March 03, 2024

Corn Belt observations: Fed survey sees modest increase in economic activity

CHICAGO — Economic activity continued to increase modestly while low commodity prices and weather problems persist across the Corn Belt’s agricultural landscape.

An update on the nation’s current economic conditions was recently published in the Federal Reserve’s Beige Book based on observation from contacts outside the Federal Reserve System, including bank directors, businesses, community contacts, economists, market experts and other sources. The information was collected on or before Aug. 24.

Here are the reports from the agricultural sector in the Corn Belt.

“The agriculture sector continued to deal with lost income due to COVID-19 related factors, though CARES Act payments provided some support. In addition, a derecho windstorm caused damage to crops (especially corn), storage facilities and livestock facilities in a number of areas within the district,” 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.

“Parts of the district were also experiencing drought. Still, contacts expected the corn and soybean harvests to be near record levels for the district as a whole. Corn prices were little changed at levels below where they were a year ago, while soybean prices rose and were above year-ago levels.

“Beef and pork production was catching up from pandemic-related reductions and the backlog of cattle and hogs ready for slaughter fell. One contact reported that a gap in the supply of hogs was forming due to earlier euthanizations of many baby pigs. Cattle and hog prices rose, but not above year-ago prices. Beef and cheese prices moved lower as supplies normalized.”

Slight Improvement

The Eighth Federal Reserve District of St. Louis reported agriculture conditions have improved slightly from the previous reporting period on July 6.

“Relative to early July, the percentage of district corn, rice and soybeans rated fair or better has increased slightly while the percentage of cotton decreased slightly. Contacts indicated that, while crop conditions look promising, low crop prices will reduce profitability and there is still concern over trade disputes with China and the effects on commodity pricing,” the St. Louis district noted.

The district includes the southern parts of Illinois and Indiana and eastern half of Missouri, as well as parts of Tennessee, Arkansas, Kentucky and Mississippi.

Income

The Federal Reserve District of Minneapolis’ agricultural conditions were mixed. Lenders responding to the Minneapolis Fed’s second-quarter survey of agricultural credit conditions overwhelmingly reported decreased farm incomes in their area relative to a year earlier, with a similar share reporting decreased capital spending.

Crops as of early August were in strong condition in most areas of the Minneapolis district, with some states on track for record or near-record production, but prices for most commodities remained low.

The district includes all of Minnesota, the Dakotas and Montana, northwestern Wisconsin and all of Michigan’s Upper Peninsula.

Western Drought

Weak conditions in the Tenth District Federal Reserve Bank of Kansas City agricultural economy persisted, and farm income deteriorated further.

The effects of the COVID-19 pandemic continued to constrain prices of key agricultural commodities, and profit opportunities remained limited. Prices for major crops and livestock increased slightly from the prior reporting period, but remained below pre-pandemic levels.

“Drought in the western portion of the Kansas City district could further reduce revenues for some producers. Dry conditions were most prevalent in Colorado, where nearly 30% of corn acres had poor or very poor quality through mid-August. Alongside lower revenues, farm income across all states in the district declined at a noticeably faster pace than the prior survey period,” the district reported.

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