Feed prices are down somewhat from late-summer peaks, so the stress on livestock producers is slightly less. Still, many hog and dairy farmers face money-losing years.
"TWO TALES OF AGRICULTURE"
"Farm income (nationwide) still is expected to be strong," said Jason Henderson, head of the Omaha branch of the Kansas City Fed. But it may be lower than 2011 in the six-state Kansas City district, centered on the livestock and wheat-growing central U.S. Plains.
"We have two tales of agriculture," said Henderson.
Record-high commodity prices give grain farmers the cash to continue a land-buying spree that raised fears a year ago of an unsustainable price bubble. At the same time, livestock producers have to pay daunting prices for feed.
The St. Louis Fed said an Arkansas banker who took part in its survey of agricultural conditions said farmers were culling herds because of the drought and having to pay sky-high prices for hay. An Illinois banker said livestock farmers who buy feed rather than grow it themselves "will be hurt the most by this year's drought."
Although irrigation would assure a harvest despite drought, profits will be lower because of the cost of fuel to pump water, said another Arkansas banker.
Oppedahl of the Chicago Fed said loan demand was up in Wisconsin, the No 2 dairy state, where the flip side of high crop prices was high feed prices and some farmers have had to take out loans to stay afloat.
"You end up there with higher loan demand," he said. Land prices in Wisconsin fell by 2 percent from July-September, according to the regional bank's survey of lenders.