Following a sharp increase to close out 2022, the Purdue University/CME Group Ag Economy Barometer had a modest increase in January, up 4 points to a reading of 130. The rise in sentiment was primarily attributable to better expectations for the future as the Future Expectations Index improved by 5 points to 127. The Index of Current Conditions rose only 1 point to a reading of 136. Although producers were a bit more optimistic about the future, they again reported expectations for tighter margins in 2023 than in 2022. The Farm Capital Investment Index was up 2 points this month. Interest rates are becoming a bigger concern for farmers.
Each January, starting in 2020, the survey has included a question asking respondents if they expect to have a larger operating loan compared to the previous year and, if so, the reason for the larger loan. In January, 22% of respondents said they expect to have a larger 2023 farm operating loan compared to 2022, down from 27% last year. Among respondents who expect to have a larger operating loan, only 5% said it was due to carrying over unpaid operating debt. The percentage of respondents who attribute their need for a larger loan to unpaid operating debt has fallen sharply since the question was first posed in January 2020. At that time, just over one-third of producers anticipated needing a larger loan because of unpaid operating debt. The sharp decline in the percentage of producers expecting to carry over unpaid operating debt supports the idea that the vast majority of producers are entering 2023 in a strong financial position despite the rise in production costs.
EDITOR’S TAKE:
The language in bold at the end of this report really says it all. Farmers and ranchers are in one of the strongest financial positions in modern history. Sure, they are concerned about rising input costs squeezing their margins – what business isn’t these days. But the offset to that is record net farm income and farmland values that shore up the balance sheet of any farmland owner. Farmers/ranchers should be at the top of your customer prospect list for the reasons provided in this report. They have money and great credit. The outlook for this year is very optimistic, and remember they purchase or lease a lot of trucks on an ongoing basis. If you have been hesitating to put your inventory on AgTruckTrader.com, it’s time to ask yourself why. AgTruckTrader.com is the only online truck sales site that specifically targets farmers and ranchers. The other big benefit – IT’S FREE FOR CAD MEMBERS!
