Ag economic outlook varies by district

CHICAGO — Half of the Federal Reserve districts reported in a survey little or no change in economic activity while the remaining half noted a modest expansion since early January.

Results of the regular survey were published in the Federal Reserve’s Beige Book on March 8, summarizing reports from bank and branch directors, plus interviews and online questionnaire completed by businesses, community organization, economists, market experts, and other sources.

The publication characterizes regional economic conditions.

The report, prepared by the Federal Reserve Bank of New York, is based on information collected on or before Feb. 27.

Here are the agriculture-related comments from districts in the Corn Belt.

CHICAGO

“Contacts’ forecasts for 7th District agricultural income for 2023 were mostly for near average returns, down from an above average 2022,” the report noted.

“Wheat prices were up, in part because of longer Russian inspection times for Ukrainian grain shipments and buyers’ greater reluctance to enter purchase agreements given uncertainty about whether the shipping deal with Russia would continue. Corn and soybean prices were also higher, spurred by uncertainty about the size of South American harvests.”

Contacts noted that lower costs for some inputs would help farm incomes, but rising feed costs were a continuing concern for livestock producers.

Egg prices dropped from extremely high levels, and dairy prices were generally lower.

There were reports of closures of smaller dairy operations, for which higher interest rates on loans were making it more expensive to expand to a more profitable scale.

Cattle and hog prices moved higher during the reporting period.

The Chicago district includes the northern two-thirds of Illinois and Indiana, all of Iowa, the southern two-thirds of Wisconsin and Michigan’s Lower Peninsula.

ST. LOUIS

Eighth Federal Reserve District contacts said agriculture conditions have declined moderately since the previous report.

The number of acres of winter wheat planted in the district this season has increased by 27%, compared with this period a year ago. These increases range from 15% to 55% across district states with the lone exception of Arkansas, which saw a moderate decrease of 14%.

District contacts are no longer optimistic on the outlook for the rest of the year, due to concern about the increased cost of inputs, especially labor.

Additionally, contacts noted sales were either at or below expectations, and some contacts expressed concern that higher interest rates were putting additional strain on their balance sheets.

The St. Louis Federal Reserve District includes the southern parts of Illinois and Indiana and eastern half of Missouri, as well as parts of Tennessee, Arkansas, Kentucky and Mississippi.

MINNEAPOLIS

District agricultural conditions remained strong heading into the end of winter.

According to the Minneapolis Fed’s fourth-quarter agricultural credit conditions survey, nearly three-quarters of lenders reported farm incomes increased from October through December, compared with the same period a year earlier.

Farm household spending, capital spending, and loan repayment rates also increased on balance, while demand for loans fell.

A forestry contact noted that prices that sawmills were paying for logs had increased recently, leading to operating losses and production cuts at mills.

The Minneapolis-based district includes all of Minnesota, the Dakotas and Montana, the northern one-third of Wisconsin, and Michigan’s Upper Peninsula.

KANSAS CITY

The farm economy in the 10th District remained strong, but risks to the outlook lingered.

In the livestock sector, cattle prices increased slightly in February and reached multiyear highs alongside lower inventories.

In the crop sector, prices of corn, soybeans and wheat remained high and continued to support profitability.

Despite strong market conditions, district contacts reported that elevated production costs, higher interest rates, and ongoing drought in some areas have put downward pressures on profit margins for many producers.

“Cost pressures have been particularly challenging for livestock operations, with several reports of early calf sales and herd liquidation as a result of intense drought and high feed costs, which could reduce revenues going forward,” the report stated.

The Kansas City district includes the western part of Missouri, Kansas, Nebraska, Oklahoma, Wyoming, Colorado and the northern New Mexico