On Wednesday, the Federal Reserve Board released its August 2022 Beige Book Update, a summary of commentary on the current state of the Federal Reserve District’s economy. The report contained several observations regarding of US agriculture.
Chart of Fed districts from The Beige Book.
* Sixth District – Atlanta – “Demand for agricultural products remained strong. Hot weather and droughts affected crop yields, particularly corn, in many areas of the district. Prices paid to farmers increased overall, but fell somewhat for corn and milk. Import restrictions from China led to higher demand for domestic cotton. Demand for poultry exceeded supply while the beef market remained stable. Long lead times for machines and parts forced many farmers to use decommissioned machines, and some small farms suffered crop losses due to inoperable equipment.”
* Seventh Circuit – Chicago – “Farm income prospects for 2022 are little changed, with Contacts continue to assume most producers would be profitable this year.
Although parts of the district were affected by drought, it was widely expected that farms would produce at least average yields for corn and soybeans.
“Harvest progress was behind the typical pace due to late sowings, but is catching up. Corn, soybean and wheat prices fell compared to the previous period, as did milk and egg prices. Hog prices fell slightly from high levels, while beef prices rose slightly. The strong demand for agricultural machinery with long delivery times continued.”
US agriculture in drought. USDA – Office of the Chief Economist (September 8, 2022).
* Eighth District – St. Louis – “Having district farming conditions moderately deteriorated since our last report. Compared to the previous reporting period Harvesting conditions in the district have either declined slightly or remained relatively unchanged. Compared to last year, the proportion of corn, cotton and soybeans rated fair or better has fallen sharply, while the same measure for rice has increased slightly.
The deteriorated conditions may be due in part to the droughts and severe flooding that have hit the district, particularly Missouri and Kentucky.
“The district contacts also pointed this out Farming conditions remained tight due to input prices and labor shortageswith the ability to hire skilled workers being their primary concern.”
* Ninth Ward – Minneapolis – “Agricultural Conditions in the Ward modestly strengthened since the previous report, with notable exceptions. A survey of agricultural credit conditions pointed this out sustained growth in farm incomes; 80 percent of agricultural lenders said incomes in their area increased in the second quarter from a year earlier. While lenders reported continued concerns about rising production costs, commodity prices were strong enough to offset this. However, Montana’s wheat and small grain production will be severely affected drought for the second year in a row.”
* Tenth Ward – Kansas City – “Tenth Ward agribusiness conditions remained supportive, helped by the overall strength in commodity prices, despite heightened volatility in certain markets in recent months. Grain prices generally remained higher than a year ago but were lower in August than earlier in the summer. In particular, corn and wheat prices fell slightly, and soybean prices also fell slightly last month. Elevated production costs and unfavorable growing conditions were worse than the national average in some district states last month. Several farmers noted that even with the higher revenues expected this year Net income levels would likely be more subdued. In the livestock sector, earnings opportunities remained solid as cattle prices were slightly higher than in the previous reporting period and hog prices increased significantly.”
* Eleventh District – Dallas – “General drought conditions have improved slightly over the past six weeks as some areas experienced significant rainfall in late August.
Many row crops experienced high abandonment and low yields, resulting in significantly lower production this year, particularly for cotton.
“High input costs and low production will put financial strain on many producers. Severe drought and higher feed costs have contributed significantly to this culling of cattle herds.”
US agriculture in drought. USDA – Office of the Chief Economist (September 8, 2022).
* Twelfth Ward – San Francisco – “Conditions in the agricultural and resource-related sectors were mixed. Drought conditions in many areas continued to impact the growing season, with some producers leaving parts of their farms fallow to prioritize water use. Farmers across the district reported strong international demand for fresh and processed foods. The delivery bottlenecks have eased somewhat in recent weeks, but overall Supply chain disruptions persisted. Utilities reported ongoing challenges meeting demand as labor and material shortages delayed maintenance and expansion projects. Input costs remained high despite some relief in fuel prices.”
Comments are closed.