Farmer optimism took a hit in May, according to the latest Ag Economy Barometer from Purdue University and CME group, released this week.
Farmer sentiment plummeted to a reading of just 99, the weakest farmer sentiment reading in the past two years – since April 2020.
The May report marks only the ninth time since 2015 that the measure of farmer sentiment has fallen below 100 points, according to Jim Mintert, director, Center for Commercial Agriculture, Purdue University.
Conditions have changed little in the marketplace between in the past two months, so what has caused farmer opinion to sour?
“The dramatic rise in production costs has got everybody upset,” Mintert said during an Agri-Talk segment on Wednesday. “The uncertainty it’s creating is really kind of creating havoc in people’s minds, and I think they’re expressing it in their sentiment.”
Despite fairly strong commodity prices at the moment, Mintert says he believes farmers are already concerned about what this year’s harvest and the next two seasons might hold.
“When input costs go up, they tend to be sticky, and the downside is commodity prices can be volatile. Farmers are wondering what commodities will be worth this fall, in the fall of 2023 and even in 2024,” Mintert says.
As part of that, Mintert says farmers are likely concerned about what they can expect to pay for diesel, which is hovering around $6 a gallon this week.
“A lot of producers locked in their fuel prices over the course of the winter, at substantially lower levels than what we’re looking at today. But now they’ve gone through planting season, those tanks are largely empty and need to be refilled over the course of the summer in preparation for harvest. So I think that just really personifies the anxiety,” Mintert told Davis Michaelsen, who was filling in for AgriTalk Host Chip Flory.
Mintert says the one silver lining he currently sees is that fewer farmers had difficulty obtaining inputs for spring planting than he and other ag economists had anticipated.
In the May survey, one out of five (19%) producers said they had difficulty purchasing inputs for the 2022 crop season, down from an average of 32% who reported difficulties in the December through April surveys. Among those producers who still reported difficulties, problems were apparent in all major input categories including herbicides, farm machinery parts, fertilizer and insecticides.
“What happened was a lot of people weren’t able to get their first choice on inputs. If they had a certain herbicide program in mind, they probably had to modify it somewhat because the supply wasn’t available at all, or maybe it wasn’t enough to cover all their acres, but they could get product,” Mintert says. “So that was a positive, but people just have a lot of anxiety about what’s taking place, and it’s all unprecedented. We’ve never experienced anything quite like this before,” he adds.
Despite the weak sentiment expressed by farmers regarding their farms’ financial performance, producers remain relatively optimistic about farmland values, Mintert says.
The Long-Term Farmland Value Expectations Index, based upon producers’ farmland outlook over the upcoming 5 years, rose 8 points in May to a reading of 149. This month’s reading takes the long-term index back to its pre-pandemic (February 2020) level.
Mintert says farmers don’t believe farmland values are driven by cash flow and their financial performance at this point, though they do expect prices to rise over the next five years.
“They’re telling us they expect to see a rise but the top two factors for expecting that rise to take place are, No. 1 non-farm investors and No. 2 inflation,” Mintert says.
The Purdue University/CME Group Ag Economy Barometer is a nationwide measure of the health of the U.S. agricultural economy. On the first Tuesday of each month, the Ag Economy Barometer provides a sense of the agricultural economy’s health with an index value. The index is based on a survey of 400 agricultural producers on economic sentiment each month. Quarterly, the index is accompanied by an in-depth survey of 100 agriculture and agribusiness thought leaders. Mintert co-authors the report in conjunction with his colleague, Michael Langemeier.
Mintert’s complete discussion on AgriTalk is available here:
