Survey Finds Farmer Sentiment Rising on Strengthened Financial Position

January 4, 2022 by Dan McCue
Survey Finds Farmer Sentiment Rising on Strengthened Financial Position
(Photo by Federico Respini via Unsplash)

WEST LAFAYETTE, Ind. — A monthly measure of farmer sentiment rose last month, something it had only managed to do once before in all of 2021, according to Purdue University’s Center for Commercial Agriculture and the CME Group.

The two entities said Tuesday their Ag Economy Barometer was up 9 points to a reading of 125 in December.

December’s Index of Current Conditions rose 18 points to a reading of 146, while the Index of Future Expectations rose 4 points to a reading of 114. 

“Excellent crop yields this fall, combined with strong crop prices, provided many producers with their most positive cash flow in recent years. That combination helps explain the year-end rise in the financial index as well as the barometer overall,” said James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.

December marked the second month in a row that farmers reported a stronger financial performance for their farms. The Farm Financial Performance Index rose 7 points to 113 in December which is the index’s highest reading since May and is 21% higher than readings obtained just before the pandemic’s onset, the researchers said.

Even as supply chain issues continue to hamper producers’ capital investment plans, the Farm Capital Investment Index rose in December, up 10 points to a reading of 49. This marks the most positive value for the investment index since August, but remains 47% lower than in December. 

The researchers said the improvement in the Investment Index was primarily the result of fewer producers in December saying they planned to reduce their machinery purchases in the upcoming year, responding instead that they plan to hold their investments steady with the prior year. 

Last month, 45% of survey participants said that low farm machinery inventory levels impacted their farm machinery purchase plans.

Of course, farmers still had a bevy of concerns that are weighing on their minds; chief among them rising production costs and the availability of production input.

When asked what their biggest concerns are for their farming operation in the upcoming year, 47% of respondents selected higher input cost from a list that included lower crop and/or livestock prices, environmental policy, farm policy, climate policy and COVID’s impact. 

Over half (57%) of producers said they expect farm input prices in the upcoming year to rise by more than 20% compared with a year earlier, and nearly four out of 10 respondents said they expect input prices to rise by more than 30%.

This December survey also asked crop producers if they have had any difficulty purchasing crop inputs from their suppliers for the 2022 crop season. 

Nearly four out of 10 (39%) of respondents said they’ve experienced some difficulties. In a follow-up question, producers who indicated that they were experiencing difficulties in making purchases were asked which crop inputs they’ve had trouble purchasing. 

Responses were varied, which could be an indication of problems across the supply chain and included difficulties in purchasing fertilizer (31%), herbicides (28%), farm machinery parts (24%) and insecticides (17%).

Both the short-term and long-term farmland value indices declined slightly in December. The Short-Term Farmland Value Expectation Index declined 4 points to 153, while the long-term index declined 6 points to 152. 

Although both indices declined in December, they remain near their all-time highs. Producers who indicated they expect farmland values to rise over the next five years were asked a follow-up question asking them about the main reason they expect farmland values to rise. 

Producers indicated nonfarm investor demand (61%), low interest rates (13%), and strong farm cash flows (11%) were their primary reasons for expecting values to rise.

President Joe Biden met Monday with farmers, ranchers and independent processors to announce the administration will allocate $1 billion to expand independent beef, pork and chicken processing in an effort to increase competition and reduce costs for consumers.

The White House said the plan also is aimed at boosting profits for livestock producers, who have complained they are getting low prices while consumer costs have soared, tapping the $1.9 trillion American Rescue Act to fund the effort.

The Ag Economy Barometer is calculated each month from 400 U.S. agricultural producers’ responses to a telephone survey. This month’s survey was conducted Dec. 8-14.

Read the full Ag Economy Barometer report here.

Dan can be reached at [email protected] and at https://twitter.com/DanMcCue.

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