Farmer Sentiment Drops in February

Dan Commodities, Economy

Courtesy of Purdue/CME Group Ag Economy Barometer

The Purdue University/CME Group Ag Economy Barometer dropped five points to 125 in February. Farmers’ perspectives regarding both current conditions on their farms and their expectations for the future also weakened during the month. The Index of Current Conditions dipped two points to 134, and the Index of Future Expectations declined six points to 121.

Several factors are weighing on producers’ minds, including the risk of falling commodity prices, rising interest rates, and uncertainty over the future growth of agricultural exports. The Farm Financial Performance Index dropped seven points to a reading of 86. Despite strong farm income, the February reading of the Farm Capital Investment Index didn’t change much, rising one point to a reading of 43.

This month, 72 percent of producers said it’s a bad time to make large investments in their farming operation, while just 15 percent said it’s the right time to make those investments.

(From the National Association of Farm Broadcasters)


Farmer Sentiment Dips in February

James Mintert and Michael Langemeier, Purdue Center for Commercial Agriculture

The Purdue University-CME Group Ag Economy Barometer Index dipped 5 points in February to a reading of 125. Farmers’ perspectives regarding both current conditions on their farms and their expectations for the future both weakened slightly as the Index of Current Conditions fell 2 points to 134 and the Index of Future Expectations declined to 121 compared to 127 in January. This month’s survey revealed that producers’ confidence in the future growth of U.S. agricultural exports continues to weaken. In addition, although both land value expectation indices remain in positive territory, more producers think farmland values could weaken in the year ahead than on previous surveys. 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 February 13-17, 2023.

Producers’ expectations for their farms’ financial performance in 2023 compared to 2022 weakened in February. The Farm Financial Performance Index declined 7 points to a reading of 86. Farmers continue to point to concerns about higher input costs, chosen by 38% of February’s survey respondents, as their biggest concern for the year ahead. Notably, in this month’s survey more producers said they are concerned about the risk of lower crop and/or livestock prices than just a few months ago. Eighteen percent of this month’s respondents chose lower output prices as one of the top risks they are facing, up from just 8 percent who cited that as a key risk in September. Concerns about rising interest rates appear to be on an upswing as well. In February, nearly one-fourth of survey respondents (24%) chose rising interest rates as a key concern, up from 22% in the last two months and up from just 14% who cited interest rates as a top concern last summer.

Figure 1. Purdue/CME Group Ag Economy Barometer, October 2015-February 2023.
Figure 2. Indices of Current Conditions and Future Expectations, October 2015-February 2023.
Figure 3. Farm Financial Performance Index, April 2018-February 2023.

Agricultural exports have been a key source of growth for U.S. agriculture for decades. Monthly Ag Economy Barometer surveys since the beginning of 2019 have routinely included a question asking producers about their expectations for agricultural exports in the upcoming 5 years. Producer’s confidence in U.S. agriculture’s exporting prowess has weakened considerably since this question was first included in barometer surveys. Confidence in agricultural exports increasing peaked in 2020 barometer surveys when just over 70% of respondents said they expected exports to increase in the upcoming 5 years. Since then, the percentage of farmers looking for exports to grow over time has drifted lower, dipping to just 33% in the February survey. And in this month’s survey, the percentage of respondents who expect U.S. exports to decline reached 18%, providing the weakest perspective on future exports since barometer data collection began, suggesting that lack of confidence in future agricultural export growth is contributing to the weak sentiment among producers.

The February reading of the Farm Capital Investment Index changed little this month, rising to 43, just one point higher than a month earlier. Weak capital investment readings have been the norm for nearly two years, despite strong farm income. Seventy-two percent of producers in this month’s survey said it is a “bad time” to make large investments in their farming operation while just 15% reported it is a “good time” to make such investments. The disparity between responses to the barometer’s investment question and actual farm equipment sales continues to be focused on costs. In February, 45% of respondents who said it was a “bad time” to make large investments said it was because of the increase in prices for farm machinery and new construction while 27% of respondents chose “rising interest rates” as a primary reason for it being a poor time for making large investments. The percentage of …..

Read the full Purdue University-CME Group Ag Economy Barometer report.