Agricultural Sector Concerns Persist Amid Lower Crop Prices and Drought

The Federal Reserve System's Beige Book released on July 15 summarized survey comments collected on or before July 6 regarding economic activities from late May through the end of June. The report highlights concerns in the agricultural sector, particularly in the Corn Belt.

The Seventh District, which includes northern Illinois and Indiana, all of Iowa, southern Wisconsin, and Michigan's Lower Peninsula, saw expectations for 2026 farm income deteriorate due to lower crop prices and flat livestock prices. Corn, soybean, and wheat prices declined, while egg and hog prices were flat overall.

In the St. Louis District, which includes southern Illinois and Indiana, eastern Missouri, and parts of Tennessee, Arkansas, Kentucky, and Mississippi, agriculture conditions remained largely unchanged from the previous Beige Book. However, a rural lender in northwest Arkansas noted that drought and reduced federal funding sharply reduced farm productivity and revenue.

The Ninth District, covering Minnesota, the Dakotas, Montana, northern Wisconsin, and Michigan's Upper Peninsula, saw crop progress and conditions generally good, but worsened slightly since the last report. Contacts reported a recent sell-off in commodities had a depressing effect on already-low crop prices, leading to farmers selling out due to poor markets and inability to get operating loans.

The Kansas City District, which includes western Missouri, Kansas, Nebraska, Oklahoma, Wyoming, Colorado, and northern New Mexico, saw strength in the cattle sector supporting the farm economy. However, ongoing weakness in the crop sector weighed on conditions in many areas, with drought intensifying in the southern and western portion of the region.