earlier for corn, wheat, soybeans, hay, hogs, cattle, chickens, eggs, and milk; prices for turkeys increased from a year earlier

Kansas City – Farm income weakened further since the last survey period, and cropland values fell modestly. Persistently low crop prices and sharp declines in cattle prices are cutting farm income in all District states. District cropland values continue to decrease slightly, while pasture values have leveled off. Similarly, cash rental rates on all types of farmland moderated and are expected to fall further in the next three months. Alongside lower farm income, farm loan repayment rates weakened further, and demand increased for new loans as well as loan renewals and extensions. Looking forward, District contacts expect modest declines in cropland values as well as continued pressure on credit conditions amid tighter profit margins for crop and livestock producers.

Dallas – Soil moisture conditions remain healthy, with only 2% of Texas considered abnormally dry in February.  A year ago, 56% of Texas was in some level of drought. While prospects for 2016 crop production are strong, farmers face low prices and downward pressure on exports due to the strong dollar. Industry contacts say many producers will not be able to cover their production costs at current crop price levels, and some have received calls from their lenders voicing concern. Cotton—Texas’ top crop—has seen prices fall even lower with risks to the downside. Contacts report that low prices and weakening demand will likely result in fewer cotton acres planted this year. Milk prices continue to drift unprofitably low, despite the supply disruption in the wake of winter storm Goliath, which killed roughly 30,000 dairy cows in West Texas and New Mexico. Cattle prices were lower than the record levels posted a year ago but are still relatively high.

San Francisco – Farm sector activity is unchanged since the reporting period. Continued dollar appreciation has slowed agricultural exports in general, although exports of pork products increased as demand from Asia strengthened. Contacts report that domestic demand from restaurants slowed for some vegetable products. Despite an unusually wet winter, overcoming prior drought conditions remains a costly challenge for growers and ranchers in much of the region. Contacts expect conditions in the agriculture sector to remain roughly the same over the coming year as commodity prices remain soft and exports continue to be subdued. ■

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Federal Reserve bank districts report that agricultural sectors have weakened overall since November, and that farm incomes are stressed. Flooding and drought in various regions are aggravating the effects of already low and falling prices for farm commodities, caused in part by weak global demand and the strong dollar.

U.S. Federal Reserve System Districts

With few exceptions, commodity prices for crops and livestock have remained low or have fallen since November. Regional Fed banks in Chicago, Kansas City, and Dallas report that conditions are not profitable for some producers, as farm input prices have not fallen as fast. These three Districts also cite large harvests as a factor in keeping commodity prices low, while Kansas City and San Francisco reported that weak global demand and the strong dollar held down livestock exports. Drought remains a problem in parts of the San Francisco District for some producers, while heavy rain and flooding impacted harvests in the Richmond, Atlanta, St. Louis, and Dallas Districts.

Prepared by the Federal Reserve Bank of Philadelphia and based on information collected through January 4, 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 – Agribusiness activity remains soft. Farmers in Virginia, North Carolina, and South Carolina continue to report delayed harvesting from the wet fall, and more South Carolina contacts report poor crop quality as a result of flooding. Some South Carolina farmers have reported ruined cotton crops. Moreover, continued rain following the floods in South Carolina left other establishments unable to harvest soybeans for animal feed. A South Carolina sod farmer said he had only one week of good harvest days during the past month. In contrast, a Maryland contact report that farming was stable across the state, with continued strength in the poultry sector. Cotton prices decreased and farm input prices were unchanged since the December report.

Atlanta – Most of the District is drought free, but as a result of excessive rain, winds, and flooding earlier in the year, the U.S. Dept. of Agriculture declared several counties in Alabama, Florida and Georgia as natural disaster areas. Florida’s orange forecast was down both from last month’s forecast and last season’s production. On a year-over-year basis, prices paid to farmers for cotton, rice, soybeans, beef, and broilers have declined while corn’s price rose slightly.

ChicagoFarm incomes declined as the large harvest pushed product prices down faster than input costs. Most contacts expect that Midwest farmers will face tighter (and possibly negative) margins this year. Many farmers are holding on to much of their corn and soybean harvest, hoping that prices will go up before they need to sell them to fund 2016 operations. Many are also waiting on purchasing inputs, anticipating that seed and fertilizer prices may decline further. One contact reported that more farmers are testing fields for nutritional deficiency before applying fertilizer to reduce input costs. Dairy, egg, hog, and cattle prices moved lower, although cattle prices rallied some toward the end of the reporting period.

St. Louis – As of late November, the region’s winter wheat crop was roughly 95% planted, which is consistent with recent history. More than 94% of the winter wheat crop is rated fair or better. However, due to warmer weather about 86% of the crop had already emerged—a proportion that is notably higher than recent averages. Moreover, late December flooding has led to concerns about significant crop damage.

Minneapolis – Agricultural conditions softened since the December report. Crop prices remain low, and farm incomes for 2015 are expected to be at their lowest levels in a decade. District sugar beet growers are concerned about reduced demand, as candy producer Hersey Co. switched last year to cane sugar due to consumer concerns about genetically modified ingredients. Several District cattle producers reported that a sharp drop in prices late in the year substantially downgraded their financial outlook. Prices received by farmers fell in November compared with a year earlier for wheat, soybeans, hay, milk, chickens, hogs, and cattle; corn prices were unchanged, while prices increased for eggs and turkeys.

Kansas City – Agricultural commodity prices generally remained low since November, keeping farm income expectations subdued. Although crop prices increased slightly in December, a strong fall harvest kept corn prices near year-ago-levels, with soybean prices significantly less than a year ago. Wheat prices also remain lower than year-ago levels alongside solid winter growing conditions throughout the west central Plains region. In the livestock sector, both cattle and hog prices are significantly below year-ago levels in the face of increasing supplies and relatively weak global demand. Both crop and livestock prices remain below the cost of production for some producers, continuing to strain farm income and cash flow. District contacts expect income to remain relatively soft in the coming months.

Dallas – The region continues to receive ample rainfall, keeping drought conditions at bay and providing good soil moisture going into the spring planting season. Last year’s crop harvest was above the five-year averages for most crops. However, crop prices are generally low, even sub-profitable for some producers, and much of the cotton crop has been discounted further because of damage from excess rain. The low prices are leading to some financial stress among agricultural producers. Cattle prices are well below year-ago levels but are still quite strong historically.

San Francisco – Activity in the agriculture sector has been flat since November. Despite an unusually wet early winter, drought conditions remain a challenge for growers and ranchers in much of the region. Shortages in water reserves have reduced the size and weight of some nut harvests and raised production costs by forcing producers in parts of California to pump more water. Inventories for dairy products and beef cattle rose as the elevated dollar held down exports. By contrast, dollar effects on exports of pork products were partially offset by rising demand from East Asia. ■

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Rainfall helped alleviate drought conditions in the Atlanta and Dallas Districts in recent weeks, while in the Richmond and St. Louis Districts crops suffered from too much moisture.

U.S. Federal Reserve System Districts

In the Atlanta District, heavy showers eased drought conditions although soybean, cotton and peanut harvests were behind the five-year average. Rain improved conditions in the Dallas District, where domestic demand for grains and cattle was solid, but export demand was weak. San Francisco Fed contacts report modest growth, with strong yields in areas less affected by drought.

The condition of the Chicago District’s corn and soybean crops improved mildly since October, with a record soybean harvest expected.In the Minneapolis District, corn, soybean, and sugar beet production hit new records in some states. In contrast, conditions weakened in the Richmond District. In South Carolina, farmers said conditions deteriorated due to flooding in early October and recent wet weather has delayed harvesting of soybeans, peanuts, cotton, and vegetables, and crimped crop yields.

Additionally, the St. Louis and Kansas City Districts report a moderate decline in agribusiness. St. Louis District farmers note that extensive rainfall cut crop production levels relative to last year, and farm sector contacts maintain a mostly negative outlook for farm income.

Prepared by the Federal Reserve Bank of Richmond and based on information collected through November 19, 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 – Activity has softened since October. Severe flooding in South Carolina in early October delayed harvesting of soybeans, peanuts, cotton, and vegetables, and cut crop yields. One South Carolina farmer reported catastrophic crop losses. He said the ground was too wet to harvest and that he was in salvage mode with crops not yet harvested. Additionally, a South Carolina sod grower reported late harvesting and a drop in sales since October. A firm in North Carolina also reported delayed harvesting and lower yields. Virginia growers report good hay quality and production but were worried that recent rains may have damaged some crops still in the ground. Prices for cotton and cattle fell slightly since October, and some farmers reported a slight increase in input prices.

Atlanta – Heavy showers improved drought conditions in much of the District. Rains led to the removal of Abnormally Dry ratings in northwestern Alabama and in south Florida. Louisiana and Mississippi’s soybean harvests were behind their five year averages. Cotton harvesting is behind the five-year average in much of the District with the exception of Alabama’s crop, which is on par with the five-year average. Peanut harvesting was behind the five-year average. On a year-over-year basis, many agriculture product prices are lower, and concern about the strong dollar and its effect on agriculture exports persists.

Chicago – Both the corn and soybean harvests exceeded expectations, and most agricultural commodity prices fell. A record harvest is anticipated for soybeans, while corn yields are down from last year. The Midwest harvest progressed quickly, which reduced drying costs for most producers. Corn, soybean, and wheat prices all fell, and some growers are storing more of their harvest on their farms in the hope of a pick up in prices down the road. Even with these declines, crop prices are high by international standards (due to the strong U.S. dollar), damping export demand. Overall, crop operations face somewhat better prospects than previously expected due to higher-than-anticipated yields and lower-than-expected costs. Nonetheless, contacts remain concerned about an increasing number of crop operations coming under financial stress over the coming year. Hog and cattle prices fell over the reporting period, while milk prices remain too low to cover production costs.

St. Louis – As of mid-November, more than 90% of the southern Midwest/northern Mid South region’s corn, rice, sorghum, and soybean crops had been harvested, while cotton was just over 80% harvested. Excess rainfall has trimmed crop production levels relative to last year. Corn, cotton and rice production are forecast more than 15% below last year’s levels. Sorghum production is forecast at double a year ago, but it is a relatively small share of overall production. Because of relatively low production levels and low crop prices, the outlook for farm income remains mostly negative.

Minneapolis – Farmers were buoyed by favorable weather during harvest, which was completed well ahead of the typical schedule. Corn and soybean production hit new records in some of the region’s states; sugar beet producers in Minnesota and North Dakota also saw record yields and good quality. However, crop prices remain low and farm incomes are expected to be weak. According to the Minneapolis Fed’s October survey of agricultural credit conditions, 83% of lenders report that incomes fell from a year earlier, and 79% expect them to be down in the fourth quarter. Prices fell in September compared with a year earlier for wheat, soybeans, hay, milk, chickens, hogs and cattle; prices increased for corn, eggs and turkeys.

Kansas City – Conditions continue to weaken as commodity prices remain relatively low. Despite expectations of strong crop yields and government farm program payments, contacts look for further declines in farm income in the months ahead for both the crop and livestock sectors. Crop prices generally remain flat since October and livestock prices are substantially below year-ago levels. Farm credit conditions also deteriorated further as repayment rates edged lower, credit availability declined slightly, and expectations of future financial stress increased somewhat. Amid the weaker farm economy, farmland values of all types were expected to decline in the coming months.

Dallas – Abundant rainfall since October further alleviated drought conditions. Less than 1% of the region was in drought in mid-November, compared with more than a third at the end of September. The wet weather improved soil moisture for crops and replenished ponds for grazing cattle. That said, Texas is likely to have an average cotton production year rather than the bumper crop thought possible in early summer. Cotton yields were hindered by a hot and dry August and the quality was diminished by too much rain just before harvest. Domestic demand for grains and cattle remained solid but export demand was weak. Grain prices fell slightly and cattle prices declined but remained at high levels. Retail beef prices were down from a year ago.

San Francisco – Output in the agriculture sector expanded modestly over the reporting period. Yields in areas less affected by drought were strong, while elevated price levels for some products helped maintain revenue in drought-stricken areas with lower yields. Similarly, drought conditions have reduced cattle herd sizes; however, supply shortages have boosted meat prices and helped keep profit margins steady. Restaurant demand for agricultural staples grew modestly, and contacts expect this to continue along with stable growth in consumer demand. ■

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