Nov 1, 2022

Purdue ag economy barometer falls

The Purdue University/CME Group Ag Economy Barometer declined again, dropping as a result of weakened farmer sentiment. The measurement fell 10 points in October to a reading of 102.

Both barometer’s sub-indices also declined. The Current Conditions Index dipped 8 points to a reading of 101, while the Future Expectations Index dropped 11 points to 102. The barometer is calculated each month from 400 U.S. agricultural producers’ responses to a telephone survey. This month’s survey was conducted Oct. 10-14.

“Concern over rising interest rates grew once again in October and is adding to the unease among producers who are worried about its impact on their farm operations,” James Mintert, the barometer’s principal investigator and director of Purdue’s Center for Commercial Agriculture, said in a news release. “Additionally, challenging shipping conditions throughout the Mississippi River valley have hampered exports recently, and the corresponding widespread weakening of corn and soybean basis levels could be contributing to heightened unease about financial performance.”

Producer concern about the financial performance of their farms was one of the primary drivers of weakening sentiment in October. The Farm Financial Performance Index fell 13 points to 86 and was a distillation of producers’ concerns about high input costs combined with weaker commodity prices.

Looking ahead to next year, more than 40 percent of producers viewed high input costs as their top concern, followed by 21% who chose rising interest rates. 13% stated lower output prices while 13% selected input availability.

After dipping to a new record low last month, the Farm Capital Investment Index improved 7 points to a reading of 38. Producers who viewed this as a bad time for large investments revealed that increasing prices for farm machinery and new construction (40 percent of respondents) was the primary reason for their negative outlook, followed by rising interest rates (20%) and uncertainty about farm profitability (17%).

Producers’ expectations for short- and long-term farmland values rose. The Short-Term Farmland Value Expectation Index rose 10 points to a reading of 133, while the Long-Term Farmland Value Index increased 5 points to 144. Strength in both indices follows reports from farmland auctions around the Corn Belt that land values are setting new record highs again this fall. Even with this month’s rise, both indices remain weaker than a year earlier. The short-term index this month was 15% lower and the long-term index was 11% lower than in October 2021.

Farm policy discussions are underway as Congress prepares for debate on a new Farm Bill in 2023. As a result, several farm policy related questions were included in this month’s barometer survey. Crop producers were asked which two policies or programs would be most important to their farms in the next five years. More than one-third (36%) of crop producers chose interest rate policy as the most important policy issue for their farming operation, followed by the crop insurance program (27%), environmental policy (16%), conservation policy (11%) and climate policy (10%).

When asked how effective the current ARC-County and Price Loss Coverage (PLC) programs are at providing a financial safety net, 72% rated the two programs as either “somewhat effective” (61%) or “very effective” (11%). When the same question was posed relative to crop insurance, 84% of respondents rated it as either “somewhat effective” (56%) or “very effective” (28%).

Read the full Ag Economy Barometer report here. The site also offers additional resources – such as past reports, charts and survey methodology – and a form to sign up for monthly barometer email updates and webinars.

Each month, the Purdue Center for Commercial Agriculture provides a short video analysis of the barometer results, available, and for even more information, check out the Purdue Commercial AgCast podcast. It includes a detailed breakdown of each month’s barometer, in addition to a discussion of recent agricultural news that impacts farmers. Available here.

The Ag Economy Barometer, Index of Current Conditions and Index of Future Expectations are available on the Bloomberg Terminal under the following ticker symbols: AGECBARO, AGECCURC and AGECFTEX. 

The Center for Commercial Agriculture was founded in 2011 to provide professional development and educational programs for farmers. Housed within Purdue University’s Department of Agricultural Economics, the center’s faculty and staff develop and execute research and educational programs that address the different needs of managing in today’s business environment.

– Kami Goodwin, Purdue University