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- “District agribusiness contacts reported seasonal slowing since our previous Beige Book, although business conditions are better than last year at this time. Several farmers stated that planting and harvesting were finished for the year, although harvesting completion dates were later than usual. Farmers in South Carolina and Virginia reported no change in input prices in the past six weeks and said that output prices were generally unchanged.”

    * Sixth District- Atlanta- “While the District experienced varying degrees of drought ranging from abnormally dry conditions to a few areas of severe drought, some areas of Alabama, Georgia, and the Florida panhandle saw some moderate improvement in drought conditions. Protein producers that rely on corn for feed reported improved margins because of continuing low corn prices. The most recent cotton and orange crop forecasts were slightly higher than last season’s production.”

    * Seventh District- Chicago- “Corn and wheat prices rose during the reporting period, while soybean prices were flat. Wheat prices were up because of drought and cold snaps in areas producing winter wheat and because of limits by the Russian government on exports. The record harvest had created concerns about sufficient crop storage space, but reports indicated that enough space was available. Shipping delays eased too, allowing stocks to move more smoothly to end users. The late extension of beneficial tax deductions will give a boost to after-tax agricultural income in 2014. Low crop prices led farmers to focus on minimizing costs instead of maximizing output in 2015, so that they purchased fewer and lower cost inputs. In addition, rental terms for some cropland were under pressure because farmers would not make enough to cover their costs next year. Ethanol margins compressed with the drop in oil prices. Hog and milk output was higher than expected, leading to further price decreases. Cattle prices were little changed, but became more volatile.”

    * Eighth District – St. Louis- “As of late November, about 96 percent of the District winter wheat crop was rated in fair or better condition. On average, 81 percent of the winter wheat crop had emerged across the District. A rate slightly below the 5-year average progress rate for this time of year. The majority of the slowdown was attributed to planting delays in Illinois because of wet weather conditions in October. Year-to-date red meat production in the District was 8.7 percent lower in November 2014 than in the same month last year. This decline was driven primarily by lower production in Illinois, Indiana, and Missouri, which collectively produce around 89 percent of the District’s red meat output.”

    * Ninth District- Minneapolis- “Overall agricultural conditions remained mixed since the previous report, with livestock and dairy producers faring better than crop farmers. According to the Minneapolis Fed’s third-quarter (October) survey of agricultural credit conditions, 69 percent of respondents said farm incomes had fallen from a year earlier, while 63 percent reported decreases in capital spending. The fourth quarter outlook was weaker, as 81 percent of lenders expected farm incomes to fall, while 77 percent expected capital spending to decrease from a year earlier. Prices received by farmers in December decreased from a year earlier for corn, soybeans, wheat, hay, and milk; prices increased for cattle, hogs, eggs, and poultry.”

    * Tenth District- Kansas City- “Agricultural growing conditions were generally favorable in December, and crop prices rose modestly. Although some western areas of Kansas and Oklahoma remained dry, scattered rains improved soil moisture in many parts of the District and the winter wheat crop was rated in mostly good condition. Wheat prices increased modestly amid global supply concerns due to limits on Russian grain exports and lower production estimates in Australia. Corn and soybean prices also rose modestly since the last survey period due, in part, to a slight downward revision in 2014 U.S. production estimates. In the livestock sector, weaker export demand for pork placed downward pressure on hog prices. High feeder cattle prices prompted some producers to feed cattle to heavier weights to boost profit margins.”

    * Eleventh District- Dallas- “Agricultural conditions improved slightly, but large portions of the state remain in drought. Harvesting has wrapped up for all row crops, except cotton, which has been slow this year and is nearing completion. Winter wheat has been planted and some areas look good with ample moisture received, while other areas need more rain to yield a decent crop and good grazing conditions. Cattle prices have declined slightly but remain near record highs. Dairy prices are markedly lower due to increased global production.”

    * Twelfth District- San Francisco- “Agricultural conditions in the District were mixed during the reporting period. Declines in petroleum prices contributed to reductions in the cost of gas and fertilizer. However, some farmers also faced lower prices for their commodities. In some areas, restaurants purchased fewer vegetables. Dairy farm profits increased significantly over the past year, but milk futures prices declined recently. Uncertainty regarding future water availability in California slowed new plantings of permanent crops.”

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