Producers responding to the Purdue University-CME Group Ag Economy Barometer survey in October 2020 were an optimistic bunch. The index gauging farmers’ sentiment towards the farm economy hit a high with a value of 183 (Figure 1). The value was remarkable given the country was still in the throes of the COVID-pandemic at the time. Two years later, producers are singing a different tune with the index dropping to levels not seen for 6-7 years, suggesting farm country is more pessimistic on the agricultural economy. The latest monthly survey generated an index value of 102 with the values for both current economic conditions (12 months into future) and future conditions (5 years into future) deteriorating. The index of current conditions is 101 and the index of future expectations is 102. The last time index values were this low farm income was much lower compared to now.
Authors of the Barometer attribute the drop in producer sentiment to higher input costs, higher interest rates, and lower commodity prices. They write, “over 40 percent of producers in the October survey view high inputs costs as their top concern followed by rising interest rates which was chosen by 21 percent of respondents. This month the percentage of producers choosing lower output prices as a top concern rose to 13 percent, matching the percentage of producers who chose input availability as a major concern.” The Purdue findings echo the results of a nonscientific survey conducted by Nebraska Farm Bureau at Husker Harvest Days. Farmers also identified input costs a top concern (35 percent). The Purdue survey found producers think now is a bad time to make large investments in either equipment or buildings. However, they expect farmland values will continue to rise in both the short-term and long-term.
No doubt rising input costs are creating management challenges for producers and these challenges are causing producers angst. Given the many factors underlying the cost increases, it’s doubtful costs will come down soon. Farmers fear input costs will remain high, but commodity and livestock prices will fall placing farm and ranch operations in a financial pinch.
Figure 2. Purdue/CME Group Ag Economy Barometer
Source: Purdue University Center for Commercial Agriculture, Producer Survey, October 2022