Farmers Growing More Optimistic About the Future

July 5, 2023 by Dan McCue
Farmers Growing More Optimistic About the Future
Sen. Chuck Grassley, R-Iowa, proudly showed off his corn via Twitter over the holiday weekend, observing, "Looks like we made 'shoulder high by Fourth of July.' Pretty good considering drought. Seed genetics deserves credit."

WEST LAFAYETTE, Ind. — Farmers are feeling more optimistic about the financial future of their own farms and their industry as a whole, according to the latest Ag Economy Barometer compiled by Purdue University and CME Group.

The monthly measure of farmer sentiment is calculated each month from 400 U.S. agricultural producers’ responses to a telephone survey.

In the latest survey by researchers at Purdue and CME, conducted between June 12 and 16, that sentiment surged 17 points, to a rosy reading of 121.

That was due to an even more marked increase in the survey’s “Index of Future Expectations” component, which jumped 25 points to a reading of 123.

Meanwhile, the other component of the overall survey, called the “Index of Current Conditions” remained flat with a reading of 116 in June.

James Mintert and Michael Langemeier, who analyzed the survey results for the Purdue Center for Commercial Agriculture, said the contrast in producers’ perspectives on current conditions vs. future expectations became clear when they examined responses to individual questions in the latest survey. 

When asked to compare their farm operation’s situation today with a year ago, 40% of respondents said their operation was “worse off” financially than a year earlier vs. 37% who felt that way in May while just 15% chose “better off” vs. 17% who made that choice in May. 

But when asked to look ahead one year, respondents’ attitudes changed. In June, 20% of respondents said they expected their financial condition to improve over the next year, compared to just 13% who said that in May. 

Meanwhile 32% expect their farm’s financial situation to decline over the upcoming year, compared to 44% who responded that way in May. 

Producers’ improved perspective on the future was not focused solely on their own farms, but extended to all of U.S. agriculture, Mintert and Langemeier found.

The percentage of producers expecting good times for U.S. agriculture in the upcoming five years rose eight points to 33% while the percentage expecting bad times fell three points to 41%.

A more optimistic view of the future was also reflected in yet another component of the survey, the “Farm Financial Performance Index” which rose 10 points in June to a reading of 86. 

The rally in corn and soybean prices for harvest time delivery that got underway in late May and extended into June was likely a contributing factor to the financial performance index rise, Mintert and Langemeier said. 

Although respondents were more optimistic about both crop and livestock returns this month, expectations for “good times” for livestock producers increased more than for crop producers. 

For example, Mintert and Langemeier write, 50% of respondents said they expect “good times” for livestock producers in the next five years, up from 37% who felt that way in May which was nearly double the increase in the percentage of respondents expecting “good times” for crop producers. 

Optimism about positive returns for cattle producers, especially cow-calf operations, was likely a key factor behind the positive livestock outlook.

The “Farm Capital Investment Index” rose five points in June to a reading of 42, which put the index back into the range it fluctuated within from January through April. 

Nearly three-fourths of respondents said they view this as a bad time to make large investments in their farm operation while just 16% of producers this month said it’s a good time to make investments. 

The rise in interest rates shares responsibility with the rise in prices for equipment and new construction were the two key reasons cited by respondents for viewing this as a bad time for investments.

This month 37% of respondents cited the increase in prices while 35% chose rising interest rates as the primary reason it’s a bad time to invest.

At the same time, Mintert and Langemeier said, producers became more optimistic about farmland values in June as both the short- and long-run farmland value indices rose. 

The short-term index, which asks producers about their outlook over the next 12 months, jumped 16 points to a reading of 126, its highest reading since last November. 

Meanwhile, the long-term index, which asks producers to look ahead five years, rose a more modest six points to a reading of 151, pushing that index up to its highest level since February 2022. 

The more positive outlook for farmland values was consistent with the improved longer-term outlook for U.S. agriculture that was evident in this month’s survey. 

Additionally, 43% of producers in this month’s survey think interest rates have peaked and nearly a quarter of survey respondents expect to see lower interest rates within the next year. 

This month’s survey also included a question targeted toward corn and soybean producers regarding their expectations for farmland cash rental rates in 2024. 

Twenty-five percent of the corn/soybean producers in this month’s survey said they expect 2024 cash rental rates in their area to rise above 2023’s rates. 

In a follow-up question only posed to respondents who said they expect rental rates to rise, nearly one-third (32%) said they expect rental rates in 2024 to increase up to 5%, while nearly half (49%) look for rates to rise from 5% up to 10%, both compared to 2023.

A number of questions posed in the June survey were intended to allow researchers to learn more about what farmers and ranchers are thinking in regard to the new farm bill, which is currently the subject of negotiations on Capitol Hill.

Mintert and Langemeier found that crop insurance titles and commodity titles remained the most important components of the farm bill to corn and soybean producers.

In both May and June, the survey included questions asking corn/soybean producers if they expect Congress to raise the PLC reference prices for corn and soybeans. 

This month half of those respondents said they look for Congress to raise both the corn and soybean reference prices. 

Finally, survey respondents were asked about the recent Supreme Court ruling upholding California’s Proposition 12.

As previously reported in The Well News, in May, the justices upheld a California ballot initiative that barred the sale of pork produced in other states unless the sow was housed in humane conditions allowing for free movement.

During the survey, participants were asked whether they believe Congress will overturn Proposition 12 as part of a new farm bill. 

Producers were split in their response to this question. Just over one-third (36%) of respondents said it’s either somewhat or very unlikely that Congress will try and overturn Proposition 12 in a new farm bill, while one-fourth (25%) of farmers in the June survey said it’s at least somewhat likely Congress will take on Proposition 12 in new farm bill legislation.

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

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