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.
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. ■