Federal Reserve survey: Input costs, availability concerns across districts

ST. LOUIS — Agriculture reports were somewhat mixed across Federal Reserve districts in the latest Beige Book report, as farmers look ahead to planting season.

Overall, economic activity has expanded at a modest to moderate pace since mid-January, according to the report prepared by the Federal Reserve Bank of St. Louis based on information collected on or before Feb.18.

The Beige Book summarizes comments from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.

Each Federal Reserve Bank gathers information on current economic conditions in its district through reports from bank and branch directors, plus interviews and online questionnaires completed by businesses, community organizations, economists, market experts and other sources.

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

Chicago

“Rising prices for agricultural products buoyed expectations for farm income in 2022, though input costs rose, as well. Corn and soybean prices continued to move up, but prices for energy, fertilizers and herbicides also rose, and concerns deepened about their availability at planting time given supply chain issues,” the Federal Reserve Bank of Chicago summary reported.

“One contact pointed out a planting decision dilemma: seeds that are more readily available do best when used with herbicides that are in short supply. Supply issues were also delaying some new tractor deliveries, possibly past spring planting.”

Prices for cattle, hogs, eggs and milk were up again.

Farm finances kept improving, and demand for agricultural loans was lower than a year ago.

Farmland prices increased more in 2021 than they had in nearly a decade, with continued growth expected in early 2022.

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 District agriculture conditions have improved modestly since the previous report.

The number of winter wheat acres planted in the district this season increased 10% over the same period last year. This increase primarily came from Illinois, Kentucky and Missouri, which saw the acreage increase by an average of 20%.

While contacts remain optimistic about 2022, there is continued concern about the increased costs of inputs such as fertilizer, pesticides and machinery. Of particular concern is corn production, which uses significantly more fertilizer than other crops.

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 since the previous report.

Farm incomes increased through the end of 2021, according to a survey of agricultural credit conditions.

While contacts expressed concern about rising input costs, producers’ finances benefited from strong commodity prices.

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

Prices of most major commodities in the region increased modestly through early February from already high levels, continuing to support farm incomes in the 10th District.

The prices of wheat, cotton and hogs increased modestly from the previous month while corn, soybean and cattle prices increased more sharply.

Despite growing concerns about supply chain complications limiting shipping activity, U.S. agricultural exports remained strong and supported demand.

“Rising input costs have put some downward pressure on profitability for producers, but broad strength in the farm economy continued to support agricultural credit conditions, and farm finances were further bolstered by sharp increases in farmland values,” the report noted.

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