Ag decreases by 22 points

Farmers’ morale deteriorates as production costs rise

calendar icon June 16, 2022

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Purdue University/CME Group Ag . Economy Scale It fell to its lowest level since April 2020, down 22 points in May to a reading of 99. Agricultural producers have weak perceptions of current conditions on their farms, as well as their future expectations, this month. The Current Conditions Index fell 26 points to a reading of 94 and the Future Expectations Index fell 21 points to a reading of 101. The Ag economy gauge is calculated each month from the responses of 400 US agricultural producers to a telephone survey. This month’s survey was conducted May 16-20.

“Despite strong commodity prices, weak producer sentiment this month appears to have been driven by rapidly rising production costs and uncertainty about the direction of input prices,” said James Minter, principal investigator on the barometer and director of Purdue University’s Trade Center. Farming. “This combination makes producers very concerned about the financial performance of their farms.”

The farm’s financial performance index fell 14 points to a reading of 81 in May. The proportion of producers who expect the financial performance of their farms to deteriorate in 2022 compared to last year increased from 29% in April to 38% in May. Over the past 13 months, the farm’s financial performance index is down 41% from its survey high of 138 in April 2021.

The Agricultural Capital Investment Index drifted to an all-time low in May and fell 30 points from the same period last year. In the May survey, only 13% of respondents said it was a good time to make significant investments in their operations, while 78% said they saw it as a bad time to invest in things like machinery and buildings. Half of producers in this month’s survey said their machinery-buying plans were affected by low farm machinery inventory levels, up from 41% in the April survey, suggesting that supply chain issues are at least partly responsible for the ongoing weakness in the capital investment index. .

High input costs remain a major concern for producers with 44% of those surveyed choosing it as the biggest concern facing planting operations in the coming year. In addition, 57% of producers said they expect a 30% or more increase in the prices paid for farm inputs in 2022 compared to the prices paid last year. The May survey also asked producers about their expectations for input costs in 2023 compared to 2022 with nearly 39% of producers indicating they expect an additional cost increase of 10% or more in the next year.

In response to the Biden administration’s policy proposal to support a $10-per-acre wheat and soybean crop insurance, this month’s poll asked respondents whether the subsidy would encourage them to plant more wheat in fall 2022 than they would otherwise. Among producers who have used a double-crop wheat/soybean rotation in the past, just over one in five (22%) said it would encourage them to grow more wheat. Among producers who have not followed the wheat/soybean rotation in the past, only one in ten said the insurance subsidy would encourage them to plant more wheat this fall.

Finally, farmers remain optimistic about farmland values. The index of short-term farmland value expectations, based on producers’ 12-month expectations, rose 1 point to 145. Meanwhile, the index of long-term farmland value expectations, based on producers’ farmland expectations over the next five years, rose 8 points in May to a reading of 149. In a follow-up question, respondents who expect farmland values ​​to rise over the next five years were asked the main reason they expect values ​​to rise. Over the past few months this question has been asked, respondents have consistently chosen non-farm investor demand as the number one cause, closely followed by inflation.