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Agricultural Webinar
August 27, 2015
Fed@YourDesk
David Oppedahl
Senior Business Economist
312-322-6122
Federal Reserve System
0%
10%
20%
30%
40%
1950 1960 1970 1980 1990 2000 2010
Food Health Care
Personal consumption shares
USDA split of a dollar spent
on food in 2008
U.S. and District output shares from farming
and food manufacturing
U.S.
0
1
2
3
4
5
1997 1999 2001 2003 2005 2007 2009 2011 2013
percen
t
Farming Food Manufacturing
District
0
1
2
3
4
5
1997 1999 2001 2003 2005 2007 2009 2011 2013
percen
t
Farming Food Manufacturing
A 10% rise in the dollar has slowed exports,
including a decline of $12 billion for agriculture
(Real Broad Trade-Weighted Exchange Value of the US$){March 1973=100}
80
90
100
110
120
1991 1994 1997 2000 2003 2006 2009 2012 2015
Value of agricultural exports expected to fall in 2015
0
20
40
60
80
100
120
140
160
FY1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
bil
lio
n $
Exports
Imports
Surplus
(*USDA projection)
2015*
Real Cash Crop Prices
($/bushel, adjusted by CPI-U for January 2010)
0
5
10
15
20
25
30
35
40
1976 1982 1988 1994 2000 2006 2012
Corn Soybeans
Real USDA Livestock Prices
($/hundredweight, adjusted by CPI-U for January 2010)
0
50
100
150
200
250
1976 1980 1984 1988 1992 1996 2000 2004 2008 2012
Hogs Cattle
Real USDA Milk Prices
($/hundredweight, adjusted by CPI-U for January 2010)
0
10
20
30
40
50
1980 1985 1990 1995 2000 2005 2010 2015
U.S. Farm Production Value (billion dollars, 2009 $)
0
50
100
150
200
250
1929 1939 1949 1959 1969 1979 1989 1999 2009
Livestock
Crop
*USDA forecast
2015*
Real net farm income boosted by direct government
payments to farmers, but the regional impact varies
0
25
50
75
100
125
150
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
bil
lio
n 2
00
9$
gov't payments*USDA forecast
Real farm sector assets and equity
at levels above prior peak
0
500
1,000
1,500
2,000
2,500
3,000
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
billio
n 2
00
9$
Debt
Equity
Assets
2015*
*USDA forecast
Farm financial ratios improved following the ‘80s crisis
8
12
16
20
24
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
perc
en
t
Debt/asset ratio
*USDA forecast
2015*
7th District Acres Harvested (million acres, USDA estimates)
0
10
20
30
40
50
1964 1969 1974 1979 1984 1989 1994 1999 2004 2009 2014
Corn
Soybeans
7th District Crop Yield Indexes
(1964=100)
100
150
200
250
1964 1969 1974 1979 1984 1989 1994 1999 2004 2009 2014
Corn
Soybeans
2015*
(*USDA projection)
Survey results for July 1, 2015
Annual change in farmland values in
Seventh Federal Reserve District
-30
-20
-10
0
10
20
30
1970 1975 1980 1985 1990 1995 2000 2005 2010
Perc
en
t
Index of Seventh District farmland values (1981=100)
0
100
200
300
400
500
1970 1975 1980 1985 1990 1995 2000 2005 2010
Nominal
Inflation
Adjusted
Indexes of Seventh District Farmland
Values vs. Cash Rents (Inflation Adjusted, 1981=100)
0
50
100
150
200
1980 1985 1990 1995 2000 2005 2010 2015
Cash rents
Land values
7th District Earnings to Price Ratio (left axis, 1981=1)
vs. Real Return on 10 Year Treasury Bonds
0.6
0.8
1.0
1.2
1.4
1980 1985 1990 1995 2000 2005 2010 2015
-2
0
2
4
6
8
10
E/P Ratio
10 year
bond rate
Percent
Index of agricultural loan demand for the Seventh
Federal Reserve District (excluding real estate)
40
60
80
100
120
140
160
1980 1985 1990 1995 2000 2005 2010 2015
Index of agricultural loan repayment rates
for the Seventh Federal Reserve District
20
40
60
80
100
120
140
160
1980 1985 1990 1995 2000 2005 2010 2015
Interest rates charged on new farm loans in the
Seventh Federal Reserve District
0
5
10
15
20
1980 1985 1990 1995 2000 2005 2010 2015
perc
en
t
Farm operating
Farm real estate
•Solid U.S. economic growth boosting demand at restaurants
and for animal products
Status of Agriculture
•Slower world economic growth and higher value of the dollar
holding back U.S. agricultural exports
•More plentiful grain and oilseed supplies pushed down prices and
feed costs for animal agriculture
•Milk and hog prices have stopped falling, while cattle remain pricey
•Rising input costs counter low interest rates, amid volatility
•Lower farm income again in 2015
•Reductions in farm assets and equity, but still quite strong
The Federal Funds Rate is anticipated to return to
a neutral rate by the end of 2017
0
1
2
3
4
5
6
7
8
9
1990'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Target Federal Funds Ratepercent
FOMC
www.chicagofed.org
