Farmers involved about rising prices & provide chain disruptions

Famers have gotten increasingly more involved in regards to the rising value of fertilizer and the continuing provide chain disruptions. For instance, the Purdue College/CME Group Ag Financial system Barometer confirmed that farmer sentiment weakened in January by 6 factors to a studying of 119, its second-lowest studying since July 2020. As well as, the Index of Present Situations fell 13 factors to a studying of 133, whereas the Index of Future Expectations modified little in January, down 2 factors to a studying of 112.

“Rising farm enter prices and ongoing provide chain disruptions seem like contributing to producers’ weaker notion of present situations and expectations of their farm’s monetary efficiency in 2022 when in comparison with final yr,” mentioned James Mintert, the barometer’s principal investigator and director of Purdue College’s Heart for Business Agriculture.

The Farm Monetary Efficiency Index fell sharply in January to a studying of 83, a 30 p.c decline in comparison with a yr earlier and 27 p.c decrease than in December 2021. The monetary index is generated based mostly upon producers’ responses to whether or not they count on their farm’s present monetary efficiency to be higher than, worse than or about the identical because the earlier yr.

“The sharp drop within the monetary efficiency index this month signifies producers count on a pointy decline in revenue in 2022 in comparison with 2021. Within the December survey, producers had been targeted on evaluating a really optimistic revenue yr, 2021, to 2020, which actually supported the index at yr finish,” mentioned Mintert.

The Farm Capital Funding Index additionally weakened this month, falling 4 factors to a studying of 45. In January, 52 p.c of respondents mentioned they plan to cut back their farm equipment purchases within the upcoming yr. Provide chain points proceed to hamper farmers’ funding plans as, for the third month in a row, over 40 p.c of producers reported that low farm equipment inventories had been holding again their buy plans. Farm building plans had been additionally weaker this month as 66 p.c of respondents reported lowering their building plans within the yr forward versus final yr.

Provide chain considerations lengthen past farm equipment and farm constructing/grain bin building plans. Disruptions within the provide chain for a lot of farm inputs, coupled with sturdy demand, are pushing manufacturing prices increased. Fifty-seven p.c of survey respondents in January mentioned they count on farm enter costs to rise by 20 p.c or extra in 2022 and 34 p.c of producers mentioned they count on costs to rise by 30 p.c or extra.

The disruptions lengthen not simply to enter pricing, but in addition enter availability. In January, 28 p.c of producers responding to the survey mentioned they’ve had issue buying crop inputs from suppliers for the 2022 crop season. In a follow-up query posed to producers experiencing issue in procuring crop inputs, respondents reported issue in buying a broad spectrum of crop inputs together with herbicides, pesticides, fertilizer, and farm equipment components.

Costs for nitrogen fertilizer have skyrocketed over the past yr. Based on USDA, anhydrous ammonia (NH3) costs in Illinois throughout January 2022 had been practically triple what they had been in January 2021. Whereas a majority (57 p.c) of corn producers mentioned they intend to make use of the identical nitrogen software fee in 2022 as in 2021; practically 4 out of ten (37 p.c) mentioned they intend to cut back their nitrogen software fee in comparison with final yr.

The rise in farm enter prices was additionally the first purpose why many producers expect to have a bigger working mortgage in 2022. This month, 27 p.c of respondents mentioned they count on to have a bigger working mortgage in 2022 than a yr earlier, 10 factors increased than on final yr’s survey and 12 factors increased than two years in the past.

For the second month in a row, each the short-term and long-term farmland worth indices declined. The Brief-Time period Farmland Worth Index declined 11 factors to an index worth of 142, whereas the Lengthy-Time period Farmland Worth Index declined 7 factors to a studying of 145 in January. Each indices have fallen about 10 p.c in comparison with their fall 2021 peak values.

“Current weak point in each indices might replicate recognition of how a lot farmland values have elevated over the past yr or extra, tempering expectations for additional worth will increase,” mentioned Mintert.

Learn the total Ag Financial system Barometer report on-line. Every month, the Purdue Heart for Business Agriculture supplies a brief video evaluation of the barometer outcomes, out there right here. For much more data, take a look at the Purdue Business AgCast podcast. It features a detailed breakdown of every month’s barometer, along with a dialogue of latest agricultural information that impacts farmers.

The Ag Financial system Barometer is calculated every month from 400 U.S. agricultural producers’ responses to a phone survey. This month’s survey was carried out between January 17-21, 2022.

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