The Purdue University/CME Group Ag Economy Barometer recorded a slight drop in producer sentiment...
The Purdue University/CME Group Ag Economy Barometer declined in September, down 14 points to a reading of 124. Producers felt less optimistic about both current conditions on their farming operations as well as their expectations for the future.
Interestingly, the Farm Financial Performance Index was unchanged from last month with a reading of 110. However, examining the detailed responses reveals there was a shift among producers with regard to their farms' financial performance. In September, fewer farms said they expected their farm's financial performance to match last year's, while the percentages of producers expecting both worse and better financial performance rose. Although the combined responses left the Farm Financial Performance Index unchanged from a month earlier, the increasing divergence in expectations among respondents from August to September could reflect differences in how individual farms managed risk in a period of rapidly fluctuating commodity prices.
The decline in farmer sentiment spilled over into the Farm Capital Investment Index, which declined 10 points. Fewer farmers this month said they planned to increase their machinery purchases than on the August survey, as just 8% of respondents plan to increase purchases, down from 10% last month. However, in a follow-up question, over half (55%) of respondents reported that their farm machinery purchase plans have been impacted by low farm machinery dealer inventories. And, although plans for machinery purchases fell, producers' plans for new construction rose this month with 13% expecting to increase construction of grain bins and farm buildings, up from 8% in August.
Producer concerns about rising input costs rose sharply this month with over one-third of respondents saying they expect input prices to rise by more than 12% in the coming year, which is six times the average farm input inflation rate of the last decade. Inflation expectations were higher this month across the board with the percentage of respondents expecting input inflation to rise above 12%, doubling since July with an increase to 34%, up from 21% last month, and the percentage expecting input price inflation of 8% or more rising to 48%.
Despite September's decline in farmer sentiment, farmers remain bullish about farmland values. The Short-Term and Long-Term Farmland Values Expectations Indices rose this month, with the long-term index hitting a record high reading of 159, which is 4 points higher than the previous month. The short-term index rose 9 points to 155, which is its third-highest reading since data collection began in 2015.
EDITOR’S TAKE:
It is easy to see why farmer sentiment might decline slightly with the rising expectation that inflation and supply chain constraints could cause some heartburn next spring as planting season approaches. That said, digging into the numbers a little further, reveals that they are still optimistic about a lot of things. The Financial Performance Index was unchanged. The Farm Capital Index declined only slightly, but indications are it was due to lack of equipment inventory so they are now looking at putting up more grain storage and other buildings. And, what about land values – they are very bullish about land and how it will perform over the coming years.
Let’s face it, if you listen to all the talking heads on TV and pundits who are constantly focusing on the negative, then it’s easy to see why anyone, yes even farmers, would be down a little. But look at the fundamentals and it paints a more robust picture. Sure, farmers are concerned about inflation, who isn’t at this point. But will it stifle their appetite for farming, for producing the greatest products on the planet, or their desire to earn their living from the earth – NO WAY! They will still be seeking more land, newer buildings and equipment and, of course, a new truck or two along the way. With AgPack to help them fight against higher operating costs with exclusive rebates and discounts, you can make a strong case that farmers are great prospective customers when you “Look Beyond the Lot”!
