Federal Reserve survey: Corn Belt optimism persists

CHICAGO — Agricultural sector conditions and outlook continued to improve across Federal Reserve System districts as the U.S. economy expanded at a moderate pace from early April through late May.

A summary of economic conditions was released June 2 in the Federal Reserve’s Beige Book based on reports from bank and branch directors, plus interviews and online questionnaires completed by businesses, community organizations, economists, market experts and other sources.

The report is based on information collected on or before May 25. Here are the Corn Belt comments relating to agriculture.

Chicago

Expectations for farm income in 2021 strengthened across sectors in April and early May.

Drought and dry weather conditions were an issue across a substantial portion of the district, though timely rains could still erase most of the impact. Frosts damaged some plants and trees, with potentially heavy losses for fruit producers.

Corn and soybean planting proceeded ahead of the normal pace. Corn, soybean and wheat prices moved up and were near multi-year highs.

Hog, cattle and milk prices rose, helped by strong meat and dairy exports. Egg prices dropped, however.

Despite higher prices, livestock producers’ margins were little improved be-cause of higher feed costs.

Farmland values increased once again, because of strong demand and limited inventory.

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

St. Louis

After consecutive reports of minimal changes, agricultural contracts in the Eighth Federal Reserve District of St. Louis now remain optimistic about current conditions overall.

“Most agricultural contacts surveyed reported that their sales thus far have met expectations. Supply chain issues are raising many producers’ costs, although higher commodity prices have helped generate higher incomes, maintaining profit margins. One contact indicated that government support has been strong in the sector,” the report stated.

The percentage of row crops planted has increased since the previous reporting period and is up slightly from this time last year for every crop of the district states. Only Indiana is behind their 2020 progress at this point.

This optimism extends to the outlook, as well, as contacts reported that their outlook for the rest of 2021 has improved somewhat.

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

Agricultural conditions improved sharply since the previous report for the Federal Reserve District of Minneapolis.

“Contacts expected strong farm incomes heading into planting season, building on recent commodity price increases and export demand. Crop progress as of mid-May was generally well ahead of recent averages in district states. However, extreme drought conditions spread in portions of the district,” according to the report.

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

Kansas City

The 10th District farm economy remained strong, but drought continued to strain all types of producers in the western part of the region.

Prices for corn, soybeans, wheat, cotton and hogs increased in recent weeks and remained at multi-year highs through the early part of May. In contrast, prospects for the cattle industry remained subdued as cattle prices were near pre-pandemic levels, but profit opportunities were limited due to elevated feed costs.

Alongside severe drought in the western portion of the district, the wheat crop was in poorer condition in Colorado relative to other states. Contacts also reported that the impact of drought on pasture quality and hay production continued to worsen.

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