The Purdue University/CME Group Ag Economy Barometer Farmer Sentiment Index rose 6 points in July to a reading of 103. Producers were somewhat more optimistic about both current and future economic conditions on their farms when compared to June. The Index of Current Conditions rose 10 points to a reading of 109 and the Index of Future Expectations rose 4 points to a reading of 100.
Even though there was a slight uptick in sentiment this month, there is still a tremendous amount of uncertainty in the agricultural economy. Key commodity prices, including wheat, corn and soybeans, all weakened during this month and producers remain concerned over rising input prices and input availability. Farm operators in this month's survey voiced concerns about several key issues affecting their operation: higher input prices (42% of respondents), lower crop prices (19% of respondents), rising interest rates (17% of respondents), and availability of inputs (15% of respondents). However, the Farm Financial Performance Index, which is primarily reflective of income expectations for the current year, improved 5 points to a reading of 88 in June. The Farm Capital Investment Index was also up one point in the most recent survey.
Producers' views on farmland values diverged this month as the Short-Term Farmland Value Index declined 9 points to 127, while the Long-Term Index rose 9 points to 150. The Short-Term Index is down 20% from its peak reading in 2021, while the Long-Term Index is only 6% lower than the peak reached last year. Short-term there was a shift away from expectations that farmland values will go higher, with more producers in July expecting values to remain about the same. The long-term change was attributable to more respondents this month expecting values to rise with fewer expecting a decline over the next five years. The short-run and long-term farmland indices don't always move in tandem, but the magnitude of this month's divergence between the short and long-term indices is unusual. Producers who expect values to rise over the upcoming 5 years continue to say that non-farmer investor demand and inflation are the two primary reasons they expect values to rise. Forty-two percent of corn and soybean producers in the June survey said they expect cash rental rates to rise in 2023, down from 52% of respondents who said they were looking for rates to rise in the July survey.
Editor's Take:
The current Ag Economy Barometer report is somewhat surprising with several key indices rising concurrently. This is better than expected given the more pessimistic views expressed in the prior two surveys. It is good news that farmer sentiment is once again edging higher, even if only slightly. The report tells us that farmers see things either improving or at least stabilizing over the next month or two. They expect land prices to also be relatively steady over the next year and beyond. Future reports will depend heavily on the prospects for controlling input costs going into the fall and next year and on crop yields this fall. Assuming commodity prices continue in the range of the past month and yields are near normal, farmers will be in a very good position to purchase those trucks you have on the lot. And, don't forget to let them know about the CAD AgPack National Sweepstakes contest - a great way to entice them into your store!
