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Producer Sentiment Improves Despite Inflation Worries

Dan Economy

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The Purdue University/CME Group Ag Economy Barometer improved in April, rising eight points to a reading of 121. However, that remains 32 percent below its level from the same time last year.

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Producer perspectives on current conditions and future expectations saw an uptick over the past month. The Index of Current Conditions improved seven points to a reading of 120, and the Index of Future Expectations rose nine points to a reading of 122. Rising commodity prices, especially for corn and soybeans, appear to be the reasons behind producers’ improved financial outlook. Even with improved prices, producers say rising input costs are the top concern for their farming operation.

In April, 42 percent of producers surveyed chose higher input costs as their biggest concern, which was more than twice as many who chose government policies or lower output prices. Sixty percent of respondents expect input prices to rise by 30 percent over the next year.

(From the National Association of Farm Broadcasters)

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Producer Sentiment Improves With Strengthened Commodity Prices; But High Cost Inflation Worries Farmers

(James Mintert and Michael Langemeier, Purdue Center for Commercial Agriculture/May 3, 2022) — The Purdue University-CME Group Ag Economy Barometer improved in April to a reading of 121, which was 8 points higher than a month earlier. Despite this month’s increase, the ag sentiment index remains 32% lower than its April 2021 reading. This month’s modest rise in the barometer was attributable to an improvement in ag producers’ perspective on their current situation as well as what they expect for the future. The Index of Current Conditions rose 7 points to a reading of 120 while the Index of Future Expectations rose 9 points to an index value of 122. Similar to the barometer, both the current conditions and future expectations indices remain well below year ago levels. Ongoing strength in commodity prices appeared to be responsible for the modest sentiment improvement, although producers’ concerns about both rising input costs and their difficulties in procuring inputs continues to hold back sentiment. The Purdue University-CME Group Ag Economy Barometer sentiment index is calculated each month from 400 U.S. agricultural producers’ responses to a telephone survey. This month’s survey was conducted from April 18-22, 2022.

An improving perspective on their farm’s financial performance was key to this month’s sentiment improvement. The Farm Financial Performance Index improved to a reading of 95, a rise of 8 points compared to March and 12 points higher than in January and February. Rising prices for major commodities, especially corn and soybeans, led to the change in producers’ financial outlook. For example, Eastern Corn Belt cash prices for corn in mid-April rose more than 10% above their mid-March level while bids for fall delivery of 2022 crop corn climbed 20% over the same period. Soybean prices rose as well, despite USDA’s late March release of U.S. producers’ surprisingly large 2022 soybean planting intentions. Near-term delivery prices for soybeans rose about 7% from mid-March to mid-April while elevator bids for fall delivery of new crop soybeans climbed 5% over the one-month span.

Producers continue to say that their top concern for their farming operation is higher input costs. Forty-two percent of producers chose higher input costs as their biggest concern, which was more than twice as many who chose government policies (21%) or lower output prices (19%). It’s hard to overstate the magnitude of the cost increases producers say they are facing. This month 60% of survey respondents said they expect input prices to rise by 30% over the next 12 months. This compares to an average of 37% of respondents who said they were expecting a cost increase of this magnitude when the same question was posed in the December 2021 through March 2022 surveys. When asked specifically for their expectations for 2023 crop input prices compared to prices paid for 2022 crop inputs, 36% of respondents said they expect prices to rise 10% or more and 21% of crop producers said input price rises of 20% or more are likely. The war in Ukraine has added a new level of uncertainty for producers. Sixty percent of survey respondents said the biggest impact of the war on U.S. agriculture will be on input prices.

Crop input challenges extend beyond their inflated cost to their availability. In April, 34% of producers said they experienced some difficulty in purchasing inputs for the 2022 crop season, up from 27% in March. In a follow-up question, producers who said they had some difficulty obtaining inputs said that herbicides (30% of respondents) were most problematic followed closely by farm machinery parts (27%) fertilizer (26% of respondents) and insecticides (17% of respondents). In a closely related question, 11% of crop producers said they received notice an input supplier would not be able to deliver one or more crop inputs they had already purchased for use in 2022. Herbicide availability was the top problem reported by …..

Read the full report here.