The Pilot News

Farmer sentiment dips in February


WEST LAFAYETTE, Ind. and CHICAGO — The Purdue University/ CME Group Ag Economy Barometer dipped 5 points to a reading of 125 in February. Farmers’ perspectiv­es regarding both current conditions on their farms and expectatio­ns for the future also weakened. The Index of Current Conditions fell 2 points to 134 and the Index of Future Expectatio­ns declined 6 points to 121. 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 February 13-17.

“Increased concern over the risk of falling output prices, rising interest rates and uncertaint­y over the future growth of U.S. agricultur­al exports is weighing on producers’ minds,” said James Mintert, the barometer’s principal investigat­or and director of Purdue’s Center for Commercial Agricultur­e.

Producers’ expectatio­ns for their farms’ financial performanc­e in 2023 compared to 2022 weakened in February. The Farm Financial Performanc­e Index declined 7 points to a reading of 86. Farmers continue to point to concerns about higher input costs (38% of respondent­s), rising interest rates (24% of respondent­s) and lower output prices (18% of respondent­s) as their biggest concern for the year ahead.

Agricultur­al exports have been a key source of growth for U.S. agricultur­e for decades. Beginning in 2019, the Ag Economy Barometer survey routinely included a question asking producers about their expectatio­ns for agricultur­al exports in the upcoming five years. Since peaking in 2020, when just over 70% of respondent­s said they expected exports to increase in the upcoming five years, the percentage of farmers looking for exports to grow over time has drifted lower. In February just 33% of survey respondent­s said they expect exports to increase, which leads Mintert to suggest that a lack of confidence in future agricultur­al export growth is contributi­ng to weakened sentiment among producers.

Despite strong farm income, the February reading of the Farm Capital Investment Index changed little, rising 1 point to a reading of 43. This month 72% of producers said it is a “bad time” to make large investment­s in their farming operation, while just 15% reported it is a “good time” to make such investment­s. The disparity between producers’ responses to the question and actual farm equipment sales continues to be focused on costs. Of those who said now is a “bad time” to make large investment­s, 45% of respondent­s said it was because of an increase in prices for farm machinery and new constructi­on, while 27% of respondent­s said it was because of “rising interest rates.”

Producers’ expectatio­ns for short-term and long-term farmland values fell in February but remain positive. The Short-term Farmland Value Index declined 1 point to 119 while the Long-term Farmland Value Index dropped 5 points to 137. Although both indices remain above 100, indicating a positive outlook on farmland values, the percentage of producers who said they expect values to decline over the next five years reached 19% this month, the highest percentage since this question was first routinely included in barometer surveys in 2019. Still, over half (56%) of respondent­s expect values five years from now to be higher than today. This month just 33% of respondent­s said they expect values to rise in the next 12 months, while 14% said they expect values to weaken.

Each February, the barometer survey includes a question focused on farm growth, asking respondent­s about the annual growth rate they expect for their farm over the next five years. This year 49% of respondent­s said their farm either had “No plans to grow” (33%) or “Plan to exit or retire” (16%). Of those respondent­s who expect their farms to grow, 19% expect it to grow by “Less than 5% annually,” and 22% said they expect it to grow by “5% to 10% annually.”

Leasing of farmland for solar energy production is a hot topic in many parts of the U.S. Since the spring of 2021, the barometer survey has periodical­ly included questions about the discussion­s farmers are having with solar companies. In both the January and February 2023 surveys, just over 10% of respondent­s said they had discussed a solar lease with a company. Of those who indicated they had been in discussion­s, nearly half (48%) of respondent­s said they were offered a lease rate above $1,000 per acre, up from a low of 27% and a high of 35% in previous surveys. This month’s survey findings suggest companies have started to increase lease rates they are willing to pay.

Read the full Ag Economy Barometer report at­r. 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 at https://purdue. ag/barometerv­ideo. For more informatio­n, check out the “Purdue Commercial Agcast” podcast available at agcast, which includes a detailed breakdown of each month’s barometer and 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.

About the Purdue University Center for Commercial Agricultur­e

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.

About CME Group

As the world’s leading and most diverse derivative­s marketplac­e, CME Group (www.cmegroup. com) enables clients to trade futures, options, cash and OTC markets, optimize portfolios, and analyze data – empowering market participan­ts worldwide to efficientl­y manage risk and capture opportunit­ies. CME

Group exchanges offer the widest range of global benchmark products across all major asset classes based on interest rates, equity indexes, foreign exchange, energy, agricultur­al products and metals. The company offers futures and options on futures trading through the CME Globex® platform, fixed income trading via Brokertec and foreign exchange trading on the EBS platform. In addition, it operates one of the world’s leading central counterpar­ty clearing providers, CME Clearing. With a range of pre- and post-trade products and services underpinni­ng the entire lifecycle of a trade, CME Group also offers optimizati­on and reconcilia­tion services through Trioptima, and trade processing services through Traiana.

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