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A N EIGHTH DISTRICT PERSPECTIVE
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. # 7

Federal Reserve Bank of St. Louis

CAROL TMAXIOM

Fall 1983

Drought Raises Crop Prices No w. . .
Meat Prices Later
Until midsummer, many analysts were projecting a
continuation of the large surpluses and low prices that
have prevailed in grain markets for several years. Ex­
cellent growing conditions and strategic plantings by
farmers were expected to raise yields and minimize the
effects of the payment-in-kind (PIK) program on produc­
tion and grain stocks. Most trade talk centered not on
whether PIK would be extended, but on what additional
steps Congress would take to reduce the mounting im­
balance between the quantity of grain produced and
quantity of grain demanded in the United States.
The worst drought in 50 years has changed the tone of
this talk dramatically. Centered on the prime corn and

Eighth Federal Reserve District

soybean areas of the Eighth District, the drought has
lowered average corn and soybean yields to 85.1 and
24.9 bushels per acre; yield estimates for both crops
declined by more than 15 percent in August alone. As
the table below indicates, only wheat and rice escaped
the drought’s damaging effects; cotton yields, down 15
percent from 1982, were damaged prior to August 1.

Drought Effects on U.S. Crop Yields1
Crop
Corn
Soybeans
Wheat
Cotton
Rice

1982 average

Aug. 1,1983

Sept. 1,1983

114.8
32.2
35.6
590.0
47.4

99.9
29.7
39.8
503.0
46.4

85.1
24.9
39.5
501.0
46.3

1 Yields for corn, soybeans and wheat are measured in bushels per
acre. C otton yields are pounds per acre. Rice yields are
measured as hundreds of pounds per acre.

SOURCE: U.S. Department of Agriculture.

ST. LO U IS




These sharp declines in yields have reduced corn and
soybean production estimates substantially. The table
on the following page compares 1982 corn and soybean
production figures for Eighth District states to the
USDA’s September 1 production estimates. The reduced
acreage planted under PIK and the drought have com­
bined to reduce the national corn crop by nearly 50 per­
cent from a year ago.
The attractiveness of PIK incentives to farmers in
Illinois and Indiana, two of the nation’s leading corn
states, contributed to reducing Eighth District produc­
tion by 12 percent more than the national decline. The
concentration of the drought in Missouri, Illinois and
Indiana also pushed the decline in Eighth District soy­
bean production to nearly 40 percent, about 7 percent
more than the national figure.
What do these sharp reductions in corn and soybean
output imply for the future? First, a PIK program for

FALL 1983

FEDERAL RESERVE BANK OF ST. LOUIS

feed grains in 1984 is no longer a possibility. Had nor­
mal weather produced the 6 billion bushel corn crop
that was expected earlier in the summer, reserve stocks
would have declined only marginally and government
storage and interest costs would have continued to grow.
Now, however, the much smaller 4.4 billion bushel
harvest is expected to reduce carryover stocks from the
3.4 billion bushels on hand this September 30 to less
than one billion bushels next September 30; this will be
the first time in seven years that corn reserves will have
fallen below the one billion bushel level. Many analysts
feel this is nearer to the reserve level desired by govern­
ment officials: adequate to meet short-term needs but
not so large as to impose the substantial subsidy costs of
recent years. The smaller soybean crop—combined with
strengthening export demand—implies a reduction in
domestic usage near 13 percent during 1984.
Unless loan rate and target price provisions of current
price support programs are altered substantially, only
another drought in 1984 is likely to keep grain and soy­
bean prices high in the year ahead. The reduction in
reserve stocks also is likely to be transitory unless
surplus production capacity is removed from agricul­
ture or declining export demand is increased suddenly.
So, barring major changes in price support legislation,
export demand or normal weather patterns, the effects
of PIK and the 1983 drought on crop prices and produc­
tion will be short-lived.
This year’s events, however, will affect meat prices
and production for several years. Currently, high grain
prices are inducing many cattle and hog producers to

September 1 Corn and Soybean Production
Estimates for Eighth District States (millions
of bushels)
CORN

1983
2.625
Arkansas
608.400
Illinois
345.000
Indiana
48.500
Kentucky
4.480
Mississippi
82.500
Missouri
Tennessee
28.800
EIGHTH DISTRICT 1,120.305
U.S. TOTAL

4,390.000

SOYBEANS

Percent
change
from 1982
6.3%
-6 0 .1
- 5 7 .7
- 6 9 .3
- 1 9 .7
- 5 9 .7
- 5 2 .9
- 5 9 .6
- 4 7 .7

1983
70.200
247.800
109.760
26.980
54.360
96.900
32.640
638.640
1,534.970

Percent
change
from 1982
-3 5 .7 %
-3 2 .5
-4 0 .1
-4 9 .2
-4 1 .9
-4 7 .4
-4 8 .6
-3 9 .4
-3 2 .6

SOURCE: U.S. Department of Agriculture.

slaughter more animals than usual. After this tem­
porary increase in meat supplies lowers red meat prices
during fall and winter, fewer animals for slaughter in
1984 will tend to increase red meat prices, perhaps by 15
percent or more from current levels. Aside from higher
feed costs, red meat producers also are earning less
because the drought has prevented animals from gain­
ing or even maintaining weight; thus, producers are
receivin g fewer dollars per pound on the sm aller
animals marketed.

Farm Exports Continue to Decline
U.S. Export Inspections (billions of dollars)

Product
Soybeans
Corn
Wheat and flour
Rice
Cotton and linters
Livestock and products
All other products
U.S. Total

Fiscal year
1982

Fiscal year
1983

Percent
change

$ 6.5
6.0
7.6
1.1
2.2
3.2
12.5

$ 5.8
5.7
6.2
0.8
1.7
2.9
11.4

-1 0 .5 %
-4 .4
- 1 8 .6
- 3 0 .4
- 2 1 .4
-8 .3
-8 .8

39.1

34.5

SOURCE: U.S. Department of Agriculture.

During the 1970s, the dollar value of farm product ex­
ports grew at an annual rate of nearly 20 percent. It now
represents nearly 20 percent of total U.S. exports. For
the first time in over a decade, however, farm export
value declined in 1982 and is expected to decline again
this year. This fiscal year farm exports are expected to
be valued at about $34.5 billion, down from $39.1 billion
a year ago. From the 1981 peak export value of $43.8 bil­
lion dollars, the estimate for fiscal year 1983 represents
a 21 percent decline in the value of farm exports in just
two years. Further details on the exports of some Eighth
District farm products are shown in the table at left.

- 1 1 .8

—Michael T. Belongia

Agriculture—An Eighth District Perspective is a quarterly summary of agricultural condi­
tions in the area served by the Federal Reserve Bank of St. Louis. Single subscriptions are avail­
able free of charge by writing: Research and Public Information Department, Federal Reserve
Bank of St. Louis, P.O. Box 442, St. Louis, Missouri 63166. Views expressed are not necessarily
official positions of the Federal Reserve Bank of St. Louis or the Federal Reserve System.
2



FEDERAL RESERVE BANK OF ST. LOUIS

FALL 1983

EIGHTH DISTRICT AGRICULTURAL DATA

Percent Change
August
1983

Average
for 1982

0.5%
0.0

0.3%
0.2

Prices and Costs1

1983

July
1983

CONSUMER PRICE INDEX (% change)
Nonfood
Food

0.3%
- 0 .6

0.5%
-0 .1

0.0
0.0
0.0
1.0

0.0
0.0
0.0
0.5

0.3
0.0
0.0
0.5

0.4
- 0 .3
0.7
- 0 .2

2.8
- 0 .4
4.2
0.0

2.2
- 5 .3
4.2
- 1 .6

- 2 .4
- 1 .6
- 2 .4

-2 .0
-2 .8
-0 .8

5.0
1.3
9.2

0.0
0.4
- 0 .5

8.2
0.0
19.1

3.3
- 6 .2
16.4

FEEDER CATTLE
Wholesale price - Kansas City ($/cwt.)

$64.75

$60.41

$60.29

$64.82

- 3 .3

- 11.1

FEEDER PIGS
Wholesale price - So. Missouri ($/cwt.)

$26.09

$21.52

$24.55

$51.14

-4 8 .2

-5 9 .3

June

PRODUCTION COSTS FOR FARMERS (% change)
All inputs
Fertilizer
Agricultural chemicals
Fuels and energy
PRICES RECEIVED BY FARMERS (% change)
All products
Livestock
Crops

BROILERS
Wholesale price -1 2-city ($/lb.)
TURKEYS
Wholesale price - New York,
8-16 lb. young hens ($/lb.)

49.07$

60.91$

Year-To-Date2 Same Period
1983
Year Ago
2.6%
0.8

2.8%
0.6

53.30$

54.24$

46.67$

21.7

17.8

58.49$

57.59$

60.75$

6.3

- 10.2

CORN
Wholesale price - St. Louis ($/bu.)

$ 3.27

$ 3.39

$ 3.68

$ 2.57

47.8

52.1

SOYBEANS
Wholesale price - N.C. Illinois ($/bu.)

$ 6.02

$ 6.33

$ 8.31

$ 5.88

49.5

45.8

WHEAT
Wholesale price - No. 1, hard winter Kansas City ($/bu.)

$ 3.92

$ 3.71

$ 3.88

$ 4.00

- 2 .5

4.9

LONG-GRAIN RICE
Wholesale price - Arkansas ($/cwt.)

$18.50

$18.50

$18.50

$17.72

0.5

8.1

COTTON
Wholesale price - all markets ($/lb.)

61,10<t

64.60$

64.50$

55.27$

12.6

22.2

152.0
67.7
125.0
7.6
458.0

125.0
51.6
116.7
5.1
377.1

118.9
60.2
87.8
5.1
403.0

161.2
78.0
130.1
6.3
532.7

- 31.9%
-3 3 .2
- 2.4
22.0
2.0

4.3%
4.7
-3 1 .9
-5 3 .4
11.9

U.S. Exports
Corn (mil. bu.)
Soybeans (mil. bu.)
Wheat (mil. bu.)
Rice (rough equivalent, mil. cwt.)
Cotton (thou, bales)

Percent Change
Receipts3
CROPS (millions of dollars)
United States
District (seven-state total)
LIVESTOCK (millions of dollars)
United States
District (seven-state total)




April
1983

May
1983

June
1983

$6,568
931

$5,837
1,200

$6,092
1,370

$6,124
1,275

-1 9 .2 %
-18 .1

6,129
896

5,505
862

6,062
914

5,815
928

14.7
12.9

Average
for 1982

Year-To-Date2 Same Period
Year Ago
1983
16.3%
9.9
-0 .1
- 3 .7
3

EIGHTH DISTRICT AGRICULTURAL DATA

Marketing Year
1980/81

1981/82

1982/83

CORN (October 1 - September 30)
Acres planted (mil. acres)
Production (bil. bu.)
Yield (bu. per acre)
Ending stocks (bil. bu.)

84.0
6,644.8
91.0
2,774.2

84.2
8,201.6
109.8
3,904.1

81.9
8,397.3
114.8
5,079.8

SOYBEANS (September 1 - August 31)
Acres planted (mil. acres)
Production (bil. bu.)
Yield (bu. per acre)
Ending stocks (bil. bu.)

70.0
1,792.1
26.4
679.4

67.8
2,000.2
30.1
652.2

72.2
2,277.0
32.2
866.9

WHEAT (June 1 - May 31)
Acres planted (mil. acres)
Production (bil. bu.)
Yield (bu. per acre)
Ending stocks (bil. bu.)

80.6
2,374.3
33.4
988.8

88.9
2,798.7
34.5
1,163.9

87.3
2,808.7
35.6
1,541.4

RICE (August 1 - July 31)
Acres planted (mil. acres)
Production (mil. cwt.)
Yield (cwt. per acre)
Ending stocks (mil. cwt.)

3.4
146.2
44.1
16.5

3.8
182.7
48.2
48.9

3.3
154.2
47.4
68.2

14.5
11.1
0.8
2.7

14.3
15.6
1.1
6.6

11.3
12.0
1.2
8.7

Crop Production4

COTTON (August 1 - July 31)
Acres planted (mil. acres)
Production (mil. bales)
Yield (net bales per acre)
Ending stocks (mil. bales)

1The consumer price index and its components are seasonally adjusted. All other data are not seasonally adjusted.
2 Percent change from December 1982, based on the most recent month available.
3 Data for receipts are seasonally adjusted.
4 Annual data for crops are based on each crop’s marketing year. SOURCE: Crop Production, Statistical Reporting Service,
Crop Reporting Board, USDA.




Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102