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 The Index of Future Expectations fell 5 points to a reading of
96, marking the lowest level for the index since October 2016.
Meanwhile, producers were slightly more optimistic regarding
current conditions; the Index of Current Conditions improved 5
points to a reading of 99. The Ag Economy Barometer is
calculated each month from 400 U.S. agricultural producers’
responses to a telephone survey. This month’s survey was
conducted June 13-17.
“Rising input costs and uncertainty about the future continue to
weigh on farmer sentiment,” said James Mintert, the barometer’s
principal investigator and director of Purdue University’s
Center for Commercial Agriculture. “Many producers remain
concerned about the ongoing escalation in production costs as
well as commodity price volatility, which could lead to a
production cost/income squeeze in 2023.”
The Farm Financial Performance Index, which is primarily
reflective of income expectations for the current year, improved
2 points to a reading of 83 in June, yet remains at one of the
index’s lowest readings over the past two years. When asked
about expectations for their farm’s financial condition in June
2023 compared to June 2022, 51% of survey respondents said they
expect their farms to be worse off financially a year from now.
This is the most negative response received to this question
since data collection began in 2015.
For the second month in a row, the Farm Capital Investment Index
held at a record low of 35, as producers continue to say now is
not a good time to make large investments in their farm
operation. Supply chain issues continue to frustrate farmers. In
May and June, 50% of producers said that tight machinery
inventories were impacting their farm machinery purchase plans.
The top concerns for producers in the upcoming year continue to
be input prices (43%), followed by input availability (21%),
government policies (18%), and lower output prices (17%).
Looking ahead to 2023, a majority of farmers expect to see
another round of large input cost increases, with 63% of
producers expecting higher costs in 2023, on top of the large
increases experienced in 2022. Nearly four out of 10 farmers
expect input prices to rise by 10% or more next year when
compared to 2022; only one out of 10 producers expect input
prices in 2023 to fall below 2022’s prices. Producers also
expect inflation to push up the cost of living for farm families
in the year ahead. Seven out of 10 survey respondents said they
expect the rate of inflation for consumer items to be 6% or
higher over the next year, and 35% of respondents said they
expect the inflation rate to exceed 10%.
When asked about their cropping plans for the upcoming year, one
out of five (19%) of crop producers said they intend to change
their crop mix in the upcoming year in response to rising input
costs. Among those who plan to shift their crop mix, almost half
of the respondents (46%) said the biggest change will be to
devote a higher percentage of their acreage to soybeans.
Twenty-six percent of those planning a crop mix change said the
biggest change would be to devote more of their farm to wheat
production, while 21% of respondents said they would shift to
planting more corn.
Although both farmland value indices remain at strong levels,
producers were noticeably less confident that farmland values
will continue to rise than they were last fall. The Short-Term
Farmland Value Expectations Index dropped 9 points to a reading
of 136 in June, while the Long-Term Farmland Value Expectations
Index dropped 8 points to a reading of 141. The short- and
long-term farmland indices are down 13% and 12%, respectively,
from the highs posted in fall of 2021.
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This month’s survey also asked farmers who planted
corn or soybeans in 2022 about their expectations for farmland cash
rental rates in 2023. Over half (52%) of respondents said they
expect cash rental rates to rise next year. Of those who expect
rates to rise, eight out of 10 respondents said they expect rates to
rise 5% or more, while four out of 10 said they expect rental rates
to rise by 10% or more in 2023.
Read the full Ag Economy Barometer report. The site also offers
additional resources – such as past reports, charts and survey
methodology – and a form to sign up for monthly barometer email
updates and webinars.
Each month, the Purdue Center for Commercial Agriculture provides a
short video analysis of the barometer results. For even more
information, check out the Purdue Commercial AgCast podcast. It
includes a detailed breakdown of each month’s barometer, in addition
to a discussion of recent agricultural news that affects farmers.
The Ag Economy Barometer, Index of Current Conditions and Index of
Future Expectations are available on the Bloomberg Terminal under
the following ticker symbols: AGECBARO, AGECCURC and AGECFTEX.
About the Purdue University Center for Commercial Agriculture
The Center for Commercial Agriculture was founded in 2011 to provide
professional development and educational programs for farmers.
Housed within Purdue University’s Department of Agricultural
Economics, the center’s faculty and staff develop and execute
research and educational programs that address the different needs
of managing in today’s business environment.
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[Writer: Kami Goodwin
Source: James Minter] |
