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 The
rise in sentiment was primarily attributable to better
expectations for the future, as the Future Expectations Index
improved by 5 points to 127. The Index of Current Conditions
rose only 1 point to a reading of 136. 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 from January 16-20.
“Although producers were a bit more optimistic about the future
this month, they again reported expectations for tighter margins
in 2023 than in 2022,” said James Mintert, the barometer’s
principal investigator and director of Purdue University’s
Center for Commercial Agriculture.
The Farm Capital Investment Index was up 2 points this month to
42; however, it remained 7% lower than a year earlier. Just over
7 out of 10 survey respondents said they think now is a bad time
to make large investments in their farm operation. Among
respondents who felt now is a bad time, 39% said high prices for
machinery and new construction, 25% said rising interest rates,
and 12% said uncertainty about farm profitability was the
primary reason. Interest rates are becoming a bigger concern for
farmers. As recently as November, just 19% percent of farmers in
the monthly barometer survey chose rising interest rates as a
key factor impacting their perspective on investments.
Each January, starting in 2020, the survey has included a
question asking respondents if they expect to have a larger
operating loan compared to the previous year and, if so, the
reason for the larger loan. In January, 22% of respondents said
they expect to have a larger 2023 farm operating loan compared
to 2022, down from 27% last year. Among respondents who expect
to have a larger operating loan, 80% indicated it was due to
increased input costs, while only 5% said it was due to carrying
over unpaid operating debt, which according to Mintert is
important to note. The percentage of respondents who attribute
their need for a larger loan to unpaid operating debt has fallen
sharply since the question was first posed in January 2020. At
that time, just over one-third of producers who anticipated
needing a larger loan said it was because of unpaid operating
debt. That percentage fell to 20% in 2021 and to 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 is important,” said Mintert.
“It supports the idea that the vast majority of producers are
entering 2023 in a strong financial position despite the rise in
production costs.”
Producers’ expectations for short-term and long-term farmland
values were mixed in January. The Short-Term Farmland Index fell
4 points to 120, down 15% when compared to one year earlier, as
more producers said they expect values to hold steady over the
coming year instead of increasing. The Long-Term Farmland Values
Index rose slightly to 142 from 140 in December. Over the last
year, the long-term index has declined just 2%, as producers
continue to retain a more optimistic long-term than short-term
view of farmland values. Among producers who expect to see
farmland values rise over the next five years, the top reasons
for their optimism continue to be non-farm investor demand (63%)
and inflation (23%).
This month’s survey also included questions about leasing
farmland for carbon sequestration, and U.S. farmers continue to
express interest in carbon contracts. During the first quarter
of 2021, approximately 7% of survey respondents said they had
engaged in discussions with companies about being paid to
capture carbon on their farms. When we repeated the question
about carbon payments in August 2022 and again in January 2023,
the percentage of producers who said they had discussed a carbon
contract with a company rose modestly to 9% of respondents.
However, relatively few farm operators have chosen to sign a
carbon contract, with just 1% of January’s survey respondents
indicating they had signed a contract.
[to top of second column] |
Read the full Ag Economy Barometer report at https://purdue.ag/agbarometer.
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, available at
https://purdue.ag/barometer
video. For more
information, check out the Purdue Commercial AgCast podcast
available at https://purdue.ag/agcast, which includes a detailed
breakdown of each month’s barometer and 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.
About CME Group
As the world’s leading and most diverse derivatives marketplace, CME
Group (www.cmegroup.com) enables clients to trade futures, options,
cash and OTC markets, optimize portfolios, and analyze data –
empowering market participants worldwide to efficiently manage risk
and capture opportunities. CME Group exchanges offer the widest
range of global benchmark products across all major asset classes
based on interest rates, equity indexes, foreign exchange, energy,
agricultural products and metals.
The company offers futures and options on futures
trading through the CME Globex® platform, fixed income trading via
BrokerTec and foreign exchange trading on the EBS platform. In
addition, it operates one of the world’s leading central
counterparty clearing providers, CME Clearing. With a range of pre-
and post-trade products and services underpinning the entire
lifecycle of a trade, CME Group also offers optimization and
reconciliation services through TriOptima, and trade processing
services through Traiana.
CME Group, the Globe logo, CME, Chicago Mercantile
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property of their respective owners.
[Writer: Kami Goodwin
Source: James Mintert]
Related websites:
Purdue University Center for Commercial Agriculture:
http://purdue.edu/commercialag
CME Group:
http://www.cmegroup.com/
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