Producer Sentiment Rises Slightly – Farm Economics Barometer
Higher input costs, lower prices among top concerns
The Purdue University/CME Group Farm Economics Barometer Farmer Sentiment Index rose 6 points in July to 103. Producers were somewhat more optimistic about current and future economic conditions on their farms. compared to June.
The Current Conditions Index rose 10 points to 109 and the Future Expectations Index rose 4 points to 100. Although all three indexes rose this month, they were still 23 to 24 lower. % to those of the previous year. The Ag Economy Barometer is calculated monthly from responses from 400 US agricultural producers to a telephone survey. This month’s survey was conducted between July 11 and July 15.
“Even though we’ve seen an uptick in sentiment this month, there’s still huge uncertainty in the agricultural economy,” said James Mintert, senior barometer researcher and director of Purdue University’s Center for Commercial Agriculture. . “Prices of key commodities, including wheat, corn and soybeans, all weakened during the month and growers remain concerned about rising input prices and the availability of inputs.”
In this month’s survey, farmers expressed concern about several key issues affecting their operations, including: higher input prices (42% of respondents), lower crop prices (19% of respondents), rising interest rates (17% of respondents) and the availability of inputs (15% of respondents).
The agricultural financial performance index, which mainly reflects income expectations for the current year, improved 5 points to 88 in June. However, this month, 49% of respondents said they expected their farm to be less financially healthy a year from now, compared to 51% who felt that way in June. This is a significantly more pessimistic outlook than that provided by producers a year ago, when only 30% of respondents said they expected their financial situation to deteriorate in the year ahead. come.
Producers remain uncertain about their expectations for farm input prices over the next 12 months. In July, 18% of crop producers said they expect 2023 farm input prices to fall between 1 and 10% from 2022 prices, compared to 12% who felt that way in June. Meanwhile, 26% of those polled in July said they expected 2023 prices to rise by 10% or more, compared to 38% who expected agricultural input prices to rise by this magnitude in June. .
Rising input costs are causing some growers to reassess their cropping plans for the coming year. In this month’s survey, nearly one in four crop growers (24%) said that due to rising input costs, they plan to change the crop mix on their farm in 2023 In a follow-up question, more than half (53%) of respondents who said they plan to change their blend will increase the percentage of their cropland devoted to soybeans. In another set of questions, 26% of producers who told us they planted winter wheat last year said they planned to increase their wheat acreage this fall.
The farm capital investment index remains near its record low, up one point to 36 in July. To shed some light on the reasons, respondents who said now is not a good time for big investments were asked about the main reason why they felt this way. Of these respondents, 44% indicated an “increase in the prices of agricultural machinery and new construction”, 15% indicated “uncertainty in the profitability of the farm” and 14% chose “increase in the rates of interest” as the main reason they viewed the timing as a bad one. for large investments. Somewhat surprisingly, only 7% of respondents chose “tight stocks of agricultural machinery at dealerships” as the main reason for answering negatively to the investment question.
Producers’ views on farmland values diverged this month, with the short-term farmland values index down 9 points to 127, while the long-term index rose 9 points. at 150. The short-term index is down 20% from its 2021 peak, while the long-term index is only 6% below its peak last year. In the short term, there has been a move away from expectations that farmland values will rise, with more producers in July expecting the value to stay about the same. The long-term change was due to more respondents this month expecting values to rise and fewer expecting a decline over the next five years.
“Short-term and long-term farmland indices don’t always move in tandem, but the magnitude of this month’s divergence between the short-term and long-term indices is unusual,” Mintert said. “Producers who expect values to rise over the next 5 years continue to say non-farm investor demand and inflation are the two main reasons they expect values to rise .”