The Kansas City Federal
Reserve Bank says the outlook for agriculture remains down, but is beginning to
show signs of stabilization. The bank notes that while aggregate measures of
farm income are significantly lower than in previous years, the farm income
forecast for 2017 was relatively unchanged from the 2016 estimate. Although
farm income was expected to stabilize, growing inventories and trade
uncertainty remain key risks to the outlook. High yields boosted production of
corn and soybeans to near-record levels for the fourth year in a row, creating
higher inventories and an expectation of prices holding at lower levels.
Alongside growing domestic supplies, demand from exports and international
trade have become more important, but agricultural producers and bankers have
expressed concerns over increasing foreign competition and uncertainty
surrounding trade deals, such as the North American Free Trade Agreement. In
the cattle sector, price variability is a primary concern, but despite larger
inventories, prices and net margins are above year-ago levels.
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