Farmer Sentiment Slightly Lower – Acreage Shifts Contemplated

Farmer sentiment remained weak in June as the Purdue University-CME Group Ag Economy Barometer fell slightly to a reading of 97, two points below its May reading. During June, farmers were a bit more optimistic about current conditions as the Current Conditions Index of 99 was 5 points higher than in May. However, the small improvement in current conditions was more than offset by weaker expectations for the future, as the Index of Future Expectations declined 5 points to a reading of 96. Rising costs and uncertainty about the future continue to be a drag on farmer sentiment.

Although producers said they expect their farm’s financial condition to be worse in June 2023 compared to June 2022, the Farm Financial Performance Index actually improved slightly to a reading of 83 compared to 81 in May. Responses received to the Farm Financial Performance Index question are primarily reflective of income expectations for 2022. On the other hand, the question that asks them about financial conditions a year from now brings into play concerns about the ongoing escalation in production cost.

The Farm Capital Investment Index remained at 35 for the second month in a row. Producers continue to view this as not being a good time to make large investments in their farm operation. One reason producers say it’s not a good time to make large investments is the problems they’ve experienced in the supply chain. For the second month in a row, fifty percent of producers in this month’s survey said that tight machinery inventories impacted their farm machinery purchase plans. 

Both the Short-Term and Long-Term Farmland Value Expectations Indices declined in June. Taken in context over the life of the barometer survey, both indices remain at strong levels, but farmers are noticeably less confident that farmland values will continue to rise from current levels. Producers who expect farmland values to rise over the next five years continue to point to non-farm investor demand and inflation expectations as the top two reasons for their optimism.

Given ongoing concerns about world food grain supplies, this month’s survey again included several questions focused on crop producers’ production plans for the upcoming year. Among the farmers in our survey who planted winter wheat in fall 2021, one out of four (24%) said they plan to increase their winter wheat acreage this fall. Among crop producers who did not plant winter wheat last fall, 14% responded that they intend to plant some winter wheat this fall. Responses to both questions point to a rise in wheat acreage in response to strong wheat prices. Responding to a somewhat broader question about their cropping plans for the upcoming year, one out of five (19%) of crop producers said they intend to change their crop mix in the upcoming year in response to rising input costs. Among those who plan to shift their crop mix, almost half of respondents (46%) said the biggest change will be to devote a higher percentage of their acreage to soybeans. Twenty-six percent of those planning a crop mix change said the biggest change would be to devote more of their farm to wheat production, while 21% of respondents said they would shift towards planting more corn.

Editor’s Take:

Of course farmers are concerned about rising input costs. These days who isn’t concerned about the impact inflation is having on the economy and our lives. This survey measures sentiment or impressions concerning various issues of farm management and profitability. Farmer sentiment, similar to any business, will reflect the general condition of the economy. Rising prices for fuel, fertilizer, crop protection products, equipment, buildings, supply chain issues, etc., are bound to make a difference in how they reflect on business going forward. Such is the case here. That said, they still have money, still paying off debts, still purchasing land and looking for things like a new truck or two. This is a perfect opportunity to put your inventory on AgTruckTrader.com and also shout the value of AgPack in helping them fight back against rising input and operating costs. You have the tools, so use them to your advantage. Great CAD members get great results by using the tools we provide.