Pessimism Creeping In

The Purdue University-CME Group Ag Economy Barometer dropped to a reading of 104 in May, a 19-point decline from April indicating producers are more pessimistic about the agricultural economy (Figure 3). The latest nationwide survey of 400 agricultural producers showed producer sentiment deteriorated for both current economic conditions (12 months into future) and future conditions (5 years into future). The index of current conditions registered 116, down 13 points from the previous reading, and the index of future expectations registered a 98, down 22 points. The overall index compares producers’ current sentiments relative to October 2015. Readings above 100 indicate producers are more positive relative to October 2015. Readings below 100 mean they are less positive. 

FIGURE 3. AG ECONOMY BAROMETER

Agricultural economists at Purdue attribute the drop in sentiment to lower commodity prices—26 percent of producers surveyed identified lower prices as their top concern. Bids in Nebraska last week show the reason for concern. Corn bids in central Nebraska averaged $6.44 per bushel compared to $7.61 last year; bids for soybeans averaged $12.61 per bushel against $16.34 a year ago; and bids on wheat in southwest Nebraska averaged $7.33 per bushel compared to $10.78 last year. Rising interest rates and bank failures were also mentioned as areas of concern by producers. Fifty-nine percent said they expect interest rates to rise during the upcoming year and 40 percent indicated they expect recent bank failures to result in changes in farm loan terms. 

The USDA Economic Research Service in February estimated U.S. net farm income in 2023 will decrease $26 billion, or 16 percent, from last year. Forecasts for net farm income in Nebraska also suggest a decline. The latest Ag Economy Barometer indicates producers are anticipating the financial setback.