Concerns about farm bill, potential trade disruptions in Fed Reserve survey

CHICAGO — Though growth in economic activity was generally small, expectations for growth rose moderately across most geographies and sectors across the Federal Reserve Districts.

Economic conditions in agriculture and other areas based on survey input was published in the Federal Reserve’s Beige Book on Dec. 4.

The information was 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. It reflects economic conditions over the past six weeks.

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

Chicago

In the Seventh Federal Reserve District, “farm income expectations for 2024 continued to be for a decline from 2023, as corn and soybean prices stayed below year-ago levels,” the report stated.

“Strong corn and soybean harvests reflected good growing conditions this year, with record corn yields for the district and soybean yields up from the last two years. Crop quality was excellent, with very low moisture levels.”

Tomatoes grew well, resulting in a “best ever” crop according industry contacts.

Over the reporting period, corn prices increased, triggering selling by some farms, while soybean prices fell. Egg, hog and milk prices increased, while cattle prices were flat.

Agriculture faced fewer logistical hurdles as rail traffic improved and recent precipitation raised water levels on the Mississippi River, easing the slowdown in barge traffic.

Farm equipment sales were slow given falling prices for trade-ins and sticky high prices on new equipment.

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

Agriculture production has slightly declined in the Eighth District since the previous report. Harvesting is complete and yields have been “all over the place” due to late planting and weather conditions.

In western Kentucky, the soybean yields were down as heavy rains negatively impacted crop quality. Additionally, lower corn and soybean prices continue to tighten farmers’ margins.

Contacts in Kentucky also shared that while cattle prices were very good, inventory was very low.

Uncertainty about the passing of the next farm bill, high borrowing rates and potential disruptions to international trade were the main concerns for farmers in the district.

Contacts in this sector expect conditions to continue to deteriorate in the upcoming months.

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

Ninth District agricultural conditions remained weak. In the most recent survey of agricultural credit conditions, 85% of respondents reported that farm incomes decreased in the third quarter from a year earlier, as productive harvests were not sufficient to offset low commodity prices and elevated operating costs.

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

In the Tenth Federal Reserve District, farm economy remained subdued despite a slight increase in crop prices.

Corn and soybean yields were above the five-year average in all states except Oklahoma and could boost revenues, but profit opportunities stayed narrow.

Despite strong production overall, pockets of drought also hindered crop production in certain areas of the region.

Cattle prices climbed further in early November and kept margins for cow/calf producers strong.

“Many district contacts cited notable declines in farm equipment values as a growing concern and continued to note lower liquidity for crop producers and high interest rates could weigh further on farm finances in the coming months,” the report stated.

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