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.
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.
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. ■