Farmer Sentiment Steady – With a Few Important Tweaks

Farmer sentiment was unchanged in November as the Purdue University-CME Group Ag Economy Barometer Index came in at a reading of 102, the same as in October. There was, however, a slight shift in underlying sentiment as the Index of Current Conditions declined 3 points while the Index of Future Expectations rose 2 points. The survey was conducted the week following the November U.S. elections but, unlike the period immediately following the two most recent presidential elections, there did not appear to be a noticeable sentiment swing attributable to the election outcomes.

The Farm Financial Performance Index improved modestly, up 5 points from last month. Nearly half (45%) of producers say they expect financial performance this year to match 2021’s. Over two-thirds (68%) of producers say they expect financial performance in 2022 to match or exceed that of the prior year, providing a more positive perspective. Concerns about high input costs continue to weigh on producers’ minds with 42% of respondents in November’s survey citing that as their top concern in the year ahead.

The Farm Capital Investment Index declined 7 points. It’s become increasingly clear that the index is capturing the perception among producers that this is not a good time to make large investments because prices for farm machinery and construction are high. Just 10% of respondents said now is a “good time” to make large investments. Among the nearly 80% of respondents who said now is a “bad time” to make large investments, almost half (47%) chose “rising prices of farm machinery and new construction” as the primary reason for their perspective.

The Long-Term Farmland Value Index held steady with a reading of 144, while the short-term index declined slightly to a reading of 129, 4 points lower than last month, despite the fact that farmland auction results in the Corn Belt continue to set new record highs. There is a noticeable uptick in the percentage of respondents who think farmland values could weaken going forward.

Given the sharp rise in energy prices that’s taken place this year, the survey asked producers how they’ve responded to the increase in their costs. Just over a fourth (27%) of respondents indicated they’ve made changes in their operation because of rising energy prices. When queried further regarding the changes they’ve implemented, responses were quite varied. The top response chosen by one-third of those making changes was reduced tillage, followed by reduced nitrogen rates and/or changed application timing which was chosen by 24% of respondents. Increased use of no-till was chosen by 11% of respondents, while 8% said they reduced crop drying. Respondents who chose the “other” category when responding were asked to specify what change they made. Farmers listed a variety of specific changes with two of the more common ones being the use of solar panels and contracting fuel needs.

EDITOR’S TAKE:

Steady as she goes, with a few minor tweaks, is what one could read into November’s survey results. Overall, farmers remain optimistic about their financial performance this year. They also see land values holding steady or moving up in the near term as farmland auctions continue to set records, but a few more farmers see them declining ever so slightly in the year ahead. Farmers are concerned about rising input costs and availability of inputs. That is also partially the rationale of why they do not see this as a good time to invest in large equipment or construction projects – no availability and higher prices. But the interesting fact is that equipment dealers are selling out of product. Also, farmers are adjusting their operations going forward to account for expected increases for input costs, very much like they did this current year!

All in all, farmers do have concerns, just like anyone else with current economic conditions. The difference, farmers are having one of their best income years – ever! Crops turned out better than expected in most areas; livestock producers are doing well overall; dairy is improving and expected to be strong in 2023; and fruit and vegetable consumption is up along with prices. Things are doing quite well down on the farm – thank you very much! In a different survey, farmers said they may not buy equipment, but they do intend to purchase trucks, and lots of them. So, while the average consumer is holding off on purchasing vehicles, OEMs are ramping up production, used vehicle values are falling and, as a result, inventories are once again building – FARMERS ARE YOUR BEST CUSTOMER PROSPECTS! Better get that inventory listed on AgTruckTrader.com TODAY!