On Wednesday, the Federal Reserve Board released its August 2023 Beige Book Update, a summary of the Federal Reserve District’s comments on the current state of the economy. The report contained several comments of US agriculture.
Chart of Fed districts from The Beige Book.
* Sixth Ward – Atlanta – “The agricultural conditions were little changed since the last report. The demand for cattle was strong. The supply of eggs increased, but the supply of chickens remained lower than normal. The supply of chickens continued to exceed demand, although the market improved somewhat. There was still an oversupply of milk on the market. A strong harvest was expected from many row crops. Demand for cotton remained weak, causing some growers to exit the cotton market.”
* Seventh Circuit – Chicago –
Income expectations for farms in the district remained well below 2022 levels for 2023. However, lower costs for some inputs, particularly fertilizers, improved net income prospects for 2024.
“Overall, drought concerns easedAlthough hot weather towards the end of the period affected the development of a wide range of crops in the Midwest. Corn, soybean and wheat prices fell. Yet there were Reports of a slowdown in exports since the prices offered by other manufacturers were cheaper on the world markets. Hog prices declined after hitting a seasonal high. Dairy prices rose from a low level and Egg prices have gone up a bit. Livestock prices rose againand remained one of the few agricultural prices to be above the level of the previous year. Agricultural land prices were still higher than a year ago.”
* Eighth District – St. Louis – “The agricultural conditions in the district were mixed since our last report. Despite record-breaking heat and heat dome-induced thunderstorms across the district, the percentage of cotton and rice rated good or better remained stable throughout the period, with cotton returning to 2021 rating levels after a modest decline in 2022.
Both corn and soybean valuations declined more significantly over the summer months and continued to remain below 2020-2021 year-ago levels.
“District contacts have described feeling the effects of extreme weather conditions increased interest rates in the form of higher input costs. On a net basis, contacts showed a slight decline in dollar sales and an increase in inventories.”
* Ninth Ward – Minneapolis – “Agricultural conditions in the district have weakened slightly. More than a third of respondents to a survey on farm credit conditions said so Farm incomes declined year-on-year in the second quarter. Several contacts noted that while commodity prices are still cheap, They declined to levels that could be below breakeven for some producers given high input costs. Drought conditions have been improving recently but have remained a problem, particularly in the eastern parts of the region.”
* Tenth Ward – Kansas City – “Agribusiness in the Tenth Ward remained strong, but conditions deteriorated along with lower soft commodity prices and an ongoing drought. Volatility in major crop markets was elevated due to heightened uncertainty about supply and demand conditions. Until mid-August, the prices for Corn And Wheat were about 10% lower than at the beginning of the month and Soybean Prices have also fallen slightly. In the livestock sector Livestock prices remained strong and continued to support profit opportunities despite significant cost pressures. Large parts of the region continued to be severely affected by drought, which could reduce crop yields and limit the availability of forage for livestock.
District contacts continued to point to input costs, interest rates and lower margins as other important concerns. Lenders said credit conditions remained solid, supported by strong farm finance.
* Eleventh Circuit – Dallas – “A significant portion of the district had entered (or re-entered) the drought in the last six weeks due to low rainfall and rising temperatures. Grazing conditions deteriorated, and the weather adversely affected the row crops. A majority of Texas Cotton The condition of the crop has been classified as poor to very poor and it is expected that there will be a high number of crop failures this year. Livestock prices continued to rise during the period, driven by tight supply and solid demand for beef.”
* Twelfth Circuit – San Francisco – “Conditions in the Agricultural and Resource Sector remained largely unchanged in the reporting period. Domestic retail and food service demand for agricultural products was stable, with strong demand for fruit and vegetables in particular. A contact from Arizona reported problems with limited product availability for retail stores. Exports of some products such as grain and hay reportedly fell, resulting in increased domestic supply and lower domestic prices. The main fish stocks were stable. Although some crop yields remained low due to the wet winter, contacts reported large crop volumes carried over from the previous crop and strong forecasts for this year’s multiannual crop yields in California and Washington. Production costs remained high, with some costs such as packaging and energy increasing.”
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