Prices decline, yield expectations rise

CHICAGO — The stories across the Corn Belt's Federal Reserve Districts mirrored one another in the agriculture sector with concerns over lower commodity prices and favorable crop conditions.

A survey-based summary of economic conditions in agriculture and other sectors was published in the Federal Reserve's Beige Book on Sept. 4.

The information is collected through reports in the 12 districts from bank and branch directors, plus interviews and online questionnaires completed by businesses, community organizations, economists, market experts and other sources.

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

Chicago

Expectations for farm income in the Seventh District continued to decline in recent weeks as corn and soybean prices fell further.

"Crop conditions were favorable across most of the district, though some areas were short on precipitation. Fall harvests were expected to approach previous records. Amidst low prices, farmers were holding higher-than-usual levels of crops in storage," the report said.

Fruit and greenhouse revenues were coming in above average.

Livestock operations benefited from lower feed costs. Cattle prices eased some, but remained high relative to historic levels.

Dairy and egg prices moved up, while hog prices were down slightly.

"In light of low crop prices and high interest rates, several contacts expected building financial stresses on less-productive farms," according to the survey findings.

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 been mixed since the previous report in July.

Several Eighth District contacts noted that sales had been below expectations due to lower demand. However, crops were in generally good shape due to a wet planting season and rains in July.

In Arkansas, the summer heat wave and severe drought has driven up irrigation costs and stresses on livestock.

District contacts have also noted that commodity prices had fallen below expectations, which negatively impacts the repayment capacity of farmers who took on operating loans and projected a higher cash flow.

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

"District agricultural conditions remained weak on balance. Low prices for crops continued to weigh down incomes, while livestock and dairy producers were faring better," according to the report.

However, crops were mostly in good or excellent condition in most of the district, and soil moisture conditions improved in some areas that were experiencing flooding earlier in the summer.

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 District farm economy deteriorated slightly alongside weakness in the crop sector and drought in some areas.

Prices for major row crops remained low alongside expectations of strong yields and production across many key states.

Crop conditions in the district were particularly favorable in Nebraska and Missouri.

Winter wheat production was also strong in Kansas and Oklahoma, but recent reports indicated less favorable corn and soybean conditions in Kansas as drought intensified.

In the livestock sector, cattle prices remained strong, but drought in southern and western portions of the district could hinder hay production and dampen profits.

Contacts continued to cite elevated production and living expenses, high interest rates and declining liquidity as key concerns for the months ahead.

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