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Federal Reserve: Observations on the Ag Economy- July 2021

On Wednesday, the Federal Reserve Board released its July 2021 Beige Book update, a summary of commentary on current economic conditions by Federal Reserve District. The report included several observations pertaining to the U.S. agricultural economy.

Graph of Fed Districts from, “The Beige Book.”

* Sixth District- Atlanta– “Agricultural conditions remained mixed. Widespread rain across parts of the District resulted in abnormally moist to excessively wet conditions while much of Florida and southern Georgia experienced abnormally dry to moderate drought conditions.

Weekly Weather and Crop Bulletin- U.S. Department of Commerce, National Oceanic and Atmospheric Administration and the U.S. Department of Agriculture. Volume 108, No. 28 (July 13, 2021).

“Planting progress for much of the region’s cotton, soybean, and peanut crops were mostly on par with the five-year average. On a month-over- month basis, the production forecast for Florida’s orange crop was up in June while the grapefruit production forecast was down; both forecasts remained below last year’s production levels. The USDA reported year-over- year prices paid to farmers in May were up for corn, cotton, soybeans, cattle, broilers, eggs, and milk, but down for rice. On a month-over-month basis, prices were up for corn, rice, soybeans, broilers, eggs, and milk, but down for cotton. Cattle prices were unchanged.”

* Seventh District- Chicago–

Agriculture stayed on course to earn higher market- based incomes relative to last year, as most product prices remained high enough to offset increased costs for freight, energy, fertilizers, and labor.

“On net, corn prices were little changed, while soybean prices were a little lower over the reporting period. Although planted corn and soybean acreage was up from last year, it was lower than expected earlier in the growing season, which helped maintain prices. Crop conditions for corn and soybeans were mixed, as some parts of the District were in excellent shape and others were stressed by drought.

“Hog and milk prices eased off highs during the reporting period, while cattle prices were flat. One contact noted that a lack of workers in slaughterhouses had led to the suspension of some contracts with poultry producers. Farmland values moved higher again.”

Eighth District- St. Louis– “District agriculture conditions declined modestly relative to the previous reporting period but remain steady relative to the same period last year. Between the end of May and end of June, the percentages of corn, cotton, rice, and soybeans rated fair or better decreased modestly across the District.”

* Ninth District- Minneapolis– “District agricultural conditions continued to benefit from strong commodity prices. However, severe drought conditions across most of the District had many crop producers concerned about yields, as most corn, soybean, and wheat acres in the District were rated in fair or poor condition.”

* Tenth District- Kansas City–

Agricultural economic conditions in the Tenth District were strong through June, with profit margins for most major commodities relatively high.

Prices of most crops were still near multi-year highs, although had declined slightly since the previous reporting period. Hog prices also remained strong. The winter wheat harvest was delayed slightly in parts of the District, but crop quality was not expected to be hindered and higher production was anticipated throughout the region. In addition, the District’s corn and soybean crop was in slightly better condition than the nation in all states except Missouri. In contrast to other commodities, profitability for cattle producers continued to be limited. Drought also persisted in some portions of the District and remained a concern for both crop and livestock producers.”

* Eleventh District- Dallas– “Drought conditions eased in much of the District, though severe drought persisted in West Texas and Southern New Mexico. In areas with sufficient soil moisture, producers were optimistic for robust crops this year. Crop prices were slightly higher overall, supported by concern over U.S. and global drought conditions. For crops like corn and sorghum, cash prices are at an eight-year high. Recent rainfall benefitted pasture conditions, which is a positive for livestock producers amid high feed costs.”

Twelfth District- San Francisco– “Activity in the agriculture and resources sectors increased somewhat. Eased local restrictions led to generally increased domestic demand for agricultural and resource-related products. International demand for logs, fruits, vegetables, seafood, and other products increased over the reporting period despite an appreciating dollar. Producers noted reduced but still adequate supply and inventory levels of fruits, raisins, and nuts. Supply chain disruptions continued to cause costly delays with trade from Asian markets in particular. Growers in California reported drought conditions and increased costs associated with irrigation. This led some farmers to leave a portion of their acreage fallow, prioritizing water usage on more profitable crops.”

Keith Good Photo

Keith Good is the Farm Policy News editor for the farmdoc project. He has previously worked for the USDA’s National Agricultural Statistics Service, and compiled the daily News Summary from 2003-2015. He is a graduate of Purdue University (M.S.- Agricultural Economics), and Southern Illinois University School of Law.

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