Keith Good: Beige Book — Observations on Ag Economy

The Federal Reserve Board has 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- “Corn prices declined further over the past six weeks. Soybean prices also fell, while cotton prices were unchanged. A West Virginia farmer stated that grain prices declined after seven years of above-average prices. Farmers’ input prices were unchanged in South Carolina and Virginia. A grower in South Carolina reported completion of corn harvesting and the start of peanut harvesting since the previous report. In West Virginia a farmer said that crop planting, reseeding, and harvesting were on schedule, and that his compost business had increased in the past six weeks.”

* Sixth District- Atlanta- “Parts of Alabama, Florida, and Georgia experienced abnormally dry to severe drought conditions. Lower corn prices continued to benefit poultry and livestock producers that rely on corn for feed. The USDA announced a new financial assistance program for eligible Florida citrus growers to help with the removal and replacement of stock affected by citrus greening.”

* Seventh District- Chicago- “Overall crop conditions were very good at the start of the harvest. The District should see record corn and soybean harvests. Early results indicated yields for corn and soybeans would range from above-average to record-high levels. The huge anticipated harvests pushed down corn and soybean prices. Crop income was lower than a year ago as higher yields were insufficient to offset lower prices. Crop insurance will cover some of the lost income, but farmers already are planning to trim costs for next year, particularly spending on farm equipment and other capital purchases. Corn farmers helped bid up cattle prices, with the intention of using the abundant harvest as feed for their own cattle production rather than selling it. Hog and milk prices were higher as well, contributing to expansions in output of these commodities.”

* Eighth District – St. Louis- “As of late September, about 75 percent of the District’s corn, rice, and soybean crops was rated in good or excellent condition. Similarly, about 60 percent of the District’s pastureland was rated in good or excellent condition; Kentucky’s pastureland, in particular, has improved significantly since the previous report. Harvest completion rates across the District have lagged behind their five-year averages.”

* Ninth District- Minneapolis- “Agricultural conditions were mixed since the previous report. The most recent USDA forecast calls for substantially increased production of corn and soybeans this year in District states compared with 2013. Livestock and dairy producers continued to benefit from lower feed costs and high output prices. Most of the district’s crops were in good or excellent condition despite late planting; however, an early frost damaged soybeans in some parts of Minnesota and South Dakota. Relative to a year earlier, prices received by farmers in September were lower for corn, soybeans, and wheat; prices increased for hay, cattle, hogs, poultry, and milk.”

* Tenth District- Kansas City- “Despite expectations of above-average yields, further declines in crop prices weighed on farm income prospects in the District. However, crop insurance and some pre-selling of this year’s crop at higher prices earlier in the year may help mitigate the effect on overall farm incomes of recent spot price declines. The corn and soybean crops were mostly rated in good to excellent condition as harvest began. Cattle prices rose since the last survey period while hog prices fell with increased production resulting from higher dressed weights. The demand for farm operating loans has risen substantially from last year as more crop producers borrowed to pay for operating costs. Bankers also reported a rise in requests for agricultural loan renewals and extensions and noted that loan repayment rates have edged down from the high levels seen the past few years. Despite the sharp drop in crop prices, farmland values were typically holding at high levels.”

* Eleventh District- Dallas- “District drought conditions eased slightly over the past six weeks, although more than half of Texas remained in a drought that has plagued the state since the end of 2010. Harvesting of row crops like cotton and corn continued, and crop conditions were slightly better than last year. Cattle prices continued to be at a record high while feed prices fell, boosting profitability for cattle producers. Domestic and export beef demand remained strong despite retail beef prices reaching a record high in August. Improved moisture conditions overall have increased optimism for winter crops and expanded prospects for cattle herd rebuilding.”

* Twelfth District- San Francisco- “Agricultural conditions in the District were mixed during the reporting period. Continuing droughts in California and parts of Washington and Idaho elevated water costs and depressed harvests of cotton and various grains, vegetables, nuts, and legumes. Farmers increased the number of acres lying fallow and reduced herd sizes. However, low corn prices and stable fertilizer and machinery prices benefited dairy and feedlot operations. Milk prices increased, and export demand for hay from the West Coast reached an historical peak.”

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