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Observations on the Agricultural Economy – May 2023 by AgFax


Jun 5, 2023

On Wednesday, the Federal Reserve released its May 2023 Beige Book Update, which outlines the Federal Reserve’s commentary on the current economic situation. This report contains several observations about the US agricultural economy.

In District 6 – Atlanta, the report notes that farm conditions have softened since the last report. Demand for cotton remains weak, with many farmers planting less cotton than they did last year. However, cattle demand is strong. Poultry producers continue to struggle as export restrictions due to avian flu concerns have created a domestic oversupply. Domestic egg demand remains high, but dairy consumption has declined. Finally, the demand for citrus fruits remained strong even as production declined.

In District 7 – Chicago, the report states that expectations for District 7 farm income in 2023 have fallen slightly as prices of key commodities decreased. Corn and soybean prices dropped as strong field work and planting progress raised hopes for a big harvest. Soft red wheat prices remained low, but drought affected most of the US wheat crop, and uncertainties over the re-extension of the agreement allowing exports from Ukraine led to higher prices for hard wheat. Prices for eggs and dairy products, especially cheese, fell but cattle prices rose. The report advises farmers to save working capital to minimize the need to avail farm operating loans.

In District 8 – St. Louis, the report notes that the overall picture is unchanged, but the outlook has deteriorated slightly since the last report. Most farmers surveyed reported higher costs, including labor costs, which contributed to a slightly worsening outlook. The proportion of row crops planted as expected from the previous reporting period increased but only slightly. Acre planted progress has been mixed across the district, with some states such as Missouri and Illinois improving significantly from last year, while others are doing slightly or significantly worse.

In District 9 – Minneapolis, the report states that district agricultural conditions were strong heading into the planting season. Around half of the respondents reported an increase in farm income in the first quarter compared to the same period last year. Lenders focused on improving liquidity and the financial condition of producers but were concerned about volatility in commodity prices and rising interest rates. Heavy winter snowfall and prolonged cold weather will significantly delay spring planting in some areas.

In District 10 – Kansas City, the report notes that the district’s agricultural economic conditions remained strong through early May but showed signs of easing. Corn and soybean prices fell slightly since April, but production is projected to reach record levels thanks to ideal planting conditions and historically high yields. However, wheat prices have risen slightly since April, but lower yields due to drought could limit incomes, especially in Kansas and Oklahoma. The livestock sector, particularly the beef industry, continues to be weighed down by high feed costs and drought.

In District 11 – Dallas, the report mentions that recent rainfall has improved drought conditions in the eastern part of the district, but severe drought persists in most parts of the world. Grain prices fell across the reporting period amid a bright outlook for US crop production this year, but drought has hampered crop production in Texas. Farmers expect a below-average cotton harvest this year but have seen significant gains in cattle prices.

Finally, in District 12 – San Francisco, the report states that agricultural and resource sector conditions weakened slightly. Reports on exports were mixed as the turmoil continued. California officials said wet weather conditions had reduced yields of cruciferous and berry crops, while the rain also interfered with pollination of tree and grape crops. However, seafood resources are reportedly stable in the Pacific Northwest, and contact points noted lower costs for transportation and irrigation water. Other costs, such as packaging, fertilizers, and energy, remain high.

By Editor

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