The Purdue University/CME Group Ag Economy Barometer farmer sentiment index rose six points in July to a reading of 103. Producers were somewhat more optimistic about both their current and future economic conditions on their farms compared to June.
Even though there was a slight increase in optimism, there’s still a lot of uncertainty in the agricultural economy. Key commodity prices, including wheat, corn, and soybeans all weakened during the month, and producers remain concerned over rising input prices and input availability. Forty-two percent of survey respondents said higher input prices were a big concern, 19 percent said lower crop prices, and 17 percent said rising interest rates.
The Farm Financial Performance Index, primarily an indicator of income expectations in the year ahead, improved five points to a reading of 88 in June. However, 49 percent of the survey respondents said they expect their farm to be worse off financially a year from now.
(From the National Association of Farm Broadcasters)
Slight increase in producer sentiment despite rising costs and lower crop prices
August 2, 2022
James Mintert and Michael Langemeier, Purdue Center for Commercial Agriculture
The Purdue-CME Group Ag Economy Barometer sentiment index rose 6 points in July to a reading of 103. Producers in this month’s survey were somewhat more optimistic about both current and future economic conditions on their farms than they were in June. The Index of Current Conditions rose 10 points in July to 109 while the Index of Future Expectations rose 4 points to 100. Although all three indices rose this month, they were still 23-24% lower than a year earlier. Farm operators in this month’s survey voiced concerns about several key issues affecting their operations with higher input prices (42% of respondents) receiving the number one ranking followed closely by lower crop prices (19% of respondents), rising interest rates (17% of respondents) and availability of inputs (15% of respondents). 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 July 11-15, 2022.
Producers’ expectations for their farms’ financial performance improved in July compared to June as the Farm Financial Performance Index rose 5 points to a reading of 88. Improvement in the index was attributable to a small shift in responses away from expecting worse performance in 2022 than last year towards expecting better financial performance than in 2021. The modest rise in the index was surprising given that key commodity prices, including wheat, corn and soybeans, all weakened during the month separating data collection for the June and July surveys. However, when asked to look ahead a year from now, there was virtually no change in producers’ responses to the July vs. the June surveys. In July, 49 percent of respondents said they expect their farm to be worse off financially a year from now, which compares to 51 percent of respondents who felt that way in June. This is a markedly more pessimistic outlook than producers provided a year ago when just 30 percent of respondents said they expect their financial condition to worsen in the upcoming year.
Although producers still expect sharp increases in crop input prices in 2023 compared to 2022, their views appear to have moderated somewhat with more producers expecting input prices to retreat in the coming year and fewer producers expecting prices to rise sharply in July than a month earlier. In July, 18% of crop producers said they expect 2023’s crop input prices to decline between 1 and 10% compared to 2022’s prices vs. just 12% of producers in June who said they expect prices to decline next year. On the other end of the spectrum, 26% of respondents in July said they expect 2023’s prices to rise by 10% or more vs. 38% of crop producers who expected a crop input price rise of that magnitude in June. Perhaps the real story is the tremendous uncertainty among producers regarding what input prices are likely to be in the upcoming year!
July marked the fourth month in a row that the barometer survey included a question asking ag producers about their expectations for the rate of inflation in consumer items over the upcoming year. Compared to responses received in April through June, producers’ expectations for inflation also showed signs of moderating in July with more producers looking for inflation to average less than 3% and fewer producers expecting inflation to exceed 10%. In July, 11% of respondents said they expect an inflation rate of less than 3% while 26% of ag producers said they think inflation will exceed 10%. These results compare to results from April through June when an average of 7% of producers said they expect the inflation rate to be less than 3% and 32% of respondents said they expect the rate of inflation to exceed 10%.
The Farm Capital Investment Index was virtually unchanged in July with a reading of 36 compared to 35 in June. This month’s reading, the fifth month in a row that the investment index was mired in the mid-30s, was 28% lower than a year earlier. Results from a new question included in this month’s survey shed some light on why producers view now as a poor time to make large investments in their farming operation in the face of strong farm machinery, building, and bin sales. Respondents who said now is a bad time for large investments were asked for the …..
The complete Purdue/CME Group Ag Economy Barometer April results can be read here.