The Purdue University-CME Group Ag Economy Barometer Index rose again in January, to a reading of 130, four points above its 2022 year-end index value. The January survey results also pushed the index 34 percent above its 2022 low point, which occurred last June.
The barometer’s modest rise in January was primarily attributable to better expectations for the future as the Future Expectations Index rose five points to 127 while the Index of Current Conditions, with a value of 136, changed little compared to December. The Financial Performance Index dropped to 93 this month, down from 109 in December, but that primarily reflects producers’ being asked to look ahead to 2023 and compare it to 2022 rather than comparing 2022 to 2021.
Of the 400 respondents, 22 percent expect to have a larger farm operating loan than in 2022, which was down somewhat from last January when 27 percent of respondents expected to have a larger operating loan.
(From the National Association of Farm Broadcasters)
Improvement In Farmer Sentiment Carries Over Into 2023
February 7, 2023
James Mintert and Michael Langemeier, Purdue Center for Commercial Agriculture
The Purdue University-CME Group Ag Economy Barometer Index rose again in January, to a reading of 130, 4 points above its 2022 year-end index value. The January survey results also pushed the index 34% above its 2022 low point which occurred last June. The barometer’s modest rise in January was primarily attributable to better expectations for the future as the Future Expectations Index rose 5 points to 127 while the Index of Current Conditions, with a value of 136, changed little compared to December. 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 January 16-20, 2023.
The Financial Performance Index dropped to 93 this month, down from 109 in December, but that primarily reflects producers’ being asked to look ahead to 2023 and compare it to 2022 rather than comparing 2022 to 2021, which is what the question in December did. To help gauge the change in producers’ expectations for 2023 compared to 2022, the December survey included a question asking producers to look ahead to 2023. Responses to that question were similar to those received this month helping confirm that, compared to a very strong income in 2022, producers expect to see margins tighten in 2023.
Twenty-two percent of the respondents in this month’s survey said they expect to have a larger farm operating loan than in 2022, which was down somewhat from last January when 27 percent of respondents expected to have a larger operating loan. Among respondents who expect to have a larger operating loan this year, only 5% said it was because they are carrying over unpaid operating debt while 80% said it was attributable to input cost increases. The percentage of respondents who attribute their need for a larger loan to unpaid operating debt has fallen sharply since we first posed this question in January 2020. In 2020, just over one-third of producers who anticipated needing a larger operating loan said it was because of unpaid operating debt. That percentage fell to 20% in 2021 and 13% in 2022 before declining again to just 5% in 2023. The sharp decline in the percentage of producers expecting to carry over unpaid operating debt provides support to the idea that the vast majority of producers are entering 2023 in a strong financial position.
The January reading of the Farm Capital Investment Index climbed 2 points to 42. January marked the second month in a row the index rose, the first time that’s occurred since the fall of 2020. January’s modest rise pushed the index up 35% compared to its November 2022 low, although the index remained 7% lower than a year earlier. Just over 7 out of 10 survey respondents in January said they think now is a bad time to make large investments in their farm operation. Among those respondents who feel that way, 39% said it was because of high prices for …..
Read the full Improvement In Farmer Sentiment Carries Over Into 2023 report here.