Low prices, high input costs keep ag sector flat

CHICAGO — Agricultural economic activity has been flat to down modestly since early September, with some crop prices remaining unprofitably low.

The Federal Reserve’s Beige Book, released Oct. 23, provided an updated summary of economic conditions in farming and other sectors.

The information is collected through reports in the 12 districts from bank and branch directors, plus interviews and online questionnaires completed by businesses, community organizations, economists, market experts and other sources.

Here are what the Corn Belt districts reported regarding the agricultural conditions.

Chicago

“Farm income expectations for the Seventh Federal Reserve District were stable over the reporting period despite prospects for above-average corn and soybean harvests,” the survey noted.

Dry weather helped reduce crop drying costs, but also led to lower crop weights, cutting into potential revenue.

Corn and soybean prices increased slightly, and farmers were maximizing crop storage in hopes of selling later at higher prices.

Cattle prices increased as the inventory of cattle continued to fall, reaching its lowest point since the 1950s. Dairy prices rose some, while egg prices ticked down. Hog prices were steady.

Agriculture transportation faced several logistical disruptions, including constrained rail traffic to Mexico and barge slowdowns from low water levels on the Mississippi River.

There were reports of agriculture equipment and input sellers offering low- and even zero-interest loans to spur sales.

The Seventh Federal Reserve 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

Eighth Federal Reserve District agriculture production has been stable since the previous report; however, sector conditions have weakened.

Contacts from Mississippi reported that, even with very good yields, most farmers will struggle to break even this year.

Across the district, crops were healthy and yields were high; however, input prices remained high and commodity prices were low. The decrease in feed prices has been positive for protein producers, yet it failed to offset other cost increases.

Contacts also noted a minimal effect of recent hurricanes, and they expected the cotton harvest to be strong despite the rains, although crops’ milling quality has been negatively impacted in Arkansas.

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

Agricultural conditions in the Ninth Federal Reserve District were stable at low levels. Preliminary estimates suggested that corn production in district states will decrease modestly from a year ago and soybean production will increase moderately.

Wheat production in district states increased significantly from last year. A decline in Montana wheat production was more than offset by increases in other states.

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

Activity in the Tenth Federal Reserve District’s agricultural sector continued to decline at a moderate pace as crop prices remained weak.

As activity slowed, farm lenders still reported increased loan demand driven by higher operating costs and living expenses.

Agricultural lenders reported lower farm incomes and a slight decline in farm loan repayment rates during the most recent survey period.

Deterioration in farm borrower liquidity and income was more pronounced in states most heavily concentrated in crop production.

Financial conditions were more stable in areas most concentrated in cattle production as profit opportunities for cow/calf producers remained strong.

Although contacts indicated slight declines in repayment rates and borrower liquidity, overall loan quality remained sound and farm real estate values held firm.

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