July 5, 2022
The Ag Economy Barometer continued to slide in June, dropping 2 points to a reading of 97. Farmers’ expectations for the future also weakened.
“Rising input costs and uncertainty about the future continue to weigh on farmer sentiment,” said James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “Many producers remain concerned about the ongoing escalation in production costs as well as commodity price volatility, which could lead to a production cost/income squeeze in 2023.”
Farm financial forecast
The Farm Financial Performance Index, which reflects income expectations for the current year, improved 2 points to a reading of 83 in June. Still, this remains one of the index’s lowest readings over the past two years.
This month, 51% of survey respondents said they expect their farms to be worse off financially a year from now, the most negative response received to this question since data collection began in 2015.
Farmers expect inflation to push up the cost of living for farm families in the year ahead. Seven out of 10 survey respondents said they expect the rate of inflation for consumer items to be 6% or higher over the next year, and 35% of respondents said they expect the inflation rate to exceed 10%.
For the second month in a row, the Farm Capital Investment Index held at a record low of 35, as producers continue to say now is not a good time to make large investments in their farm operation. Supply chain issues continue to frustrate farmers. In May and June, 50% of producers said that tight machinery inventories were impacting their farm machinery purchase plans.
The top concern for producers is still input prices and input availability. Looking ahead to 2023, a majority of farmers expect to see another round of large input cost increases, with 63% of producers expecting higher costs in 2023, on top of the large increases experienced in 2022.
When asked about their cropping plans for the upcoming year, 19% of crop producers said they intend to change their crop mix in the upcoming year in response to rising input costs. Among those who plan to shift their crop mix, almost half of the respondents (46%) said the biggest change will be to devote a higher percentage of their acreage to soybeans. Twenty-six percent of those planning a crop mix change said the biggest change would be to devote more of their farm to wheat production, while 21% of respondents said they would shift to planting more corn.
Among the farmers in our survey who planted winter wheat in fall 2021, 24% said they plan to increase their winter wheat acreage this fall. Among crop producers who did not plant winter wheat last fall, 14% responded that they intend to plant some winter wheat this fall. Responses to both questions point to a rise in wheat acreage in response to strong wheat prices.
Although both farmland value indices remain at strong levels, producers were less confident in June that farmland values will continue to rise. The Short-Term Farmland Value Expectations Index dropped 9 points to a reading of 136 in June, while the Long-Term Farmland Value Expectations Index dropped 8 points to a reading of 141. Producers who expect farmland values to rise over the next five years continue to point to non-farm investor demand and inflation expectations as the top two reasons for their optimism.
This month’s survey also asked farmers who planted corn or soybeans in 2022 about their expectations for farmland cash rental rates in 2023. Over half of respondents said they expect cash rental rates to rise next year. Of those who expect rates to rise, eight out of 10 respondents said they expect rates to rise 5% or more, while four out of 10 said they expect rental rates to rise by 10% or more in 2023.
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 June 13-17.
Source: Purdue University/CME Group, which are solely responsible for the information provided and is wholly owned by the source. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset.
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