Federal Reserve Board May 2018 Beige Book map

Editor’s note: The following was compiled by Keith Good, University of Illinois Farmdoc Project social media manager, for the project’s Farm Policy News website.

On May 30, the Federal Reserve Board released its May 2018 Beige Book update, a summary of commentary on current economic conditions by Federal Reserve District. The report included several observations pertaining to the U.S. agricultural economy.

Seventh District: Chicago

The outlook for farm income for 2018 brightened again, with improvements concentrated in the crop sector. Nonetheless, several contacts expressed unease over the potential impact of international trade policies on the farming sector.

After weather-related delays, corn and soybean planting proceeded quickly in Illinois and Indiana, to the point that it was running ahead of normal progress. However, Iowa and Wisconsin were somewhat behind their typical paces for planting.

Dry weather and the late spring hindered the development of pastures, which led to shortages of and higher prices for hay, cutting into margins for some livestock producers. Cattle and egg prices were down, but hog and dairy prices moved up. Dairy prices were still quite low, however, and there were reports of a bump up in operators exiting the sector.

Eighth District: St. Louis

District agriculture conditions improved modestly from the previous reporting period and robustly from the same time last year. After contacts reported concerns about weather being too wet and cold for a strong early planting season, mid-May acreage planted for corn, cotton and soybeans were, respectively, 13, 12 and 24 percentage points above the same time last year.

Contacts indicated that the prospective Chinese tariffs on U.S. soybeans would be damaging to exporters but at this point seemed unlikely.

Ninth District: Minneapolis

District agricultural conditions were mixed. While recent increases in some commodity prices were viewed as a positive sign, farmers were also concerned about access to international markets.

Late-season snows delayed spring planting in much of the district, with crop progress well behind five-year averages as of mid-May.

Tenth District: Kansas City

The Tenth District farm economy continued to weaken, but the pace of deterioration slowed due to a slight uptick in agricultural commodity prices. Prices for all major agricultural commodities in the district increased slightly during the survey period. Despite the increase in prices, farm income continued to decline and demand for financing remained high.

The decline in the first quarter makes 2018 the fifth consecutive year that bankers have reported lower farm income than the year before.

Bankers generally expect the pace of loan demand to increase in coming months and continued to report increased interest rates on all types of agricultural loans, which could raise interest expenses for farm borrowers. However, farmland values remained relatively stable and loan delinquency rates remained low.

Compared with declines in farm income, declines in farmland values have remained modest.

Eleventh District: Dallas

Drought conditions continued to plague much of West Texas and Southern New Mexico, particularly in the Texas panhandle. Crop conditions for winter wheat were much poorer compared with last year due to the lack of soil moisture.

Row crop planting continued, and crops were in mostly fair to good condition, but there was concern among producers about the dry weather potentially causing below-average yields. Given the current level of prices, grain farmers need at least average yields to be profitable this year. Cotton farmers were a bit more optimistic due to higher prices over the last six weeks and because cotton yields generally hold up better than other crops during drought.

Cattle prices rose, largely due to seasonal factors but also buoyed by very strong domestic and international demand.