CHICAGO — Economic activity increased in nearly all Federal Reserve districts but remained well below where it was prior to the pandemic, according to a recent survey.
The Federal Reserve’s Beige Book was prepared by the Federal Reserve Bank of Chicago based on information collected on or before July 6.
Information was collected from bank directors, interviews and questionnaires completed by business, community contacts, economists, market experts and other sources to check the current economic pulse.
Here’s what the survey said about the agricultural climate across the Corn Belt.
“The COVID-19 pandemic continued to weigh on agriculture incomes. That said, farm incomes received a boost from some commodity price increases and (Coronavirus Aid, Relief and Economic Security) Act payments. Corn and soybean prices moved up after a (U.S. Department of Agriculture) report that the number of corn acres planted was smaller than expected,” according to the Seventh Federal Reserve District of Chicago survey, which includes the northern two-thirds of Illinois and Indiana and all of Iowa, Wisconsin and Michigan.
“Following a smooth planting season, corn and soybean crops were off to an excellent start. Specialty crops were also in decent shape. Meat production rebounded to levels near that of a year ago as packing plants reopened and began running extra shifts. Nevertheless, contacts reported a large backlog of hogs to slaughter. Cattle and hog prices fell and were below year-ago levels.
“Milk prices at the farm gate stayed below last year’s levels in spite of some upward movement in dairy prices. Cheese demand surged, pushing prices to high levels.
“Ethanol margins widened, but some facilities remained closed and others were operating below full capacity. Demand for sites to locate renewable energy assets, recreational ground and rural housing helped keep farmland values mostly stable.”
Modest Increases
The Eighth Federal Reserve District of St. Louis reported agriculture conditions remain unchanged relative to the previous reporting period.
“Between the end of May and end of June, the percentages of corn and soybeans rated fair or better increased modestly, while the percentages of cotton and rice decreased modestly. The percentages of corn, rice and soybeans rated fair or better are significantly above their values a year ago, while the percentage of cotton rated fair or better slightly decreased,” Eighth District respondents noted.
The district includes the southern parts of Illinois and Indiana and the eastern half of Missouri, as well as parts of Tennessee, Arkansas, Kentucky and Mississippi.
“Agriculture contacts have indicated that, in the past month, agribusinesses have not experienced significant shortages or slowdowns in demand and have remained open due to their essential status. However, there is some concern that additional financing may be necessary to bridge gaps in cash flows if the overall economic slowdown is prolonged,” the Eighth District respondents said.
Trade Headwinds
Agricultural conditions remained poor in the Federal Reserve District of Minneapolis. Producers reported that disruptions in trade with China were creating “headwinds” in grain markets.
Recent declines in milk prices dealt a blow to already suffering dairy producers. In contrast, the majority of the district’s corn and soybean crops were in good or excellent condition as of late June.
The Minneapolis-based district includes all of Minnesota, the Dakotas and Montana, northwestern Wisconsin and all of Michigan’s Upper Peninsula.
Packing Plants
The Tenth District Federal Reserve Bank of Kansas City’s farm economy remained weak despite some signs of stabilization in markets for key agricultural commodities. By late June, all U.S. meat packing plants were operational, but COVID-19 continued to impede supply chain functions.
“Capacity utilization and meat production at packing plants increased slightly since May but appeared to remain limited somewhat by modified operations. Alongside production constraints, demand for meat was expected to decrease in 2020 as a result of broader economic weaknesses, putting additional downward pressure on cattle and hog prices,” the Tenth District reported.
“Ethanol production rebounded slightly in June but remained about 20% lower than a year ago and continued to weigh on corn prices. District contacts reported that farm borrower liquidity weakened considerably alongside lower commodity prices, but government aid programs could provide a moderate degree of support to agricultural credit conditions.”
The Kansas City district includes the western part of Missouri, Kansas, Nebraska, Oklahoma, Wyoming, Colorado and the northern New Mexico.