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Federal Reserve: Observations on the Ag Economy- October 2022

On Wednesday, the Federal Reserve Board released its October 2022 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 in the District were mixed. Cotton growers noted some softening, which was attributed to slowing demand for textiles. Cattle ranchers reported strong sales and increased prices for livestock. Demand for chicken was strong amid reports of domestic consumers trading down from other protein sources; however, poultry exports weakened due to concerns by foreign importers over avian flu outbreaks. Row crop production remained solid, but farmers were hesitant to invest in equipment amidst concerns over future crop demand.”

* Seventh District- Chicago– “Income expectations for agricultural producers in 2022 were unchanged over the reporting period, with a profitable year expected for most despite elevated input costs. Contacts were optimistic that corn and soybean yields would be better than had been expected this summer, even with drought in parts of the District. Corn and soybean prices moved higher during the reporting period.

Shipping costs, however, were elevated due to reduced barge capacity from low river levels.

“Dairy prices, most notably for butter, and egg prices, were up as well. Hog and cattle prices declined.”

Eighth District- St. Louis– “District agriculture conditions have declined modestly since our previous report. Production and yield forecasts declined for corn, rice, and soybeans from August to September. Crop yields have remained stable for corn, fallen for rice and soybeans, and improved for cotton from August to September. However, crop yields have fallen consistently compared with 2021. District production and yields have been affected by extreme weather conditions such as drought, flood, strong winds, and hail.

“Agriculture contacts remain concerned about rising input prices, global supply chain disruptions, and the extremely competitive nature of the current labor market.

Fertilizer prices are up 30% in 2022 after increasing 80% in 2021.

Supply chain issues have continued to be a challenge, with one grain processor reporting waits of 48-50 weeks for packaging materials. Contacts do not foresee these conditions changing for the next 6 months.”

* Ninth District- Minneapolis– “District agricultural conditions improved modestly and remained strong overall heading into harvest season, even as elevated input costs bit into producer margins. Early indications pointed to solid harvests and good crop conditions throughout most of the District, with the exception of portions of Montana heavily affected by drought.”

* Tenth District- Kansas City– “Financial conditions remained strong due to still elevated crop prices. However, contacts reported several adverse developments tied to drought and input costs. At the start of the fall harvest season, nearly one-third of corn and soybean crops were in very poor condition in some District states, heightening concerns about reduced yields.

Exceptionally dry conditions also contributed to lower river levels, higher transportation costs, and lower crop prices in some areas in September.

“In the livestock sector, hog prices declined moderately over the past month, but remained slightly above year-ago levels. Cattle prices continued to increase alongside reports of additional herd liquidations, due, in large part, to higher feed and transportation costs.”

* Eleventh District- Dallas– “Significant rainfall early in the reporting period greatly improved drought conditions across much of the district, though soil moisture has begun worsening again in recent weeks. Many areas experienced little-to-no row crop production as a result of the drought, causing fields to be plowed under. Significant culling of cattle herds continued, though the pace slowed slightly as much- needed rainfall greened up pastures.”

Twelfth District- San Francisco– “Conditions in the agriculture and resource-related sectors worsened somewhat. Overall demand for produce, fruits, and seafood was unchanged. However, labor shortages, transportation delays, elevated input prices, drought conditions, and wide temperature fluctuations continued to hinder production, especially for cherries, pears, and apples. Weaker global activity and an appreciating dollar reduced demand in international markets for domestic agricultural products, especially wheat, nuts, raisins, and tree logs. One producer mentioned that increased energy costs in Europe have prevented European farmers from refrigerating and storing fresh fruit, increasing their immediate supply in the region and heightening competition in export markets.”

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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