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FRBSF WEEKLY LETTER Number 93-07, February 19, 1993 The Twelfth District Agricultural Outlook Agricultural conditions in the Twelfth Federal Reserve District are expected to improve modestly in 1993 helped by increased water supplies and firming prices. The U.s. Department of Agriculture's (USDA) annual outlook projects increases in production and cash receipts for many important District crops, but also forecasts rising costs. The USDA expects 1993 gross cash income to rise about 1 percent, but projects net cash income to fall 1 percent from 1992 levels in the West (including the Twelfth District and Rocky Mountain states). In its outlook, the USDA indicates that total u.s. agricultural exports in 1993 are expected to remain close to last year's $42 billion, as increased exports of higher-value crops offset declines in commodity exports. Since many of these high-value crops are District products, District farmers are expected to continue to benefit from strong agricultural exports in 1993. help support prices. Similarly, the USDA predicts that increased plantings and higher yields will boost rice production in California in 1992-1993 by 21 percent, while rice prices are expected to be lower. Production declines for field crops that have faced poor market conditions in the past several years could be reversed this year as prices begin to improve. The recent firming of potato prices, following a decline in production in Idaho and Washington last year, is expected to lead to increased potato production in the District during 1993. Similarly, dry bean production, which dropped 27 percent in California, 46 percent in Idaho, and 36 percent in Washington in 1992, is projected to improve on expectations of higher prices in 1993. Vegetables In general, the USDA's outlook foreeasts higher production and rising costs for many District farmers in 1993. Several developing issues are likely to alter this outlook, including the improving water supply situation, the response to the North American Free Trade Agreement, and the potential for changes in access to grazing on federal lands. Field crops Production of several important District field crops is expected to increase in 1993 as improved water supplies allow increased plantings. Wheat production in 1992-1993 is forecast to increase substantially over the 1991-1992 season, which was affected by the drought and freeze. The USDA projects production to rise over 20 percent in California, Idaho, and Washington, and about 10 percent in Arizona and Oregon, but prices are expected to remain firm during 1993. California cotton production for 1992-1993 is expected to increase 12 percent from last season because of higher acreage and record yields. The USDA expects an 8 percent decline overall in the u.s. cotton crop this season, which should Poor market conditions and continued insect problems in some areas weaken the outlook for the District's vegetable crop. The USDA's outlook projects reduced plantings for many important vegetables. Continued low prices prompted California farmers to cut the number of acres of processing tomatoes and celery planted this season by 20 percent and 15 percent, respectively. Farmers also reduced plantings of several vegetables in response to the whitefly infestation in California's Imperial Valley and in parts of Arizona. The number of acres of lettuce planted this season dropped 6 percent in California and 35 percent in Arizona. Lower broccoli and cauliflower plantings in the Imperial Valley were offset by increased planting in other parts of California, pushing the total number of acres up about 15 percent for both crops. Prices for lettuce, celery, and tomatoes currently are well above last year's levels and are expected to remain relatively high in 1993. The District's melon crop has been significantly affected by the whitefly infestation in the Imperial Valley and Arizona. For the 1992-1993 season, the USDA expects Arizona farmers to plant THE WESTERn ECOnOmy The Western Economy is a quarterly review of economic conditions in the Twelfth Federal Reserve District. FRBSF fewer acres of cantaloupe or honeydew melons. !n California, no plantings of cantaloupe or honeydew melons were reported this winter. fruits and nuts Increased production and lower prices are expected for many of the District's important fruit and nut crops in 1993. Citrus fruit production in California has almost completely recovered from the December 1990 freeze. According to the USDA, total orange production in California for the 1992-1993 season is expected to increase 3 percent from 1991-1992. In Arizona, orange production is expected to drop 20 percent, however. Orange prices are expected to remain low in 1993. Lemon production is projected to rise 13 percent in California and 12 percent in Arizona. The USDA projects apple production in 19921993 to rise 9 percent in Washington and 5 percent in California. Production of pears in the Northwest also is expected to be strong this season, leading to a 4 percent increase in total U.s. production. Prices for both apples and pears are forecast to fall in 1993. District nut production generally is projected to remain strong in 1993. Production of California's valuable almond crop is expected to increase 12 percent this season. The USDA forecasts walnut production in California to fall 19 percent, however. In Oregon, hazelnut production is projected to increase 5 percent to reach a record level. Grape production in 1992 increased throughout the District, rising 12 percent in California, 30 percent in Oregon, and 10 percent in Washington. The USDA expects production to increase again in 1993 as domestic demand continues to expand. California's wine grape industry faces an infestation of Phylloxera, an aphid-like insect that attacks the root system of grapevines. Wine grape production is expected to be lower, especially in the Napa and Sonoma areas, for the next several years as growers replace their vineyards with more resistant vines. creased exports in 1993. In 1992, U.s. exports rose 50 percent for turkey, 11 percent for chicken, and 13 percent for beef. Beef prices are expected to hold steady this year despite increased competition. Demand for dairy products is expected to remain soft in 1993. Milk prices appear to have stabilized after fa!ling in 1991 and the first half of 1992. In Alaska, the salmon catch was large, but down from 1991's record haul. Salmon prices are expected to be strong in 1993, however. Updating the outlook The USDA's outlook suggests that agricultural production and cash receipts will be higher in 1993, although net farm income likely will fall because of rising costs. Several issues could alter this outlook. Substantial precipitation so far this winter has eased the drought conditions that plagued farmers in California, the Pacific Northwest, and intermountain states during 1992. The USDA's most recent analysis of conditions as of January 1, 1993 shows snowpack levels to be above to well above normal and forecasted spring and summer streamflow to be about norma! for most parts of the District. This forecast suggests that water deliveries likely will be higher than during the last several years. Already state water officials in California have announced that water deliveries will be 40 percent of contracted amounts, up from 10 percent announced early in December. This level of deliveries assumes that the remainder of the winter is dry, so if December and January's precipitation pattern continues through February and March, water deliveries are likely to be higher, boosting production and lowering irrigation costs. Increased water supplies also would improve range conditions and lower feed costs, helping District ranchers. Ranchers could face additional costs this year if Congress decides to raise grazing fees on federal lands this term. District cattle exports cou Id be lower than expected because of a recent tariff imposed by Mexico. The agricultural trade picture for the District is made more complex by the North American Free Trade Agreement. Production and prices of some crops could be lower than expected if imports from Mexico increase significantly. Most vulnerable crops, including many California fruits and vegetables, have substantial protection built into the current agreement. livestock, dairy, and fishery The USDA expects much of the strength in the livestock industry to continue to come from in- Stephen O. Dean Senior Research Associate DISTRICT INDICATORS (seaaonally AdJuated) 9204 9203 9202 9201 9104 9103 9102 9101 U.S. crop prices, 1985=100 100.5 Dlstrlet crop prtees, 1985=100 115.0 107.8 108.1 110.7 101.9 109.5 111.0 114.7 118.1 113.2 113.7 108.5 120.7 128.9 Farm cash receipts, million $ NlA 2,543.4 107.8 2,478.9 2,501.0 2,894.2 2,529.5 2,698.3 2,529.0 Callie-on-feed, 1985=100 91.2 Callie prices, CalWomla, $ICw!. 60.1 91.t 86.8 86.0 81.2 84.2 91.9 92.0 60.2 58.4 60.9 62.1 62.6 66.4 84.5 AGRICULTURE FORESTRY Lumber production, millions board feet 1,419.7 1,381.1 1,287.1 1,417.9 1,351.9 1,428.7 1,467.7 1,359.0 Northwest lumber Inventory, mlllons board feet 2,098.8 2,205.1 2,285.1 2,187.6 2,308.9 2,400.3 2,309.8 2,390.7 162.9 147.9 153.1 156.8 137.9 131.6 137.6 113.5 U.S. lumber prices, 1986=100 ENERGY Spot price of oil, $-barrel 20.6 21.7 21.1 18.9 21.8 21.6 20.8 22.0 891.7 893.1 906.7 906.9 912.1 929.3 938.8 957.7 District rig count 63.9 60.8 65.9 54.6 63.2 74.5 80.4 72.2 Fuel mining employment, 1985=100 67.3 68.3 70.3 70.1 69.9 72.7 73.6 74.8 U.S. seismic crew count 75.1 71.2 81.3 80.2 89.7 98.4 110.2 117.9 99.2 105.3 107.0 105.9 104.1 104.5 108.8 108.6 176.0 175.2 177.4 180.9 180.7 184.1 185.9 193.1 U.S. rig count MINING Minerai prices, 1986=100 Metal mining employment, 1985=100 CONSTRUCTION Nonresidential awards, 1985=100 Residential permits Western housing starts, thousands Construction employment, thousands 98.7 95.5 104.1 115.0 IOU 93.4 103.1 10M 21,051 19,586 19,182 19,780 19,496 18,524 19,833 17,667 22.7 26.3 26.7 21.9 19.5 24.1 25.5 15.6 891.7 893.1 906.7 906.9 912.1 929.3 938.8 957.7 MANUFACTURING Wages, Calnornla, $Ihour Employment, thousands 12.2 12.3 12.2 12.1 12.0 11.9 11.8 11.8 2,835.1 2,871.3 2,908.6 2,948.0 2,956.4 2,982.4 3,005.8 3,050.3 Durables, 1985=100 88.9 90.2 91.7 93.1 94.0 95.3 96.4 97.9 Construction durables, 1985=100 91.3 91.3 93.4 94.3 93.7 95.4 95.8 97.7 Aerospace, 1985=100 92.4 95.8 99.1 1032 105.8 107.1 109.4 111.9 Electronics, 1985=100 85.2 88.0 87.3 87.8 88.8 90.8 92.2 92.8 Semiconductor orders, mil. $, not s.a. 1,940.2 1,711.8 1,543.0 1,439.3 1,378.4 1,272.1 1,298.9 1,218.3 Whlslretail trade employmenl, thousands 4,645.4 4,852.6 4,675.7 4,701.4 4,693.0 4,713.4 4,725.7 4,725.7 Retail sales, PacWlc District, mil. $ 26,363 25,818 25,696 25,881 25.078 25,445 25.321 24,655 Services employment. thousands 5,404.5 5,532.3 5,511.0 5,502.6 5,497.5 5,488.5 5,471.9 5,445.0 Health care, 1985=100 134.0 133.0 132.5 131.8 131.2 129.8 128.9 127.6 Business services, 1985=100 112.8 112.6 113.5 113.4 112.0 112.7 113.6 113.1 Hotel, 1985=100 132.2 130.9 132.3 133.3 134.5 131.7 132.1 132.1 Recreation, 1985=100 141.7 140.9 139.6 139.5 140.7 139.1 140.1 138.2 1,233.0 1,234.4 1,239.2 1,244.3 1,242.3 1,245.1 1,2472 1,247.9 Anance, Insurance, and real estate emp., thousands GOVERNMENT EMPLOYMENT, THOUSANDS Federal government State and local 803.5 802.7 801.8 609.7 611.5 614.1 810.7 614.5 2,916.9 2,945.7 2,906.0 2,901.6 2,883.8 2,888.9 2,8832 2,851.0 Data are weighted aggregates of avaHable 12th Dlatrlet data conslnJcled by FRBSF stall from public and Industry sources. Opinions expressed in this newsletter do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco, or of the Board of Governors of the Federal Reserve System. Editorial comments may be addressed to the editor or to the author.••. Free copies of Federal Reserve publications can be obtained from the Public Information Department, Federal Reserve Bank of San Francisco, P.O. Box 7702, San Francisco 94120. Phone (415) 974-2246, Fax (415) 974-3341. On1:'6 VJ 'o:>sPUPJ~ UPS lOLL x09 'O'd O)SI)UOJ:I UOS JO ~U08 al\JaSa~ IOJapa:l PERSONAL INCOME Annualized Percant Growth Rates Twelfth District Business Sentiment* GOP Percent 100 9203 9202 Alaska Arizona Calliomia Hawaii Idaho Nevada Oregon Utah Washington 3.2 5.5 3.3 -24.0 2.8 4.4 4.7 5.1 3.4 -1.0 6.2 4.5 2.8 8.6 1.9 3.0 3.9 3.7 12th District U.S. 2.9 2.7 4.3 4.0 9201 9104 9103 13.2 8.5 3.5 10.7 4.6 11.1 9.0 10.5 9.5 4.8 5.6 1.6 2.2 13.9 4.1 5.2 6.3 7.6 5.0 1.9 4.2 3.8 2.3 6.2 6.9 5.3 5.9 5.4 6.1 3.1 5.4 4.4 3.5 80 o Recession o Growth less than 2.5% 60 lI2.5%to3%growth 40 _"Growth above 3% 20 01 02 1990 03 O. 01 02 1991 03 O. 02 01 1992 03 Q4 • Expectations for GOP gfowttl during the next four quarters based on a survey of approximately 75 business leaders in the 12th Federal Reserve 0islrie!. • Year-lo-date NON·AGRICULTURAL EMPLOYMENT Annualized Percant Growth Rates 9204 9203 9202 9201 UNEMPLOYMENT RATES Average Ouarterly Data 9104 9204 9203 9202 9201 9104 Neveda Oregon Utah Washington 7.9 0.3 -3.5 -2.9 4.3 5.1 2.5 2.8 4.7 -0.8 4.0 -1.6 -3.3 1.6 0.6 -0.4 4.5 -1.4 -7.1 -1.2 -1.7 -1.3 -2.8 -1.6 0.1 1.9 -2.2 3.6 0.6 -0.5 1.2 6.1 4.3 3.6 3.0 1.9 7.5 -0.2 -3.3 1.5 6.0 4.3 1.5 2.0 2.9 Alaska Arizona Calliomia Hawaii Idaho Neveda Oregon Utah Washington 9.0 7.3 9.9 4.8 6.6 6.3 7.4 5.5 7.9 9.4 6.4 9.4 4.6 6.3 7.2 7.0 5.1 6.8 9.1 7.3 8.7 4.0 6.2 6.2 6.7 4.8 6.8 9.1 8.7 8.4 3.5 6.3 6.6 8.1 4.6 7.3 9.8 7.3 7.7 3.0 6.2 5.7 6.5 5.3 6.8 12th District U.S. -1.1 0.4 -0.8 0.3 -1.5 1.1 0.6 -0.2 -1.3 -0.2 12th District U.S. 8.9 7.3 8.4 7.6 7.9 7.5 8.0 7.2 7.2 7.0 Alaska Arizona CaJliomia Hawaii Idaho 01 1993
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