Federal Reserve Bank

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

The stories across the Corn Belt’s Federal Reserve Districts mirrored one another in the agriculture sector with concerns over lower commodity prices and favorable crop conditions.

Farmland values for the Seventh Federal Reserve District increased 2% in the second quarter of 2024 from a year earlier, marking the smallest year-over-year gain since the third quarter of 2020.

To gain a better perspective in the current November and December futures price volatility, a soybean trade specialist noted historic parallels in the past 20 years, buyer opportunities and demand potentials.

Agricultural conditions varied in tandem with sporadic droughts across the Federal Reserve districts, but concerns over crop price declines were common in all corners of the Corn Belt.

Agricultural reports across Federal Reserve Districts in the Corn Belt were mixed, as drought conditions eased in some districts, but farm finances and incomes remained a concern.

Farmland values in the Seventh Federal Reserve District averaged a 4% increase from a year ago, the smallest year-over-year gain in three and a half years.

While overall economic activity expanded slightly since late February, ag sector concerns remain due to income prospects and weather.

Overall economic activity increased slightly since early January, with eight of the 12 Federal Reserve districts reporting slight to modest growth while ag conditions dipped, according to the latest Beige Book.

Farmland values in the Seventh Federal Reserve District are slowing down from double-digit increases of the last couple years to single-digit annual percentage increases.

Agricultural economists provided an economic forecast for 2024 in the Purdue Agricultural Economics Report’s annual outlook.

Agricultural conditions ranged from steady to slightly worse, according to the latest Federal Reserve Beige Book.

On the first business day of the new year, Missouri Treasurer Vivek Malek began accepting applications for about $120 million of state-subsidized, low-interest loans to small businesses, farmers and affordable housing developers.

Productivity is just one of many factors that impact the price of farmland. “The drivers of farmland value are unique to the area,” said Mykel Taylor, associate professor and Alfa Endowed Eminent Scholar at Auburn University.

Although indicators pointed to a recession in 2023, the U.S. economy has grown during this year.

Agricultural conditions improved or deteriorated slightly since the previous Beige Book report in October, depending on the Federal Reserve district.

After a five-year run that featured a costly trade war and an even costlier, deadly pandemic, the biggest players in the global soybean market are positioning themselves for a big, bruising 2023-2024 marketing year.

Farmers looking to trim historically high production costs could face more challenges again next season. The price of oil and natural gas is expected to rise into next year compared to current levels.

A year-over-year gain of 5% in agricultural land values, the smallest gain in three years, was reported in the third quarter of 2023, according to a survey.

The impact of drought conditions across much of the Corn Belt on crops and water transportation were a common theme in the Federal Reserve’s recent survey.

The October set of U.S. Department of Agriculture reports combined farmer surveys, in-field measurements of the crops yet to be harvested and grain samples of the harvested crops.

A year ago, my column was entitled “Cattle supplies to tighten moving forward.” The day I wrote that column December live cattle futures traded around the $154 level, but a few days ago kissed $192.

The Federal Reserve left U.S. interest rates unchanged this month, waiting to see if the rapid rate hikes since March 2022 will finally push inflation down to their target of 2%.

Agricultural conditions were somewhat mixed, with drought conditions and lower commodity prices reported in parts of the Corn Belt, according to survey results in the Federal Reserve’s “Beige Book.”

An important gauge of inflation was released this week, the Consumer Price Index. It showed August inflation above expectations at 3.7% and a new three-month high.

Those who follow my column know I am quite bullish toward the food and energy markets. They also know that my forecast for those markets to turn bullish has not yet come to fruition.

A shortage of food and energy should be coming sooner than later. I fully expect the final quarter of this year and into late 2025 to be a period marked by rising prices for those two basic markets.

The last weekly column I penned in July stated boldly: “We are entering a new era for food and energy prices that will not be solved until 2025, or later.”

Farmland values rose slightly year-over-year and from the first to the second quarter of 2023 in the Seventh Federal Reserve District, according to a survey.

When Russia invaded Ukraine on Feb. 24, 2022, Chicago wheat prices rose from $8.85 a bushel to $14.27 by March 7 2022. The rally, however, was rather short-lived.

Several fundamental events have combined in recent days suggesting that stocks as measured by the Dow Jones could drop 50% to 60% from current levels.

The Purdue University/CME Group Ag Economy Barometer rose two points in July to a reading of 123, indicating a slight increase in farmer sentiment about the ag economy.

There are several interesting theories on the ag and energy markets that have been unfolding the past few weeks.

The Federal Reserve’s decision to raise its benchmark rate for the 11th time, by a quarter-point, could once again send ripple effects across the economy.

The Federal Reserve began hiking interest rates more than a year ago to fight inflation. In June 2022, inflation was nearly 9%, but has since dropped to 3%.

The first half of 2023 has come to end and it was bullish for the stock market, and though commodities, per se, remain stuck in a trading range that goes back a year, there were some historic events that did unfold with hard assets.

Watching the various markets move higher on bad news and lower on good news is the order of the day. Lately, there is little connection between logic and reality.

There is no doubt the grain complex has evolved into a full-blown weather market thanks to above-normal temperatures and below-normal rainfall in the U.S. Grain Belt going into the heart of the growing season.

A year ago, the Federal Reserve began pushing interest rates higher at the fastest rate in 30 years in an effort to fight inflation. The Fed hiked rates fivefold and may not be done yet.

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.

Midwest farmland values continued an upward trend, but slowed in the first quarter, according to a survey in the Seventh Federal Reserve District.

Over the past few weeks, and now that we are into the second quarter of the year, a number of commodity markets have been chopping around with a downward bias, or simply remained bearish.

The first quarter of 2023 has ended, and moving forward, the financial environment for commodities should be far more bullish than what was seen the past few months.

In my column from Dec. 30 last year, entitled “Cattle report bullish for prices,” I wrote: “Moving forward, I am uncomfortable with the long side of most markets for the first quarter of 2023."

Volatility in the agricultural industry creates opportunities, not just challenges. “A good manager positions himself to capitalize on that volatility,” said David Kohl, professor emeritus of agricultural and applied economics at Virginia Tech.

A few days ago, former President Barack Obama, a basketball junkie, said “this is the best time of the year.” What he was excited about was the fact the NCAA Division 1 men’s basketball tournament is played each March to determine the national champion.

It is not unusual for markets to be blindsided by a shock of some sort. But lately, markets of all kinds are being caught flatfooted and hit with shocks and aftershocks.

The second to the last column I penned for this newspaper in 2022 was entitled “The super cycle is alive and well.” I wrote: “Commodities in the new year will outperform the other major asset classes, stocks, bonds and currencies.”

Over the past few weeks, a host of markets have turned lower to sharply lower. The reason for the weakness is the money managers, the funds, the “algo boys” high-frequency traders and chartists are finally reluctant to fight the Fed.

In the world of investments and trading, there are two rules always to be followed and never forgotten that stand above all others. One is “don’t fight the Fed.” The other, “don’t fight the tape.”