Federal Reserve is watching and seems pleased with agriculture

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Agriculture remains one of the strong parts of the economy in the eyes of the Federal Reserve. 

For the past two months, Fed economists have generally given agriculture high marks across its districts. 

“Strong crop yields were reported, while in general, agricultural commodity prices fell and drought conditions stabilized or improved. Richmond, Chicago, and Kansas City reported strong crop yields for fall harvests. Contacts in the Kansas City District noted decreases in farm incomes and increases in the demand for farm operating loans, as prices softened in response to rising yields. The Chicago, Kansas City, Dallas, and San Francisco Districts indicated strong demand and increased profitability in livestock due to lower feed costs. Atlanta contacts reported making investments in various types of agricultural equipment as a means to further improve production and contain costs. Prices paid to farmers for wheat, corn, and soybeans fell in Atlanta, Chicago, and Minneapolis. However, in Chicago, higher exports cushioned the decline. The Kansas City District indicated rising farmland values, although the rate of increase slowed.” 

That is the summary of the Fed’s latest Beige Book, but what does the rest of it say?

The Beige Book is prepared by Federal Reserve economists across the twelve Fed districts and the primary focus on agriculture is in the Cornbelt and regions that have substantial crop and livestock production activity.

Beige Book


Harvesting took longer this fall than a year ago given the larger size of the crop and delays from precipitation. Crop yields remained higher than expected across the District, even in areas that experienced yield losses from drought. In general, farmers tended to sell soybeans and store corn. Pastures and winter wheat fields were in better shape than they were last year. Crop prices fell over the reporting period, though higher exports of corn, soybeans, and wheat cushioned the decline. Lower fertilizer prices relieved some concerns about 2014 crop production costs. Milk and cattle prices were a bit higher; hog prices fell, although they remained above the level of a year ago. The prospects for livestock producers improved due to reduced feed costs.  


As of mid-November, over 90 percent of the District corn, sorghum, and rice crops had been harvested, while harvest progress of the District cotton and soybean crops was 81 and 89 percent complete, respectively. Winter wheat planting was 87 percent complete, on average, across the District.


The agriculture sector saw slight contraction. In the Minneapolis Fed’s third quarter (October) survey of agricultural credit conditions, 28 percent of lenders reported that farm incomes decreased from the second quarter, while 15 percent reported increases; nearly half expect incomes to decrease in the final three months of 2013. October prices received by farmers decreased from a year earlier for wheat, corn, soybeans, milk, eggs, turkeys and cattle; prices increased for chickens, calves, hogs and dry beans. An early-October blizzard in western South Dakota killed an estimated 15,000 cattle there. Drought conditions abated in most of the District in late fall.


 A steep drop in crop prices, which partly reflected better-than-expected corn and soybean yields, lowered District farm income and boosted demand for farm operating loans since the last survey period. Some livestock operators in Western Nebraska also faced significant herd losses due to a severe October snowstorm. Farm income was expected to remain weaker than last year despite some support from crop insurance and a gradual improvement in livestock sector profitability resulting from lower feed costs. With reduced incomes, agricultural bankers reported the number of requests for loan renewals and extensions edged up and demand for new farm operating loans also increased. Farmland values rose further, but the pace of gains moderated and most contacts expected values would hold steady through the end of the year.


 Drought conditions continued to ease, although the Texas panhandle area remained particularly dry. Corn and sorghum production was higher, while cotton production was down. The livestock sector continued to benefit from improved pasture conditions, lower feed costs, and high selling prices for cattle.


Recovery from the drought in most locations allowed improved crop production across the agriculturally-based Federal Reserve Districts in 2013.  While some areas were challenged from weather conditions, the majority of production returned to normal and above normal levels.  Prices of commodities responded at lower levels, creating better economic conditions for end users, including exporters. Due to lower outlooks for grain prices, land values have softened and slowed their rate of upward movement. Farm income and farm debt conditions are being monitored.

Source: FarmGate blog

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