The Purdue University/CME Group Ag Economy Barometer “farmer sentiment” index declined 5 points to a reading of 112 in September. The decline in farmer sentiment was primarily the result of producers’ weakened perception of current conditions, as the Current Conditions Index declined 9 points to 109.
The Index of Future Expectations also weakened slightly, declining 3 points from a month earlier to a reading of 113. The Ag Economy Barometer is calculated each month from 400 U.S. agricultural producers’ responses to a telephone survey. This most recent survey was conducted Sept. 19-23.
“Concerns about input costs and, in some cases, availability are key factors behind the relative weakness in this month’s farmer sentiment,” said James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “However, a growing number of producers are also concerned about the impact of rising interest rates on their farm operations.”
Higher input costs remain the number one concern among survey respondents. In September, 44 percent of respondents chose “higher input costs” as their number one concern, while 23 percent chose “rising interest rates,” and 14 percent chose “availability of inputs.”
When asked to look ahead to 2023, the largest share (38 percent) of producers expect input prices to rise from one percent to nine percent compared to 2022 prices. Meanwhile, nearly a fourth (24 percent) of producers expect input prices to rise from 10 percent to 19 percent, and nine percent of survey respondents said they expect an input price rise of 20 percent or more.
The Farm Capital Investment Index declined to a record low of 31 in September, as producers continue to indicate now is not a “good time” to make large investments in their farming operations. To understand why they felt that way, a follow-up question was posed to farmers who reported now being a “bad time” to make large investments.
For the third month in a row, producers overwhelmingly (46 percent) said it was due to increasing prices for farm machinery and new construction; however, 21 percent indicated that “rising interest rates” were a primary reason, up from 14 percent who cited interest rates in August.
Despite that negative perspective, fewer producers plan to reduce their farm machinery purchases. Since peaking in March 2022 at 62 percent, the share of producers who plan to reduce their machinery purchases compared to a year earlier has been declining, dipping to 47 percent in September. Their plans for farm building purchases tell a similar story. Since the March 2022 high of 68 percent, producers who planned to reduce their building and grain bin purchases have fallen to 56 percent in September.
Producers’ perspective on farmland values continues to soften. This month, the Short-Term Farmland Value Expectations Index fell 5 points to 123, and the Long-Term Farmland Value Expectations Index fell 7 points to 139. Compared to a year ago, the short-term index is down 21 percent, while the long-term index has fallen 12 percent over the same time frame. In a follow-up question posed to respondents who expect farmland values to rise over the next 5 years, nonfarm investor demand (60 percent) remains their primary reason for the rise.
This month’s survey included a series of questions to understand producers’ cover crop usage. Nearly six out of 10 (57 percent) respondents said they currently plant cover crops on a portion of their farmland, while approximately one in four producers said they have never planted a cover crop.
Most producers who report planting cover crops say they only plant them on a portion of their farmland, with half indicating they plant on 25 percent or less of their acreage. However, some farms report more intensive use of cover crops as nearly a fourth of respondents said they plant cover crops on over 50 percent of their farms’ acreage.
A large share (40 percent) of producers who reported planting cover crops this month said they have been planting cover crops for five years or less, while 28 percent of respondents said they have been planting cover crops for more than 10 years. The reasons for planting cover crops vary, with 37 percent citing “improve soil health” and 33 percent citing “improve erosion control” as the primary motivators. Just five percent of cover crop users indicated “carbon sequestration” as a motivation for planting cover crops.
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. 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 affects farmers.
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 at Purdue Univerity 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.
Purdue University Center for Commercial Agriculture: http://purdue.edu/commercialag
CME Group: http://www.cmegroup.com/