Slight enhance in producer sentiment regardless of rising prices and decrease crop costs

August 2, 2022

Slight enhance in producer sentiment regardless of rising prices and decrease crop costs

July Barometer

Slight enhance in producer sentiment regardless of rising prices and decrease crop costs. (Purdue/CME Group Ag Economy Barometer/James Mintert).
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WEST LAFAYETTE, Ind. and CHICAGO — The Purdue University/CME Group Ag Economy Barometer farmer sentiment index rose 6 factors in July to a studying of 103. Producers had been considerably extra optimistic about each present and future financial situations on their farms when in comparison with June. The Index of Current Conditions rose 10 factors to a studying of 109, and the Index of Future Expectations rose 4 factors to a studying of 100. Although all three indices rose this month, they had been nonetheless 23% to 24% decrease than a yr earlier. The Ag Economy Barometer is calculated every month from 400 U.S. agricultural producers’ responses to a phone survey. This month’s survey was performed July 11-15.

“Even although we noticed a slight uptick in sentiment this month, there may be nonetheless an incredible quantity of uncertainty within the agricultural economic system,” mentioned James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “Key commodity costs, together with wheat, corn and soybeans, all weakened through the month and producers stay involved over rising enter costs and enter availability.”

Farm operators on this month’s survey voiced considerations about a number of key points affecting their operation, together with larger enter costs (42% of respondents), decrease crop costs (19% of respondents), rising rates of interest (17% of respondents) and availability of inputs (15% of respondents).

The Farm Financial Performance Index, which is primarily reflective of earnings expectations for the present yr, improved 5 factors to a studying of 88 in June. However, this month, 49% of respondents mentioned they anticipate their farm to be worse off financially a yr from now, which compares to 51% who felt that approach in June. This is a markedly extra pessimistic outlook than producers offered a yr in the past when simply 30% of respondents mentioned they anticipate their monetary situation to worsen within the upcoming yr.

Producers stay unsure over their expectations for crop enter costs over the following 12 months. In July, 18% of crop producers mentioned they anticipate 2023’s crop enter costs to say no between 1% and 10% when in comparison with 2022’s costs, versus 12% who felt that approach in June. Meanwhile, 26% of respondents in July mentioned they anticipate 2023’s costs to rise by 10% or extra, in comparison with 38% who anticipated a crop enter worth rise of that magnitude in June.

The rise in enter prices is main some producers to reassess their cropping plans for the upcoming yr. In this month’s survey, practically one out of 4 (24%) of crop producers mentioned that on account of the rise in enter prices, they plan to alter their farm’s crop combine in 2023. In a follow-up query, over half (53%) of respondents who mentioned they plan to alter their combine will enhance the share of their cropland dedicated to soybeans. In a separate set of questions, 26% of producers who mentioned they planted winter wheat final yr indicated they plan to extend their wheat acreage this fall.

The Farm Capital Investment Index stays close to its document low, up one level to a studying of 36 in July. To make clear why, respondents who mentioned now’s a nasty time for big investments had been requested for the first purpose they felt that approach. Of these respondents, 44% indicated an “enhance in costs for farm equipment and new building,” 15% mentioned “uncertainty about farm profitability,” and 14% selected “rising rates of interest” as the first purpose they considered now as a nasty time for big investments. Somewhat surprisingly, solely 7% of respondents selected “tight farm equipment inventories at sellers” as their main purpose for responding negatively to the funding query.

Producers’ views on farmland values diverged this month because the Short-Term Farmland Value Index declined 9 factors to 127, whereas the long-term index rose 9 factors to 150. The short-term index is down 20% from its peak studying in 2021, whereas the long-term index is simply 6% decrease than the height reached final yr. Short-term, there was a shift away from expectations that farmland values will go larger, with extra producers in July anticipating values to stay about the identical. The long-term change was attributable to extra respondents this month anticipating values to rise with fewer anticipating a decline over the following 5 years.

“The short-run and long-term farmland indices don’t all the time transfer in tandem, however the magnitude of this month’s divergence between the quick and long-term indices is uncommon,” Mintert mentioned. “Producers who anticipate values to rise over the upcoming 5 years proceed to say that nonfarm investor demand and inflation are the 2 main causes they anticipate values to rise.”

Read the complete Ag Economy Barometer report at https://purdue.ag/agbarometer. The web site additionally presents further assets – resembling previous reviews, charts and survey methodology – and a type to enroll in month-to-month barometer e-mail updates and webinars.

Each month, the Purdue Center for Commercial Agriculture gives a brief video evaluation of the barometer outcomes, obtainable at https://purdue.ag/barometervideo. For much more info, try the Purdue Commercial AgSolid podcast. It features a detailed breakdown of every month’s barometer, along with a dialogue of current agricultural information that impacts farmers. Available now at https://purdue.ag/agcast.

The Ag Economy Barometer, Index of Current Conditions and Index of Future Expectations can be found on the Bloomberg Terminal underneath the next ticker symbols: AGECBARO, AGECCURC and AGECFTEX.

About the Purdue University Center for Commercial Agriculture

The Center for Commercial Agriculture was based in 2011 to supply skilled improvement and academic packages for farmers. Housed inside Purdue University’s Department of Agricultural Economics, the middle’s school and employees develop and execute analysis and academic packages that tackle the totally different wants of managing in at present’s enterprise surroundings.

About CME Group

As the world’s main and most various derivatives market, CME Group (www.cmegroup.com) allows purchasers to commerce futures, choices, money and OTC markets, optimize portfolios, and analyze information – empowering market members worldwide to effectively handle danger and seize alternatives. CME Group exchanges provide the widest vary of world benchmark merchandise throughout all main asset lessons based mostly on rates of interest, fairness indexes, overseas change, power, agricultural merchandise and metals. The firm presents futures and choices on futures buying and selling by means of the CME Globex® platform, fastened earnings buying and selling by way of BrokerTec and overseas change buying and selling on the EBS platform. In addition, it operates one of many world’s main central counterparty clearing suppliers, CME Clearing. With a variety of pre- and post-trade services underpinning the whole lifecycle of a commerce, CME Group additionally presents optimization and reconciliation companies by means of TriOptima, and commerce processing companies by means of Traiana.

CME Group, the Globe brand, CME, Chicago Mercantile Exchange, Globex, and E-mini are emblems of Chicago Mercantile Exchange Inc. CBOT and Chicago Board of Trade are emblems of Board of Trade of the City of Chicago, Inc. NYMEX, New York Mercantile Exchange and ClearPort are emblems of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. BrokerTec, EBS, TriOptima, and Traiana are emblems of BrokerTec Europe LTD, EBS Group LTD, TriOptima AB, and Traiana, Inc., respectively. Dow Jones, Dow Jones Industrial Average, S&P 500, and S&P are service and/or emblems of Dow Jones Trademark Holdings LLC, Standard & Poor’s Financial Services LLC and S&P/Dow Jones Indices LLC, because the case could also be, and have been licensed to be used by Chicago Mercantile Exchange Inc. All different emblems are the property of their respective homeowners.  

Writer: Kami Goodwin, 765-494-6999, kami@purdue.edu

Source: James Mintert, 765-494-7004, jmintert@purdue.edu

Media Contacts:

Aissa Good, Purdue University, 765-496-3884, aissa@purdue.edu

Dana Schmidt, CME Group, 312-872-5443, dana.schmidt@cmegroup.com

Related web sites:

Purdue University Center for Commercial Agriculture: http://purdue.edu/commercialag

CME Group: http://www.cmegroup.com/

Agricultural Communications: (765) 494-8415;

Maureen Manier, Department Head, mmanier@purdue.edu  

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