Economic activity increased in almost all Districts, but remained well below where it was prior to the COVID-19 pandemic. Consumer spending picked up as many nonessential businesses were allowed to reopen. Retail sales rose in all Districts, led by a rebound in vehicle sales and sustained growth in the food and beverage and home improvement sectors. Leisure and hospitality spending improved, but was far below year-ago levels.
Most Districts reported that manufacturing activity moved up, but from a very low level. Demand for professional and business services increased in most Districts, but was still weak. Transportation activity rose overall on higher truck and air cargo volumes. Construction remained subdued, but picked up in some Districts. Home sales increased moderately, but commercial real estate activity stayed at a low level.
Financial conditions in the agriculture sector continued to be poor, while energy sector activity fell further because of limited demand and oversupply. Loan demand was flat outside of some Paycheck Protection Program (PPP) activity and increased residential mortgages. The PPP and loan deferrals by private lenders reportedly provided many firms with sufficient liquidity for the near term. Outlooks remained highly uncertain, as contacts grappled with how long the COVID-19 pandemic would continue and the magnitude of its economic implications.
Employment increased on net in almost all Districts as many businesses reopened or ramped up activity. Districts highlighted gains in the retail and leisure and hospitality sectors. However, payrolls in all Districts were well below pre-pandemic levels. Job turnover rates remained high, with contacts across Districts reporting new layoffs. Contacts in nearly every District noted difficulty in bringing back workers because of health and safety concerns, childcare needs, and generous unemployment insurance benefits. Many contacts who have been retaining workers with help from the PPP said that going forward, the strength of demand would determine whether they can avoid layoffs.
Prices were little changed overall. Contacts across Districts largely reported both input and selling prices were flat. When input prices did change, increases slightly outnumbered decreases. Contacts in several Districts reported that supply chain challenges were pushing up prices for health and safety equipment used to limit the spread of COVID-19. There were also reports of rising food and beverage prices, particularly for beef. When selling prices changed, decreases outnumbered increases, as contacts in several Districts cited weak demand and limited pricing power. One exception noted by multiple Districts was new and used vehicle prices, which were boosted by low inventories.
Agricultural conditions remained weak. Mostly drought-free conditions prevailed. On a month-over-month basis, June’s production forecast for Florida's orange crop was down from the previous month and last year, while Florida’s grapefruit production forecast was down from the previous month but remained ahead of last year. The USDA reported that in May, year-over-year prices paid to farmers were up for rice, soybeans, and eggs but down for corn, cotton, cattle, broilers, and milk. On a month-over-month basis, prices increased for cotton, rice, cattle and broilers but decreased for corn, soybeans, eggs and milk.
The COVID-19 pandemic continued to weigh on agriculture incomes. That said, farm incomes received a boost from some commodity price increases and CARES Act payments. Corn and soybean prices moved up after a USDA report that the number of corn acres planted was smaller than expected. Following a smooth planting season, corn and soybean crops were off to an excellent start. Specialty crops were also in decent shape. Meat production rebounded to levels near that of a year ago as packing plants reopened and began running extra shifts. Nevertheless, contacts reported a large backlog of hogs to slaughter. Cattle and hog prices fell and were below year ago levels. Milk prices at the farm gate stayed below last year’s levels in spite of some upward movement in dairy prices. Cheese demand surged, pushing prices to high levels. Ethanol margins widened, but some facilities remained closed and others were operating below full capacity. Demand for sites to locate renewable energy assets, recreational ground and rural housing helped keep farmland values mostly stable.
District agriculture conditions remain unchanged relative to the previous reporting period. Between the end of May and end of June, the percentages of corn and soybeans rated fair or better increased modestly, while the percentages of cotton and rice decreased modestly. The percentages of corn, rice, and soybeans rated fair or better are significantly above their values a year ago, while the percentage of cotton rated fair or better slightly decreased. Agriculture contacts have indicated that, in the past month, agribusinesses have not experienced significant shortages or slowdowns in demand and have remained open due to their essential status. However, there is some concern that additional financing may be necessary to bridge gaps in cash flows if the overall economic slowdown is prolonged.
District agricultural conditions remained poor. Producers reported that disruptions in trade with China were creating “headwinds” in grain markets. Recent declines in milk prices dealt a blow to already suffering dairy producers. In contrast, the majority of the District’s corn and soybean crops were in good or excellent condition as of late June. Oil and gas activity continued to decline even as crude prices rebounded somewhat. The number of active drilling rigs in the District as of late June was down sharply again from the previous reporting period. Multiple District iron ore production facilities remained shuttered as demand for steel was low.
The Tenth District farm economy remained weak despite some signs of stabilization in markets for key agricultural commodities. By late June, all U.S. meat packing plants were operational, but COVID-19 continued to impede supply chain functions. Capacity utilization and meat production at packing plants increased slightly since May, but appeared to remain limited somewhat by modified operations. Alongside production constraints, demand for meat was expected to decrease in 2020 as a result of broader economic weaknesses, putting additional downward pressure on cattle and hog prices. Ethanol production rebounded slightly in June, but remained about 20% lower than a year ago and continued to weigh on corn prices. District contacts reported that farm borrower liquidity weakened consider- ably alongside lower commodity prices, but government aid programs could provide a moderate degree of sup- port to agricultural credit conditions.
Soil moisture conditions remained favorable across most of the district, except for the Texas Panhandle area where there was drought. Wheat remained a bright spot with production up from last year, though prices were lower. While overall crop conditions were favorable, lower-than-profitable prices were leading agricultural producers to rely on government support payments to supplement farm income. On the livestock side, meat packers were adjusting to the new operating environment and have ramped production back up. Dairy prices rose as the industry made a concerted effort to curb production in response to lower restaurant demand.