On September 27, Real Time Economics writer Neil Shah commented on the downward revision to second quarter U.S. gross domestic product (GDP) from 1.7 percent to 1.3 percent:
One factor in the 0.4 percentage point revision: Government statisticians factored in a drop in June in farmers' inventories, revising these down by some $8 billion. Basically, 2012's hot, dry weather has decimated corn and soybean crops, along with hay, making feed for cattle, hogs and chickens prohibitively expensive and pushing farmers to take livestock to slaughter early to avoid feed costs—a trend that diminishes their animal inventories and technically detracts from the nation's GDP growth rate.
In his blog post, Shah also noted that:
The drop in farm inventories in the second quarter accounted for about 0.2 percentage point of the 0.7 percentage point drop in GDP between the second and first quarters.
While we don't have quarterly agricultural-related GDP measures at the regional level, we do have some interesting insight into the Southeast's farm sector thanks to our Agriculture Advisory Council. The council met September 26 at the Atlanta Fed's Birmingham Branch and was led by our Regional Executive from that office, Lesley McClure. Here are some of the highlights from this meeting:
- The drought that is gripping some parts of the country is having mixed impact on the region. The latest U.S. Drought Monitor shows that only central Georgia is experiencing drought at critical levels. Additionally, no part of Florida is showing any drought conditions for the first time in several years.
- Agriculture contacts said that the rise in some crop prices resulting from the drought in the Midwest had led to increased crop production in the Southeast, where soil conditions were more favorable, but the overall rise in feed prices was putting pressure on livestock producers.
- The drought-induced low water level in the Mississippi River is causing some shipping delays as barges have to slow down to navigate certain channels.
- The Florida citrus crop is looking quite solid, and export demand is holding up well. Overseas demand for livestock is also strong.
- High fuel costs increase farmers' production and irrigation costs. In addition, fertilizer prices are high, and transporting goods to market is also quite costly.
- Biofuels research is continuing to accelerate. Shipments of wood pellets to Europe, which is looking for resources to replace coal, are increasing.
Although we did not discuss agritourism at the council meeting, I thought it was worth noting as fall is a popular season for agriculture-related businesses. An article by staff writer Lela Somoza in the Atlanta Fed's EconSouth magazine looks at this growing industry—read it and then head out to a local corn maze!
By Mike Chriszt, a vice president in the Atlanta Fed's research department and
Teri Gafford, REIN director at the Atlanta Fed's Birmingham Branch