Agriculture, the Fed has been watching you
The Federal Reserve Board of Governors is expected to have its finger on the pulse of the economy, but how about on the pulse of agriculture, and its part of the U.S. economy? The Fed’s Beige Book, which is a summary of the data fed to the Fed, indicates the Federal Open Market Committee which sets monetary policy, is getting a fair picture of agriculture and the stress that the drought is having. Let’s read what is contained in the Beige Book released on August 29.
The Beige Book is named for the color of its cover, nothing more, but is published every six weeks ahead of the FOMC meeting at which interest rate policy is reviewed and adjusted. About two weeks after the meeting, the Beige Book is released to the public. The report’s chapters reflect the economic activity in each of the twelve Federal Reserve Districts, such as manufacturing activity, consumer purchases, real estate transfers and the like. Agriculture is one of those sections in each report, by some of the twelve district banks, where agriculture is a major part of the economy in its district.
“The drought has substantially reduced expected yields for corn and soybeans, although the impact varied considerably across the District. Scattered rains near the end of the reporting period helped revive soybeans to some degree; however, with the exception of some late-plantings, the precipitation was too late to improve yields for most of the corn crop. Crop insurance and higher prices will partially offset lost revenue. However, some farmers face the prospect of having to buy corn at market prices after selling ahead more than they will likely harvest. Livestock pastures are in poor shape as well, and fields with low corn yields were being chopped for silage to feed livestock. With feed costs high, livestock operations cannot cover their costs of production, and operators have reduced their herds accordingly. Hog and cattle prices were down from the prior reporting period, while dairy prices were up as milk production dipped.
Eighth District—St. Louis
“Severe drought conditions have caused downgrades to forecasted crop production. Annual 2012 production of cotton, soybean, and corn in the District states is expected to fall from 2011 levels by 12 percent, 18 percent, and 24 percent, respectively. In contrast, annual production of rice and sorghum in the District states is expected to increase by at least 12 percent. The fraction of all crops rated in fair or better condition has fallen in all District states since the previous report. Similarly, the fraction of pasture rated in fair or better condition declined in all District states. The District states’ year-to-date coal production for the end of July was 3.4 percent higher compared with the same period last year. Meanwhile, the District states’ coal production for July 2012 was approximately on par with July 2011.”