News
Farm finances remain a concern, Fed says
Pro Farmer reported in late May that “the Fed’s Beige Book noted that 10 of the 12 districts recorded slight or modest economic growth (in May), while the other two recorded no change in activity. The Fed noted: “Farm reports were mixed as drought conditions eased in some districts, but farm finances/yields continued to be a concern. The overall outlook has become somewhat more pessimistic amid reports of increasing uncertainty and greater downside risks.”
The Beige Book of May 2024 contained the following observations regarding the US agricultural economy.
US Federal Reserve Districts.
Sixth District – Atlanta
Poultry producers reported some improvement in domestic sales revenue, attributed to reduced supply resulting from avian influenza, but foreign restrictions continued to limit exports.
Agricultural conditions have weakened slightly. Farmers growing row crops have struggled due to low demand and oversupply, and many do not expect to make a profit this year. Beef demand was strong, but cattle supply remained limited; demand for dairy products remained stable. Citrus growers reported solid demand and farm yields slightly above expectations.
Seventh District – Chicago
Income expectations for farmers in the District increased slightly during the period under review as prices of various agricultural products increased. Widespread precipitation reduced the intensity of the drought in Iowa but also delayed corn and soybean planting after an early start. The prices of corn, soybeans and wheat rose. Most livestock prices have risen, although egg prices have fallen. Continued concerns about the financial impact of bird flu on livestock have been offset by additional support from the federal government. Butter and cheese prices rose, with reports of stronger exports. Several contacts reported an increase in costs for repairs, machinery parts and fuel. Demand for operational loans increased, in line with lower levels of working capital for farms.
Eighth District – St.
Agricultural conditions have declined slightly since our previous report, with most contacts describing conditions as below expectations. District contacts were mixed in terms of inventory, sales and capital expenditures and pointed to rising labor costs as an additional stressor. Increased precipitation and extreme weather events such as tornadoes continued to disrupt the progress of soybean, cotton and corn planting in all states in the District, while the progress of rice planting remained similar to that of a year ago. The most active planting periods have ended or will end in the next two weeks; however, soybeans, corn and cotton were all planted at about 50 percent in mid-May, down from more than 90 percent planted at the same time a year ago, and slightly below the average of recent years. District contacts were mixed in terms of inventory, sales and capital expenditures and pointed to rising labor costs as an additional stressor.
Ninth District – Minneapolis
Agricultural conditions in the District remained weak despite some positive developments. Creditors who responded to a survey on agricultural credit conditions overwhelmingly reported a decrease in agricultural income in the first three months of 2024 compared to the previous year, with expectations of further declines in the second quarter.
However, industry contacts reported that some moderation in input costs was expected to benefit producers’ margins. Recent precipitation has alleviated drought conditions across much of the region, and planting and crop progress have generally been close to average in early spring. However, poor snow cover during the winter had a negative impact on the quality of the winter wheat harvest in the western parts of the District.
Tenth District – Kansas City
Conditions in the Tenth District’s agricultural economy softened in early May and agricultural finances contracted slightly. Corn, soybean and wheat prices have increased slightly since April but have remained weak, keeping profit opportunities narrow. Winter wheat conditions in Colorado and Kansas were particularly poor and raised concerns about reduced incomes, while growing conditions in Oklahoma and Nebraska were comparatively better. Corn and soybean planting has been delayed in some areas of the region, which has also raised concerns about future crop conditions. In the livestock sector, cattle prices remained strong and supported profit opportunities for cow/calf producers. District contacts mentioned that financial stress remained modest, but concerns about further deterioration were growing.
Eleventh District – Dallas
Dry conditions remained in the western parts of the District, while other parts received abundant rainfall and some flooding was observed in scattered areas. The pastures were in good condition, as were the hay and wheat fields. Soil conditions are quite favorable for row crops this year. Better cotton production is expected this year compared to recent years based on current conditions, although cotton prices have fallen. Prices for most other crops rose during the period under review, while livestock prices declined from highs. The spread of avian influenza among dairy cows continues to be a concern for the milk supply, although it is not a food safety issue due to the pasteurization process.
Twelfth District – San Francisco
Conditions in the agricultural and resource-related sectors remained mixed. Current yields and inventories of previous harvests of food products, such as tree fruits, nuts and shellfish, remained high during the period under review. Domestic demand from the food services and retail sectors remained stable, but was not sufficient to absorb domestic supply. As a result, prices of some agricultural products, such as apples, fell, and exports increased.