June 6, 2023
Farmer sentiment dropped sharply in May as the Purdue University-CME Group Ag Economy Barometer Index declined 19 points, the Index of Current Conditions dipped 13 points and the Index of Future Expectations fell 22 points below a month earlier.
The May reading marked the weakest sentiment since July 2022, fueled by lower crop prices. Eastern Corn Belt fall delivery bids for corn fell over $0.50/bushel (10%) and soybean bids declined over $1.00/bushel (8%) while new crop June/July delivery wheat bids declined nearly $0.50/bushel (8%) in mid-May compared to bids available in mid-April.
Ongoing concerns about rising interest rates, high input prices, and even the possibility that recent U.S. bank failures could lead to changes in farm loan terms in the upcoming year also contributed to weak producer sentiment.
Farm financial outlook
The Farm Financial Performance Index fell from 93 in April to 76 in May, a 17-point decline. Crop price weakness contributed to the decline as 38% of this month’s respondents say they expect weaker financial performance for their farm this year compared to just 23% who felt that way in April.
Although the top concern among producers in the upcoming year remains higher input costs, the risk of lower crop and livestock prices has become top of mind. This month 26% of respondents chose lower output prices as their top concern compared with just 8% of respondents who made that choice last September.
Higher interest rates are putting additional pressure on farmers’ profit prospects for the upcoming year. Although interest rate projections have moderated somewhat in the last several months, 59% of producers still say they expect interest rates to rise during the upcoming year and 22% of respondents chose it as a top concern for their farm in the next 12 months.
Additionally, 40% of farmers in this month’s poll said they expect this spring’s U.S. bank failures to lead to some changes in farm loan terms in the upcoming year, possibly putting more financial pressure on their operations.
In a turnaround from last month, the Short-Term Farmland Value Expectations Index fell 13 points in May to the weakest short-term index reading since August 2020. Just 29% of May survey respondents say they expect farmland values to head higher over the next 12 months.
Producers remain optimistic about the longer-term outlook for farmland values as the Long-Term Farmland Value Expectations Index rose 3 points in May. However, this month’s rise still leaves the reading below where it was one year ago. Among producers who expect farmland values to rise over the upcoming 5 years, the two most commonly cited reasons continue to be strong non-farm investor demand and inflation.
Farm bill priorities
When asked what will be important to them in a new Farm Bill, 48% of producers say the crop insurance title will be the most important aspect of a new farm bill to their farms, followed by the commodity title (25%).
Corn and soybean growers were asked what change, if any, they expect to see to the Price Loss Coverage (PLC) reference prices in the upcoming farm bill. Close to half (45%) of corn and soybean growers say they expect Congress to establish higher reference prices for both crops in a new farm bill.
This month’s survey was conducted from May 15-19, 2023. Read the full report.
Source: Purdue University, CME Group
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