Keith Good: Beige Book — Observations on Agricultural Economy

The Federal Reserve Board released its Summary of Commentary on Current Economic Conditions.

Commonly referred to as the “Beige Book,” the report included the following observations with respect to the U.S. agricultural economy:

* Fifth District- Richmond- “Prices received by farmers dropped for some crops since our last report. For example, cotton prices decreased in the last six weeks and corn prices fell year over year. However, farmers reported no change in input prices in recent weeks. A Virginia producer reported completion of summer soybean planting and barley harvesting, while corn harvesting has begun in South Carolina.”

* Sixth District- Atlanta- “Parts of Georgia, Florida, and Alabama experienced abnormally dry to moderate drought conditions over the reporting period, while the rest of the District ended the period drought free. The USDA designated several counties in the Florida Panhandle as primary natural disaster areas due to damages and losses caused by excessive rain earlier this year. Lower corn prices benefitted livestock and poultry producers that rely on corn for feed.”

* Seventh District- Chicago- “Corn and soybean production in the District should exceed last year’s levels. Although much of the District recently weathered a dry spell, cool temperatures helped reduce the stress on crops. Nonetheless, crops in the northern parts of the District may not fully mature before the dates of normal first frosts. With national records expected for the corn and soybean crops, prices moved down from the prior reporting period. To avoid selling crops for lower prices than in recent years, farmers have explored options for storage and livestock feeding. Higher milk prices helped the livestock sector stay profitable even though hog and cattle prices slipped. Ethanol prices eased, but production remained profitable.”

* Eighth District – St. Louis- “As of mid-August, around 73 percent of the District corn, rice, and sorghum crops was rated in good or excellent condition. In contrast, only 56 percent of District pasturelands was rated in good or excellent condition. District farmers will likely produce close to 9 percent less corn in 2014 than in the previous year. However, District rice, cotton, and sorghum production will be 34 percent, 17 percent, and 11 percent higher than last year, respectively.”

* Ninth District- Minneapolis- “Agricultural conditions were mixed since the last report. Most of the District’s corn and soybean crops were in good or excellent condition in mid-August, with strong yields forecasted. Livestock and dairy producers continued to benefit from higher output prices and lower feed costs. A majority of lenders responding to the Minneapolis Fed’s second-quarter (July) survey of agricultural credit conditions reported lower farm incomes compared with the previous quarter. Relative to a year earlier, prices received by farmers in July were lower for corn, soybeans, and wheat; prices increased for hay, cattle, hogs, poultry, eggs, and milk. A mildew outbreak in North Dakota may reduce sunflower yields.”

* Tenth District- Kansas City- “Improved growing conditions and the potential for record crop production this fall depressed prices and lowered farm income expectations since the previous survey period. The majority of the District’s corn and soybean crops were rated in good condition but improved yields may not offset the effect that recent price declines will have on income. District farm income remained well below year-ago levels even with strong profits in the livestock sector due to rising cattle and hog prices. Demand for farm operating loans rose further but loan-to- value ratios remained relatively conservative. Still, some bankers reported loan repayment rates had weakened since last year and also noted a rise in loan renewals and extensions. Despite lower farm income, cropland values generally held steady during the growing season while strong demand for high-quality pasture supported modest gains in ranchland values.”

* Eleventh District- Dallas- “The severity of District drought conditions eased over the reporting period, particularly in the Texas Panhandle and southern New Mexico. Texas’ cotton crop was mostly in fair to good condition and harvesting started in some areas. Most crop prices declined over the past six weeks due to expectations of very high U.S. corn, cotton, and soybean production. Domestic demand for beef remained solid despite continued record-breaking cattle prices. Some cattle producers have started to rebuild their herds after the sharp liquidations that took place over the past few years, but progress has been slow because of historically high cattle prices.”

* Twelfth District- San Francisco- “Contacts reported good agricultural conditions in the District overall. Excellent cotton and grain harvests are expected. Produce supplies are somewhat constrained due to the drought in California, and prices of some products, including grapes and nuts, are high. Growers in California were able to tap underground aquifers this year but are concerned about water sources next year should the drought continue. Contacts reported a spike in growers’ shipping costs due to the diversion of locomotives to the Midwest to haul oil and Beige Book — September 3, 2014gas rail cars to refineries in Texas.”

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