Ag Economy Barometer: Farmer Sentiment Improves

Dan Agri-Business, Economy

Ag Economy Barometer

Farmer sentiment improved modestly in April as the Purdue University-CME Group Ag Economy Barometer reversed a two-month decline, up six points to 123.

The Current Conditions Index rose three points to 129, while the Index of Future Expectations rose seven points to 120. More producers expect prime interest rates to either hold steady or possibly decline during the next 12 months than felt that way earlier in the year. Perspectives on farmland values shifted somewhat in April, with fewer producers expecting values to decline in the upcoming year and more producers looking for values to rise.

When asked about the possibility of a new Farm Bill being passed by Congress in 2023, responses were mixed, with 40 percent of producers saying that passage was at least somewhat likely, while nearly 30 percent of respondents think that passage is at least somewhat unlikely.

Meanwhile, 40 percent of respondents considered crop insurance the most important Farm Bill title, followed by commodity programs and conservation.

(From the National Association of Farm Broadcasters)


Farmer sentiment improves; less pessimism over interest rates

James Mintert and Michael Langemeier, Purdue Center for Commercial Agriculture

Farmer sentiment improved modestly in April as the Purdue University-CME Group Ag Economy Barometer reversed a two-month decline up 6 points to a reading of 123. Both the Index of Current Conditions and the Index of Future Expectations improved in April with the biggest rise taking place in future expectations. The Current Conditions Indexrose 3 points to 129 while the Index of Future Expectations rose 7 points to 120. When asked to look ahead one year, more producers said they expect to be better off financially than now with fewer respondents expecting conditions to worsen compared to both a month earlier and one year earlier. This month’s survey was conducted from April 10-14, 2023.

Figure 1. Purdue/CME Group Ag Economy Barometer, October 2015-April 2023.

The Farm Financial Performance Index rose 7 points in April to 93, matching the index’s January reading. The prime interest rate charged by U.S. commercial banks increased from 7.75% in January to 8% in late March and a shift in farmers’ expectations regarding future Federal Reserve Board interest rate policy could be one reason the financial performance index improved this month. Compared to earlier in the year, fewer producers expect interest rates to rise over the next year and more producers think rates are likely to hold steady or even decline. This month 34% of respondents said they expect the U.S. prime interest rate to remain unchanged or decline over the next year compared to 25% of producers who felt that way in February. At the same time, two-thirds (66%) of producers expect interest rates to keep rising, compared to 75% of respondents who felt that way in February. The biggest shift was among respondents expecting rates to rise 1 to 2% in the next year which declined to 37% of respondents in April vs. 43% of respondents in February.

Figure 2. Indices of Current Conditions and Future Expectations, October 2015-April 2023.
Figure 3. Farm Financial Performance Index, April 2018-April 2023.

The Farm Capital Investment Index was virtually unchanged in April at a reading of 43, which was just one point higher than a month earlier. That leaves the index 7 points higher than a year earlier, but still down 32 points compared to two years ago. Among the over 70 percent of respondents who continue to think it’s a bad time for large investments, the top two reasons cited continue to be the increase in prices for machinery and construction and rising interest rates. In a reversal from last month, more respondents chose rising equipment and construction costs (39%) than rising interest rates (33%) as a top reason for this being a poor time for large investments.

Figure 4. Farm Capital Investment Index, October 2015-April 2023.
Figure 5. Why Is Now a Bad Time to Make Large Investments?, July 2022-April 2023.

For the first time since last fall, the Short-Term Farmland Value Expectations Index increased compared to a month earlier. The index rose 10 points in April to a reading of 123 while the long-term farmland index held steady at a reading of 142. Even with this month’s rise, the short-term index remains 21 points lower than a year earlier and 36 points lower than two years ago. The shift in the short-term index took place mostly because …..

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