Federal Reserve survey: Input costs shift planting, management plans

CHICAGO — Concerns over tighter margins despite higher crop prices were common across the Federal Reserve districts in the April 20 Beige Book survey.

Federal Reserve System contacts reported the overall economic activity continued to expand at a moderate pace since mid-February. Several districts reported moderate employment gains despite hiring and retention challenges in the labor market.

The report was prepared at the Federal Reserve Bank of Minneapolis based on information collected on or before April 11.

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. The Beige Book summarizes comments from those contacts.

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

Chicago

“Agriculture markets experienced price increases and substantial volatility during the reporting period related to Russia’s invasion of Ukraine. Prices for corn, soybeans and wheat moved higher, as did input prices, particularly for fertilizer and diesel fuel,” according to the Federal Reserve Bank of Chicago.

“Some farmers switched to using manure as fertilizer, though availability was limited, particularly in areas without substantial livestock activity.

“Rising input costs led to a shift in planting plans from corn to soybeans, which require less expensive inputs.”

In addition, concerns deepened about whether input deliveries would be in time for planting.

On average, prices for cattle, hogs, eggs and milk were all up from the prior reporting period.

Strong gains in farmland prices continued, in part because of greater interest by investors.

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

Agriculture conditions have improved slightly since the previous Eighth Federal Reserve District report.

The number of acres planted across the district for corn, cotton, rice and soybeans was slightly changed from last year. Tennessee saw the most growth of all district states, with a moderate increase of 10% in acres planted.

Corn and rice were planted in lesser quantities compared with last year, while cotton and soybeans increased in acreage.

Contacts expressed concern about a continued rise in input costs and availability of inputs, particularly fertilizer.

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

The Ninth Federal Reserve District agricultural conditions improved moderately heading into planting season.

“Strong crop prices appeared to outweigh increases in input costs, bolstering incomes, according to contacts; however, livestock and dairy producers were seeing their margins squeezed,” according to the report.

Early reports indicated a reduction in district corn acres planted and an increase in wheat and soybean acres in 2022.

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

The farm economy in the Tenth District remained strong alongside elevated commodity prices, but volatility and uncertainty in global markets emerged as a risk for the sector.

The price of wheat and corn increased rapidly, and soybean prices increased modestly in March as the conflict in Ukraine led to expectations of substantial disruptions in global production and trade activity. The turmoil also led to rapid increases in the price of major inputs such as fuel and agricultural fertilizers.

“While crop prices supported farm revenues, concerns about the cost and availability of agricultural inputs intensified, and higher feed prices could also pressure profit margins for livestock producers. In addition, surging grain prices increased costs for food processing facilities in the district,” the report stated.

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