Federal Reserve survey: Costs continue to pressure ag conditions

CHICAGO — Agricultural conditions were unchanged or declined in most of the Federal Reserve Districts, while cost pressures intensified from fuel and fertilizer spikes.

The Federal Reserve System's Beige Book provided a snapshot of economic conditions collected on or before May 27.

This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials. The report notes current conditions as well as trends since the previous Beige Book was released seven weeks ago.

Here are what the Corn Belt districts reported regarding the agricultural conditions.

Chicago

Expectations for 2026 Seventh Federal Reserve District farm income were little changed over the reporting period.

Although weather conditions and crop planting varied across the district, planting was largely on schedule and most crops were off to a good start.

"Fertilizer and fuel prices remained elevated. One contact reported buying diesel 'hand to mouth' instead of by the truckload due to elevated prices and uncertainty about future prices," the report said.

A modest number of acres switched from corn to soybeans, as corn requires more fertilizer.

Contacts indicated fertilizer costs would be a greater concern in the fall and winter if higher prices persist as that is when prices tend to be locked in for the subsequent growing season.

Corn, soybean and wheat prices rose. Dairy prices generally increased, cattle and hog prices were flat and egg prices decreased.

The Seventh District of Chicago 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 have declined slightly in the Eighth Federal Reserve District since the previous report.

A rice producer in Arkansas noted that sales were below expectations, citing closed shipping lanes and reduced export demand stemming from the ongoing conflict in the Middle East.

In the Mississippi Delta, a farm operator reported that planting progress was well ahead of last year; however, farmers' financial positions are no better — and possibly worse — than a year ago.

Credit conditions have tightened for some growers, with reports of delays in operating lines and increased reliance on credit.

A poultry producer in Arkansas observed that poultry markets have softened considerably year-over-year, as supply growth has outpaced historical norms and pushed prices lower.

Cotton contacts indicated improved pricing, though earlier reductions in acreage have limited the industry's production response.

The St. Louis-based 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 in the Ninth Federal Reserve District remained weak overall, but planting was going well.

According to the most recent Ag Credit survey, 76% of respondents reported that farm incomes decreased in the first quarter from a year earlier, and respondents were concerned about the impact of surges in diesel and other input prices on margins.

However, corn, soybean and spring wheat planting progress in district states as of mid-May was well ahead of average, and high cattle prices remained a source of strength.

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

Conditions in the Tenth Federal Reserve District farm economy remained split across crop and livestock sectors. Corn, soybean and wheat prices have increased moderately since April, but the spike in fuel and fertilizer costs was expected to keep profit opportunities narrow.

Contacts noted that wheat conditions in Kansas, Nebraska and Oklahoma were particularly poor due to severe drought, raising concerns about reduced revenue for producers.

"Strong cattle prices continued to support cow-calf producers and boosted incomes for dairy and crop operations with diversification into beef cattle," the report said.

"According to the latest lender survey, ranchland values increased sharply alongside strength in the cattle sector, and cropland values increased modestly despite ongoing challenges for crop farms."

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