The Purdue University/CME Group Ag Economy Barometer Producer Sentiment Index declined 19 points to a reading of 104 in May. The Index of Future Expectations was down 22 points to a reading of 98 in May, while the Index of Current Conditions was down 13 points to a reading of 116. These indices were likely triggered by weakened crop prices. In mid-May, 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%), all compared to bids available in mid-April for that month’s barometer survey.
Producers are feeling the squeeze from weakened crop prices which have reduced their expectations for strong financial performance in the coming year.
The Farm Financial Performance Index reflected May’s weaker sentiment reading, dropping 17 points. Crop price weakness, uncertainty related to U.S. bank failures, and rising interest rates were likely key factors behind the decline. A total of 38% of respondents said they expect weaker financial performance for their farm this year, compared to just 23% who felt that way in April. Higher input cost remains the top concern among producers in the year ahead; however, concerns over the risk of lower crop and/or livestock prices are growing. A total of 26% of respondents chose lower output prices as their top concern compared with just 8% of respondents who felt that way in September. Meanwhile, nearly three-fifths (59%) of producers said 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 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.
Producers’ expectations for short-term farmland values fell 13 points to 110 in May. In contrast, producers remain more optimistic about the longer-term outlook for farmland values as the Long-Term Farmland Value Expectations Index rose 3 points to a reading of 145.
With farm bill discussions ongoing, the survey asked respondents what title in the upcoming legislation will be most important to their farming operation. Nearly half (48%) of producers said the Crop Insurance Title will be the most important aspect of a new farm bill to their operations.
EDITOR’S TAKE:
The Purdue Ag Barometer simply measures how farmers/ranchers are feeling about various aspects of their operation at a given point in time. There is a huge amount of variability in the indices over time. Crop prices happened to be in a bit of a lull when the May survey was conducted. Plus, farmers are seeing the same news as everyone else suggesting the Federal Reserve may not be done raising interest rates. Add to that a rather mixed spring planting season and farmer/rancher sentiment was almost surely going to dip. But now I would bet a chocolate chip cookie that when June’s report arrives, we will see an uptick in farmer sentiment. Why? Commodity prices have bounced back. The Fed is not as likely to raise interest rates at their next meeting. And very importantly – rain is expected in the corn belt soon. If all this happens, or even most of it, farmers/ranchers will be in a better mood. So, get your inventory on AgTruckTrader.com – now! Promote the heck out of AgPack® with over $30,000 in exclusive rebates and discounts available when they purchase or lease a qualified truck from you, our CAD members!
