View PDF

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

Agriculture
AN EIGHTH DISTRICT PERSPECTIVE
WINTER 1985

Increased Production and Lower Net Income Loom
Ahead for Agriculture
Large world supplies of all major commodities and con­
tinued moderate demand growth point to a small decrease
in 1985 for the average price of all U.S. farm products.
Although receipts from product marketings likely will rise
because of increased sales volume, larger increases in pro­
duction expenses suggest a decline in U.S. net farm income.
In this issue of Perspective, we review these projections
and specific commodity forecasts for the coming year as
presented recently at the U.S. Department of Agriculture’s
61st Annual Outlook Conference.

Farm Income
The index of prices received for all farm products is ex­
pected to decline 0 to 4 percent in 1985 as small increases
in red meat prices are offset by larger average declines in
crop prices. Based on expectations of slightly higher crop
and livestock marketings and these price trends, cash
receipts for all farm products should range between $142-47
billion, an increase of between 1 and 5 percent over 1984
values. Smaller government payments and higher produc­
tion expenses, however, are likely to put nominal net farm
income between $19 and $24 billion, near 1982 levels.
Moreover, as the data in chart 1 indicate, this income level
translates to real farm income between $8 and $10 billion,
about one-half of 1981 ’s real income.

Red Meat

In light of these factors, hog prices should range between
$48-52 per cwt. in the first quarter of 1985 and increase
to between $51-55 per cwt. in the third quarter before re­
turning to the $48-52 range in the fourth quarter. Fed steer
prices are expected to peak near $70 per cwt. in the
second quarter before declining seasonally in the second
half of the year to $65-69 per cwt. These increases imply
2 to 4 percent increases in the retail prices of beef and pork,
most of which will occur in the third and fourth quarter.

Soybeans
With planted acreage of 68.5 million acres and trend
yields near 31 bushels per acre, the 1985 soybean crop
would be near 2.1 billion bushes. Although past years have
seen planted acreage affected by provisions of the com pro­
gram and crop shifting between corn and soybeans, the ex­
tent of this shifting is expected to be minor this year. In
fact, recent years have shown the size of the soybean crop
to be much more sensitive to yields than to planted acreage.
At this time, however, without any good indication of
weather patterns and yields, a crop slightly below 2.1 billion
bushels is expected. A harvest of this size would put soy­
bean meal prices near a $155/ton (about $6.50/bu.) average
for the 1984-85 season.

Coarse Grains

U.S. coarse grain (com, sorghum, barley and oats) pro­
duction is expected to be 789.3 million tons in the 1984-85
Cattle and hog producers are expected to benefit in 1985
crop year, about 100 million tons more than the 1983-84
from lower feed costs and higher meat prices resulting from
level associated with PIK and the drought. Prices, how­
1984’s herd liquidations and the smaller supplies they
ever, will be affected by a variety of offset­
imply for this year. Both beef and pork pro­
ting factors. Increased livestock feeding and
duction should average 3 percent less than
export demand, on one hand, will contribute
1984. The effects of these declines on prices
to nigher prices, but an expected 14 percent
THE
will be moderated, however, by the contin­
FEDERAL
increase in world production and more
uing downward trend in per capitated meat
RESERA E
substitution of less expensive wheat in
RANK o f
consumption; in 1985, consumption is ex­
livestock feeding will offset some of these
ST. LOLLS
pected to fall another five pounds (3.5 per­
price gains. In view of all conflicting sup­
cent) to an average of 138 pounds per capita.
ply and demand shifts, com prices should



WINTER 1985

FEDERAL RESERVE BANK OF ST. LOUIS

Real N et Farm Income

197C

71

72

73

74

75

76

77

78

79

80

81

82

83

84

1985

NOTE: D a s he d line re p re s e n ts p ro je c t e d re a l net farm income.

range between $2.65-2.95 per bushel, down from the $3.20
average price for the 1983-84 crop year.

Wheat
The expectation for another large (2.6 billion bushel) crop
in 1985 and no significant increase in export demand points
to wheat prices only slightly above the $3.30/bu. loan rate.
Consistent with these supply-demand projections is a defi­
ciency payment at the $1.08 per bushel maximum provid­
ed by current law.

ADDITION OF AGRICULTURAL
FINANCE DATA
This issue introduces a new set of Eighth District
agricultural finance data to replace the annual crop produc­
tion data formerly on page 4. The change reflects the im­
portance of both debt usage by farmers and the volume of

farm loans made by District lenders.
The non-real estate farm debt and farm interest rate sec­
tions provide detail on the two most important sources of
operating loans for farmers: commercial banks and Pro­
duction Credit Associations (PCAs) of the Farm Credit
System. PCA interest rates are not adjusted for stock pur­
chase requirements which can cause the effective rates to
be from .5 to 1.5 percentage points higher depending on
the provisions of individual PCAs. Interest rate data are
not available for the same date.The section on agricultural
loan performance tracks the record of farm borrowers at
commercial banks. The first of two performance indicators
measures the proportion of farm loans that are overdue a
minimum of 30 days. These are loans that have not yet been
“ written o f f ’ by banks, but this information provides a
rough indication of expected future losses. The remaining
new section compares the actual “ write offs” of loans by
agricultural banks over the last two years.
—Michael T. Belongia and Kenneth C. Carraro

Agriculture—An Eighth District Perspective is a quarterly summary of agricultural conditions in the area served
by the Federal Reserve Bank of St. Louis. Single subscriptions are available 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 System.



FEDERAL RESERVE BANK OF ST. LOUIS

WINTER 1985

EIGHTH DISTRICT AGRICULTURAL DATA
Percent Change
Prices and Costs1
C O N S U M E R P R IC E IN D EX (% chan g e )
N onfood
Food
P R O D U C T IO N C O S T S FOR F A R M E R S (% ch a n g e )
A ll in p u ts
F e rtilize r
A g ric u ltu ra l ch e m ica ls
F uels and e n e rg y

S e p t.

O c t.

N ov.

A v e ra g e

1984

1984

1984

fo r 1 9 8 3

0.4%
-0 .3

-0 .6
0.0

0 .4 %
0.4

0 .2 %
0.1

0.0
0.0
0.0

0 .3 %
0.2

0.5

-0 .6
-4 .1
0.0
0.5

-0 .5

0.3
-0 .2
0.3
-0 .3

-2 .8
-1 .4
-5 .6

-0 .7
-1 .4
1.5

-0 .7
2.9
-5 .8

F EE D ER C A T T LE
W h o le sa le p rice - K ansas C ity ($/cw t.)

$63.98

$65.06

FE E D E R PIG S
W h o le sa le p rice - So. M isso u ri ($/head)

$34.95

$33.23

P R IC E S R E C E IV E D BY F A R M E R S (% chan g e )
A ll p ro d u cts
L ive sto ck
C rops

0.0

Y e a r -T o -D a te
19 8 4 2

3 .8 %
3.4

S a m e P e rio d
Y ear Ago

4 .1 %
3.9

-1 .3
3.7
2.4

-0 .6
5.2
2.4

-0 .5

-1 .5

0.8
0.3
1.6

-2 .1
-4 .4

1.5
5.1
-3 .0

$ 65.42

$63.71

2.8

7.2

$ 35.72

$ 3 3 .9 6

29.2

45.6

0.0

B R O ILE R S
W h o le sa le p rice - 12-city ($/lb.)

53.54$

48.77$

52.14$

5 0.39$

-8 .7

-9 .5

TURKEYS
W h o le sa le p rice - N ew Y ork,
8-16 lb. yo u n g hens (C/lb.)

76.18<P

82.61$

91.59$

6 0.48$

21.8

37.9

CORN
W h o le sa le p rice - No. 2, ye llo w - St. Louis ($/bu.)

$ 3.09

$ 2.84

$ 2.77

$ 3.2 7

-1 9 .7

-2 1 .5

SOYBEANS
W holesale price - No. 1, yellow - Central Illinois ($/bu.)

$ 6.21

$ 6.27

$ 6.21

$ 7.06

- 2 0 .1

-2 4 .3

$ 3,89

$ 3.86

$ 3.85

$ 3.95

0.0

0.8

$18.25

$18.25

$18.25

$ 1 8 .4 0

-3 .9

-3 .8

-0 .3

-1 .5

W HEAT
W h o le sa le p rice - No. 1, h ard w in te r K ansas C ity ($/bu.)
LO N G -G R A IN RICE
W h o le sa le p rice - A rka n sa s ($/cw t.)
C O T TO N
A ve ra g e p rice re ce ive d by U .S . F a rm e rs ($/lb.)

64.60$

64.60$

66.00$

62.86$

Percent Change
U.S. Exports
C o rn (m il. bu.)
S o yb e a n s (m il. bu.)
W h e a t (m il. bu.)
R ice (rough e q u iv a le n t, m il. cw t.)
C o tto n (thou, bales)

J u ly

Aug.

S e p t.

A v e ra g e

1984

1984

1984

fo r 1 9 8 3

130.0
39.1
138.0
4.8
387.9

136.0
30.6
148.0
5.7
478.7

109.0
18.9
245.5
8.1
279.8

157.6
69.5
125.7
5.9
4 5 9 .7

-3 8 .1
-7 4 .6
86.7
60.5
-5 7 .8

-2 4 .5
-6 4 .9
90.8
-6 .7
-1 7 .5

$5,706
1,076

$5,801
875

$5,429
1,059

$5,851
1,277

-0 .2
1.6

-7 .4
-1 9 .5

5,588
889

5,766
877

5,499
870

5,771
934

-8 .3
-1 2 .8

-1 .2
-2 .0

Y e a r-T o -D a te
19842

S a m e P e rio d
Y ear Ago

Receipts3
C R O P S (m illio n s o f d o lla rs)
U n ite d S tates
D is tric t (seve n -sta te total)
L IV E S T O C K (m illio n s of d o lla rs)
U n ite d S ta te s
D is tric t (seve n -sta te total)




3

Non Real Estate Farm Debt Outstanding (millions of dollars)

9/84
u .s .
E ig h th D is tric t5
A rk a n s a s
K e n tu c k y
M isso u ri
T e n n e sse e

41,625
3,212
628
740
1,545
398

Banks
Percent Change From
9/83
9/82
6.4%
10.5
21.0
10.9
1.4
0.8

1 2 .4 %
18.1
23.4
12.6
9.3
4.5

PCAs4
Percent Change From
9/84
19,410
NA
463
403
447
368

9/83

9/82

-5 .1 %
NA
7.7
-1 3 .3
-4 .3
-1 4 .0

-1 3 .7 %
NA
- 1 4 .1
-3 4 .6
-1 6 .1
-3 1 .5

Agricultural Production Loan Interest Rate6
Banks

E ig h th D is tric t A verage

PCAs

11/7/84

11/7/83

10/1/84

10/1/83

13.3%

1 2 .9 %

1 3 .0 %

1 1 .9 %

Agricultural Bank Loan Performance7
Percent of Overdue
Farm Loans at
Agricultural Banks

U .S.
E ig h th D is tric t5
A rk a n s a s
K e n tu c k y
M isso u ri
Tennessee

Percent of Net Loan
Charge-Offs at
Agricultural Banks

9/84

9/83

9/84

9/83

2 .6 %
3.0
1.3
3.1
3.9
2.7

2 .3 %
2.4
2.2
2.3
2.7
3.3

.6 8 %
.56
.33
.48
.91
.90

.4 6 %
.39
.28
.56
.53
.76

1 The consumer price index and its components are seasonally adjusted. All other data are not seasonally adjusted.
2 Percent change from December 1983, based on the most recent month available.
3 Data for receipts are seasonally adjusted by this Bank.
4 Source: Farm Credit Banks of Louisville and St. Louis.
5 Includes all of AR and parts of IL, IN, KY, MO, MS and TN.
6 Interest rate data are for different dates. PCA rates are weighted averages for Arkansas and Missouri, not adjusted for stock purchase requirements.
Source: Farm Credit Banks of St. Louis.
7 Agricultural banks are defined as those with more than 25 percent of total loans in agricultural loans.




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