Agricultural activity was mixed but improving on average. Most Federal Reserve reporting Districts noted higher prices for their respective major crops at the time farmers were able to lock-in for the fall harvest, while Cleveland, Richmond, and Chicago reported that some crop prices have declined recently.
Planting for key crops compares favorably with historical progress. Most reporting Districts noted that growing conditions are currently good, but Richmond reports flood damage in West Virginia and Atlanta reports varying degrees of drought. Farm income is expected to improve from very low levels in Chicago, St. Louis, Minneapolis, Kansas City, and Dallas. Livestock prices were mixed in the reporting Districts.
Prepared at the Federal Reserve Bank of St. Louis and based on information collected through July 1, 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 increased modestly since the May 23d Beige Book report. Farmers report that spring planting of cotton, peanuts, and corn is complete. Farm input prices have remained unchanged in recent weeks while prices of grains, cotton, and corn declined. While the damage has yet to be assessed, West Virginia contacts expect that recent severe flooding will force farmers in some areas of the state to plow under their crops in the weeks ahead.
Atlanta – Conditions across the District are mixed. Drought conditions spread through much of the region, ranging from abnormally dry to severe drought. Nonetheless, by mid-June, District cotton, soybean, and peanut planting were close to their five-year averages and nearing completion. On a year-over-year basis, prices paid to farmers for corn, cotton, rice, soybeans, beef, broilers, and eggs declined, although on a month-over-month basis, prices increased for corn, cotton, soybeans, and broilers.
Chicago – Prices for corn and soybeans rallied through the reporting period, though corn prices gave back all of their gains in the second half of June. The price gains led more farmers to lock in prices for the fall harvest, though the increases are not enough to change expectations for weak farm incomes this year. Corn and soybean stands were generally in good shape in most of the District, though if the hotter- and drier-than-normal weather persists much longer, yields could drop. Margins for dairy and beef producers continue to be tight because of low prices. Hog producers, on the other hand, are doing better due to higher-than-expected prices.
St. Louis – Most fields were unscathed by the heavy rain in May and early June. About 94% of both District corn and soybeans were rated fair or better as of mid-June, which is around five percentage points higher than the five-year averages for both crops. Among major District row crops, rice is the only crop with a lower rating than its five-year average. With healthy fields and the recent crop price rally, row-crop farmers are set to experience significant income improvements relative to 2015.
Minneapolis – Conditions improved slightly, thanks to strong growing conditions and small increases in some commodity prices from their recent lows. Coming off an early start to planting, most of the District’s corn, soybean, and wheat crops were rated in good or excellent condition as of late-June. Chicken processor Gold’n Plump is investing up to $80 million in a Minnesota processing plant as part of a major expansion. Prices received by farmers increased in May from a year earlier for corn, soybeans, and turkeys; prices for wheat, hay, cattle, hogs, chickens, eggs, and milk fell from a year earlier.
Kansas City – Farm revenue improved modestly from the previous reporting period. Despite market volatility, corn and soybean prices rose modestly due to international production concerns, providing some relief to persistently weak profit margins in the District’s farm sector. Wheat prices remain flat compared to the previous survey period, and profit margins remain tight even though early reports of harvested yields have been strong. In the livestock sector, hog prices rebounded to year-ago levels and were generally above the breakeven cost of production. Conversely, cattle prices have declined slightly from the previous reporting period due to slightly softer demand which continues to suppress profits in the cattle sector.
Dallas – Production prospects for crops remain strong across most of Texas thanks to good soil moisture and favorable weather. Crop prices generally improved over the reporting period and, while still fairly low, some pushed above break-even levels. Developments on the livestock side were mixed. While measurable rainfall across the state continued to benefit pasture conditions, cattle prices fell and feed costs rose.
San Francisco – The agriculture sector picked up over the reporting period. Increased water supply following a wet winter has improved growing conditions in California and other states, boosting yields and quality for various crops. Demand for beef cattle strengthened; ranchers are beginning to realize profits after a prolonged period of losses. Overall, the strong dollar continues to hold down exports for most goods. However, strong demand from Asia has boosted exports of pork products, while lingering overseas supply shortages from last year’s avian influenza outbreak has boosted exports of poultry products. ■