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 The rise in the overall measure of agricultural producer
sentiment was driven by increases in both the Index of Current
Conditions, which rose 9 points to 118, and the Index of Future
Expectations, which climbed 16 points to 116. 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 Aug. 15-19, after The U.S. Department of
Agriculture released both the August Crop Production and World
Agricultural Supply and Demand Estimates reports.
“Producers in the August survey were less worried about their
farm’s financial situation than in July, although they remain
concerned about a possible cost/price squeeze,” said James
Mintert, the barometer’s principal investigator and director of
Purdue University’s Center for Commercial Agriculture.
This month, more producers indicated they’re expecting better
financial performance for their farms in 2022 and the upcoming
year, as the Farm Financial Performance Index improved 11 points
to a reading of 99. Both corn and soybean prices rallied from
their July lows into mid-August which, along with expectations
for good yields, helped explain some of the improvement in
financial performance expectations.
At the same time, there continues to be a tremendous amount of
uncertainty among producers regarding the future cost of items
they purchase both for their farms and family usage. When asked
about their biggest concerns for the next year, over half (53%)
of respondents chose higher input costs, followed by rising
interest rates (14%), input availability (12%), and lower output
prices (11%). On the farm level, there is a big disparity in
opinions among farmers regarding whether input prices will
retreat or escalate in 2023. Approximately four out of 10
producers expect crop input prices in 2023 to be either
unchanged or possibly decline by as much as 10%, compared to
2022. On the other hand, just over half of all producers expect
input prices to rise from 1% to 20%. At the consumer level,
nearly half (48%) of respondents said they expect the rate of
inflation for consumer items during the next 12 months to be in
the 0% to 6% range. Compared to previous barometer surveys, more
producers this month said they expect inflation to be in the
upper end of that range than those who felt that way earlier
this year.
Producers continue to view now as a bad time to make large farm
machinery and building investments. In a follow-up question,
nearly half (49%) of those who said it is a bad time for
investing cited increasing prices as the primary reason. The
Farm Capital Investment Index remains near its record low, but
was up 3 points to a reading of 39 in August.
Upward pressure on cash rental rates for Corn Belt farmland in
2023 seems likely. Four out of 10 corn and soybean producers
expect farmland cash rental rates to rise in 2023 compared to
2022. This month, 27% of respondents said they expect rates to
rise up to 5% compared to 39% of respondents who expect rates to
rise between 5% and 10% in 2023.
Expectations for both short- and long-term farmland values were
nearly unchanged over the previous month. Among survey
respondents who say they expect farmland values to rise over the
next five years, well over half (57%) chose nonfarm investor
demand as the main reason they expect values to rise.
To understand producers’ exposure to and
experiences with companies offering payments for capturing
carbon, this month’s survey asked respondents if they’ve engaged
in these types of discussions and the payments being offered. In
August, 9% of respondents said they have engaged in discussions
with companies offering payments for carbon capture, the highest
percentage of respondents since the question was first included
in the survey. Of those who engaged in discussions, 75% said the
payment rate per metric ton of carbon offered was less than $20,
and just 1% said they have signed a carbon contract. Respondents
who engaged in discussions and chose not to sign a contract were
asked the minimum payment per acre they would accept to enroll
their farm in a carbon capture program.
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Two-thirds of those respondents said the payment rate
needed to be at least $30 per acre, suggesting that payment rates
need to rise to encourage more participation in carbon capture
programs.
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 Mintert]
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