February 02, 2023

Fed survey notes shipping, input price concerns

CHICAGO — National economic activity expanded modestly across Federal Reserve Bank districts, but condition varied across industries and districts, according to the latest Beige Book.

The survey-based document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve Bank officials.

This report was prepared by the Federal Reserve Bank of Dallas based on information collected on or before Oct. 7 and is intended to characterize the change in economic conditions since the last report published Sept. 7.

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

Chicago

“Income expectations for agricultural producers in 2022 were unchanged over the reporting period, with a profitable year expected for most despite elevated input costs,” the report from the Federal Reserve’s Seventh District noted.

Contacts were optimistic that corn and soybean yields would be better than had been expected this summer, even with drought in parts of the district.

Corn and soybean prices moved higher during the reporting period. Shipping costs, however, were elevated due to reduced barge capacity from low river levels.

Dairy prices, most notably for butter, and egg prices were up, as well. Hog and cattle prices declined.

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

Eighth Federal Reserve District agriculture conditions have declined modestly since the previous report.

Crop yields have remained stable for corn, fallen for rice and soybeans and improved for cotton from August to September. However, crop yields have fallen consistently compared with 2021.

District production and yields have been affected by extreme weather conditions such as drought, flood, strong winds and hail.

Agriculture contacts remain concerned about rising input prices, global supply chain disruptions and the extremely competitive nature of the current labor market. Fertilizer prices are up 30% in 2022 after increasing 80% in 2021.

Supply chain issues have continued to be a challenge, with one grain processor reporting waits of 48 to 50 weeks for packaging materials. Contacts do not foresee these conditions changing for the next six months.

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

Ninth Federal Reserve District agricultural conditions improved modestly since the last survey and remained strong overall heading into harvest season, even as elevated input costs bit into producer margins.

Early indications pointed to solid harvests and good crop conditions throughout most of the district, with the exception of portions of Montana heavily affected by drought.

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

Agriculture’s financial conditions in the Federal Reserve’s 10th District remained strong due to still elevated crop prices. However, contacts reported several adverse developments tied to drought and input costs.

At the start of the fall harvest season, nearly one-third of corn and soybean crops were in very poor condition in some district states, heightening concerns about reduced yields.

Exceptionally dry conditions also contributed to lower river levels, higher transportation costs and lower crop prices in some areas in September.

In the livestock sector, hog prices declined moderately over the past month, but remained slightly above year-ago levels.

Cattle prices continued to increase alongside reports of additional herd liquidations, due in large part to higher feed and transportation costs

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