The Decatur Daily Democrat

High cost inflation worries farmers

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The Purdue University/ CME Group Ag Economy Barometer improved in April, up 8 points to a reading of 121; however, it remains 32% below its reading from the same time last year. Producers’ perspectiv­e on current conditions and future expectatio­ns saw an uptick over the past month. The Index of Current Conditions improved 7 points to a reading of 120, and the Index of Future Expectatio­ns improved 9 points to a reading of 122. 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 April 18-22. “Rising prices for major commoditie­s, especially corn and soybeans, appear to be leading the change in producers’ improved financial outlook,” said James Mintert, the barometer’s principal investigat­or and director of Purdue University’s Center for Commercial Agricultur­e. “However, it’s hard to overstate the magnitude of the cost increases producers say they are facing.” The Farm Financial Performanc­e Index improved to a reading of 95, up 8 points from March, and 12 points higher than in January and February. As Mintert suggests, much of this could be attributed to the strengthen­ed commodity prices. For example, Eastern Corn Belt cash prices for corn in mid-April rose more than 10% above their mid-March levels while bids for fall delivery of 2022 crop corn climbed 20% over the same period. Soybean prices rose as well. Nearterm delivery prices for soybeans rose about 7% from mid-March to mid-April, while elevator bids for fall delivery of new crop soybeans climbed 5% over the one-month span. Even as commodity prices have strengthen­ed, producers continue to say higher input costs are the top concern for their farming operation. In April, 42% of producers chose higher input costs as their biggest concern, which was more than twice as many who chose government policies (21%) or lower output prices (19%). In April, 60% of survey respondent­s said they expect input prices to rise by 30% over the next 12 months. This compares to an average of 37% of respondent­s who said they were expecting a cost increase of this magnitude when the same question was posed in the December 2021 through March 2022 surveys.

When asked specifical­ly for their expectatio­ns for 2023 crop input prices compared with prices paid for 2022 crop inputs, 36% of respondent­s said they expect prices to rise 10% or more and 21% of crop producers said input price rises of 20% or more are likely. The war in Ukraine has also added a new level of uncertaint­y for producers. Sixty percent of survey respondent­s said the biggest impact of the war on U.S. agricultur­e will be on input prices.

Crop input challenges extend beyond their inflated cost to their availabili­ty. In April, 34% of producers said they experience­d some difficulty in purchasing inputs for the 2022 crop season, up from 27% in March. In a follow- up question, producers who said they had some difficulty obtaining inputs said that herbicides (30% of respondent­s) were most problemati­c, followed closely by farm machinery parts (27%), fertilizer ( 26%), and insecticid­es (17%). In a related question, 11% of crop producers said they received notice an input supplier would not be able to deliver one or more crop inputs they had already purchased for use in 2022. Of those, herbicide availabili­ty was the top problem reported. Despite an overall improved financial performanc­e outlook, the Farm Capital Investment Index remains at its all-time low. Supply chain problems remain a key reason many producers feel now is not a good time for making large investment­s in their farming operations. For example, just over 40% of producers said their farm machinery purchase plans were impacted by low machinery inventorie­s. The rising cost of all inputs, including machinery, buildings, and grain bins, is likely another factor causing producers to say now is not a good time for large investment­s. Read the full Ag Economy Barometer report. 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.

 ?? (PHOTO COURTESY OF PURDUE/CME GROUP AG ECONOMY BAROMETER/ JAMES MINTERT) ?? Producer sentiment improves with strengthen­ed commodity prices; but high cost inflation worries farmers
(PHOTO COURTESY OF PURDUE/CME GROUP AG ECONOMY BAROMETER/ JAMES MINTERT) Producer sentiment improves with strengthen­ed commodity prices; but high cost inflation worries farmers

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