June 27, 2022

Federal Reserve survey: Thin margins remain amid economic growth

CHICAGO — The trend of slight to moderate economic growth continues across the Federal Reserve districts.

Survey-based findings of the current economic temperature were reported in the Beige Book released on June 1, based on information collected on or before May 23.

This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.

Each Federal Reserve Bank gathers information on current economic conditions in its district through reports from bank and branch directors, plus interviews and online questionnaires completed by businesses, community organizations, economists, market experts and other sources.

Here are the agriculture-related comments from districts in the Corn Belt.

Chicago

“Farm net income expectations for 2022 were little changed overall during the reporting period, as prices and costs increased by similar amounts. Corn, soybean and wheat prices were all up, as were prices for diesel and propane,” according to the Federal Reserve Bank of Chicago.

Cool, wet weather slowed spring planting for corn and soybeans. In addition, concerns lingered about whether fertilizer would arrive at farms on time.

Strong dairy exports helped boost milk prices. Bird flu continued to ravage poultry farms, pushing up egg prices. Hog prices moved sideways, while cattle prices were lower.

As with crop farmers, livestock producers also faced higher input costs. Agricultural land prices continued to rise strongly.

The Chicago district includes the northern two-thirds of Illinois and Indiana, all of Iowa, the southern two-thirds of Wisconsin and Michigan’s Lower Peninsula.

St. Louis

Agriculture conditions in the 8th Federal Reserve District have improved slightly since the previous report.

Contacts reported thin margins despite increased commodity prices due to rising input and labor costs, but remain optimistic due to persistent high demand.

Contacts noted that rising energy prices have created an unprecedented opportunity for alternative energy products and other new technologies in the sector.

The percentage of row crops planted has increased since the previous reporting period, but is down from this time in 2021.

Progress of acres planted is down this year for every crop and all states in the district, which reflects production issues due to staffing and supply chain concerns.

The St. Louis Federal Reserve 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

The 9th Federal Reserve District agricultural conditions remained strong. According to the first-quarter survey of agricultural credit conditions, 87% of respondents reported increased farm incomes relative to the same period a year earlier.

Farmland values increased briskly. However, due to an exceptionally cold and wet spring, crop planting and progress were well behind schedule in much of the district, except for Montana and western portions of the Dakotas, where drought conditions were rampant.

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

Kansas City

“Agricultural commodity prices remained at multiyear highs, providing ongoing tailwinds to the 10th Federal Reserve District farm economy. Market conditions remained favorable for prices of all major commodities in the region and prices of wheat, corn, soybeans, cotton and cattle increased modestly from the previous month,” the Beige Book reported.

Farm income and credit conditions also improved further during the most recent survey period. However, contacts expected conditions to soften slightly in the coming months and many cited concerns about rising input costs, broad inflationary pressures and severe drought.

The western and southern portions of the region have been most exposed to drought, affecting wheat, hay and grazing conditions that could reduce profit opportunities for both crop and livestock producers in those areas.

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

Tom Doran

Tom Doran

Field Editor