Survey reflects improved ag outlook

CHICAGO — Economic activity expanded modestly and agricultural conditions were somewhat improved through the first two months of 2021.

The economic pulse in the nation’s Federal Reserve System was documented in a survey of bankers, economists, market experts, business owners and community organization representatives and published March 3 in the Beige Book. The information reflects conditions from Jan. 1 through mid-February.

Here’s what the report summaries said about the agricultural climate across the Corn Belt.

Chicago

Economic activity in Federal Reserve Bank of Chicago’s Seventh District increased modestly in January and early February, but remained below its pre-pandemic level.

“Contacts expected agricultural income to be solid in 2021, though down some from 2020′s strong results — direct income from agricultural products could be higher in 2021, but federal government payments were expected to be lower. Corn, soybean and wheat prices moved up during January and early February,” according to the district report.

Higher crop revenues helped boost demand for farm equipment, and there were reports of low inventories of new equipment in some areas.

Cattle and hog prices also moved up from the prior reporting period. Dairy prices were generally down, and producers faced uncertainty regarding demand from government food programs and schools.

Looking ahead, recent adverse weather was expected to support prices, particularly for milk and cattle. Cold weather boosted costs for district farmers; more generally, contacts reported rising input costs for both crop farmers and livestock producers driven by higher fertilizer and feed prices.

Farmland values continued to increase strongly.

The Chicago district includes the northern two-thirds of Illinois and Indiana and all of Iowa, Wisconsin and Michigan.

St. Louis

Agriculture conditions in the Eighth Federal Reserve District of St. Louis have improved moderately relative to the previous reporting period.

The number of acres of winter wheat planted this season throughout the district increased sharply relative to the previous year, although acres planted declined slightly in Kentucky.

Despite pessimism in early 2020, farmers expressed optimism after a strong finish in 2020, with prices and sales up well above what was expected.

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.

Minneapolis

As was the case with other parts of the Corn Belt, the Federal Reserve District of Minneapolis reported moderate improvements in agricultural conditions due to continued rallies in commodity prices and government support programs.

“Respondents to the Minneapolis Fed’s fourth-quarter (January) survey of agricultural credit conditions reported increased farm income and capital spending compared with a year earlier, and the outlook for the next quarter was for continued growth in farm incomes,” the report stated.

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

Kansas City

“The Tenth District’s farm economy strengthened alongside a sharp rebound in farm income and agricultural credit conditions,” according to the report.

In the most recent survey period, a majority of district contacts indicated that farm income was higher than a year ago for the first time since 2013, leading to increased loan repayments and slight increases in farm real estate values. Crop prices rose modestly since January and remained considerably higher than a year ago.

Contacts located in regions more dependent on livestock revenues and exposed to severe drought, however, were less optimistic. Although cattle prices also increased modestly since January, they remained lower than a year ago, and higher crop prices could lead to higher feeding costs for livestock producers in the coming months.

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