Farmer sentiment was slightly weaker in March as the Purdue University/CME Group Ag Economy Barometer fell 8 points to a reading of 117. Both of the barometer’s sub-indices declined 8 points in March, leaving the Current Conditions Index at 126 and the Future Expectations Index at 113. Keep in mind, however, that the most recent survey coincided with the demise of Silicon Valley Bank and Signature Bank.
Rising interest rates and slightly lower prices for key commodities were major factors behind this month’s lower sentiment reading. Although the March survey did not include any questions directly related to the bank closures, responding to an open-ended comment question posed at the end of each survey, multiple respondents voiced concerns about the banking sector’s problems and its potential to hurt the economy. Issues surrounding weakness in the banking sector also likely weighed on producer sentiment this month.
The Farm Financial Performance Index remained unchanged from February at a reading of 86. Notably, concern about higher input cost has been falling since last summer’s peak when 53% of respondents cited it as their number one concern for the year ahead. At the same time, the percentage of producers pointing to interest rates as a top concern has been increasing, up 11 points from last summer.
While there was little change in the Farm Capital Investment Index, down one point in March, there was a change in how respondents perceived whether now was a good or bad time for large investments. Since last July, respondents who felt now is a bad time to make large investments have consistently chosen “increased prices for farm machinery and new construction” as the key reason. That changed in March as more felt that rising interest rates was the key reason.
Producers’ outlook for farmland values in the short-term and long-term were mixed in March. The Short-Term Farmland Value Index declined 6, while the Long-Term Farmland Value Index rose 5 points to 142.
When asked to look ahead 5 years, nearly half (46%) of respondents said they expected the renewable diesel industry to be larger than it is today. In a follow-up question, respondents were asked what impact they expect the renewable diesel industry to have on soybean prices over the upcoming 5 years, with 39% expecting a price increase of up to $0.50 per bushel, 28% expecting a boost in price between $0.50 up to $1.00 per bushel, and 21% expecting soybean prices to rise by $1.00 or more per bushel.
EDITOR’S TAKE:
It is understandable that farmers/ranchers would be concerned about the status of the U.S. banking system and interest rates. Almost every American was shaken by the news of two large bank failures and what that could do to financial markets. Add to that the Federal Reserve hiking interest rates to levels not seen in decades and, yes, farmers and all of us are concerned. That said, there were several bright spots in the latest Purdue Ag Barometer Report. Farmers/ranchers are seeing input cost decline. They are optimistic about expanding bio fuel markets. And, they expect land prices to be solid in the long-term. Farmers/ranchers are generally optimistic. They look forward to re-connecting with nature in the spring and harvesting their bounty over time. You, by being a CAD member, are connected to the farm/ranch community. Use it to your advantage by marketing to this loyal customer base. Let them see and experience who you are and what you stand for – Agriculture!
