Farmer Sentiment Even Higher in August Survey

The Purdue University/CME Group Ag Economy Barometer farmer sentiment index rose 14 points in August to a reading of 117. The rise in the overall measure of agricultural producer sentiment was driven by increases in both the Index of Current Conditions, which rose 9 points to 118, and the Index of Future Expectations, which climbed 16 points to 116. Producers in the August survey were less worried about their farm's financial situation than in July, although they remain concerned about a possible cost/price squeeze.

More producers indicated they're expecting better financial performance for their farms in 2022 and the upcoming year, as the Farm Financial Performance Index improved 11 points. Both corn and soybean prices rallied from their July lows into mid-August which, along with expectations for good yields, helped explain some of the improvement in financial performance expectations.

At the same time, there continues to be a tremendous amount of uncertainty among producers regarding the future cost of items they purchase both for their farms and family usage. When asked about their biggest concerns for the next year, over half (53%) of respondents chose higher input costs, followed by rising interest rates (14%), input availability (12%), and lower output prices (11%). On the farm level, there is a big disparity in opinions among farmers regarding whether or not input prices will retreat or escalate in 2023. Approximately four out of ten producers expect crop input prices in 2023 to be either unchanged or possibly decline by as much as 10%, compared to 2022. On the other hand, just over half of all producers expect input prices to rise from 1 to 20%. At the consumer level, nearly half (48%) of respondents said they expect the rate of inflation for consumer items during the next 12 months to be in the 0 to 6% range. Compared to previous barometer surveys, more producers said they expect inflation to be in the upper end of that range than those who felt that way earlier this year.

Expectations for both short- and long-term farmland values were nearly unchanged over the previous month. Among survey respondents who say they expect farmland values to rise over the next five years, well over half (57%) chose non-farm investor demand as the main reason they expect values to rise.

The August survey showed a slight rise in the number of farmers in talks with companies offering payments for sequestering carbon. However, just 1 percent of respondents said they’ve signed a carbon contract, and most of those who chose not to sign said it was because the payment rates being offered are still too low.

Editor’s Take:

Not a great surprise that farmers are in an even better mood in August versus July. They now have a much better idea of what crop yields are likely to be and which way prices are trending. That combination of knowledge, in turn, allows them to better predict what kind of year they might have financially. It obviously is looking pretty good based on the Purdue survey results!

The survey also provides a glimpse of another source of income for farmers/ranchers – carbon credits. By managing soil health to capture more carbon, farmers can sell those credits to exchanges that offer them to companies wishing to cover some of their carbon emissions with the credits. As a result, farmers are paid a fixed amount per acre for their efforts. But according to the this survey, they are holding out for higher payments.

All-in-all, it is a very positive outlook. Farmers/ranchers will have a lot of cash on hand at the end of the year. And despite all the concerns about input costs and tighter margins in 2023, they will have a huge tax liability unless they can invest some of their profit in items used on the farm/ranch, such as pickups. So you can help them lower their tax burden by leasing or selling them a new or qualified pre-owned vehicle and simultaneously lower their concerns over input cost. By providing up to $30,000 in exclusive rebates and discounts via AgPack, you can make a sale and protect your margins, which allows you to beat out the competition. It truly is a win-win!