Ag conditions mixed across Federal Reserve districts

CHICAGO — The outlook for farm income fell in most Corn Belt districts on lower commodity prices and increased costs, according to a survey of Federal Reserve districts.

Results of the survey were published in the Federal Reserve’s Beige Book on May 31.

The survey report was prepared at the Federal Reserve Bank of Chicago based on information collected on or before May 22.

This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.

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

Chicago

Expectations for Seventh Federal Reserve District’s farm incomes in 2023 fell some as prices for key products moved lower.

Corn and soybean prices decreased, as rapid fieldwork and planting progress heightened expectations for a large harvest.

Soft red wheat prices remained weak, but hard wheat prices rose due to drought affecting much of the U.S. wheat crop and uncertainty surrounding another extension of the agreement allowing exports out of Ukraine.

There were lower prices for eggs and dairy products, especially cheese. Hog prices increased from a low level and cattle prices moved higher.

“In light of higher interest rates, contacts expected farmers to conserve working capital to minimize the need to take out farm operating loans. There were reports of slower farm machinery sales, but also shortages of some types of equipment,” the survey summary stated.

Prices for farmland were higher again as demand remained solid and inventories of farms for sale were limited.

The Seventh District of Chicago 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

Overall conditions in the Eighth Federal Reserve District have remained unchanged, but the outlook has weakened slightly since our previous report.

Most agriculture contacts surveyed reported that their costs, including labor, have increased, which has contributed to the slightly worsening outlook.

The percentage of row crops planted has increased as expected since the previous reporting period and is up slightly from this time in 2022. The progress of acres planted is mixed across the district.

Some states, such as Missouri and Illinois, have improved strongly over last year, and the other district states have fared slightly to materially worse.

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 were solid heading into planting season. About half of respondents to a survey of agricultural credit conditions reported that farm incomes increased in the first quarter from a year earlier.

“Lenders noted improvements in liquidity and in the financial condition of producers, but they were concerned about commodity price volatility and rising interest rates,” the report stated.

Heavy snow over the winter and persistent cold weather will significantly delay spring planting in some areas, contacts reported.

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

Conditions in the 10th Federal Reserve District agricultural economy remained strong through early May, but showed signs of moderating.

Corn and soybean prices declined slightly since April and were moderately lower than a year ago.

Prices moved down recently based on reports of ideal planting conditions throughout most states and early projections that production could hit record levels due to historically strong yields.

Wheat prices increased slightly since April, but poor yields caused by drought could limit revenues, particularly in Kansas and Oklahoma.

Profits among cattle producers continued to be pressured by high feed costs and drought that damaged pasture conditions throughout the region.

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