Farmer sentiment declines in September, inflation expectations jump

Rhea-AI Summary

The Purdue University/CME Group Ag Economy Barometer dropped 14 points in September to 124, marking the lowest farmer sentiment since July 2020. Both the Index of Current Conditions and Index of Future Expectations also fell. The Farm Financial Performance Index remained at 110, but expectations showed divergence. The Farm Capital Investment Index declined 10 points to 43, with machinery purchase plans dropping. Concerns over input prices surged, with 34% expecting over 12% increases. However, long-term farmland value expectations rose, with the long-term index reaching a record high of 159.

Positive

• Long-term farmland value expectations index rose to a record high of 159.
• Short-term farmland values expect an increase, rising to 155, its third-highest reading since 2015.
• 13% of producers plan to increase construction of grain bins and farm buildings.

Negative

• Ag Economy Barometer declined to 124, the lowest farmer sentiment since July 2020.
• Farm Capital Investment Index fell 10 points to 43, down 50% since January 2021.
• Only 8% of farmers plan to increase machinery purchases, down from 10% last month.
• 34% of farmers expect input prices to rise by over 12%, significantly higher than the last decade's average.

WEST LAFAYETTE, Ind. and CHICAGO, Oct. 5, 2021 /PRNewswire/ -- The Purdue University/CME Group Ag Economy Barometer declined in September, down 14 points to a reading of 124. With producers feeling less optimistic about both current conditions on their farming operations as well as their expectations for the future, this is the weakest farmer sentiment reading since July 2020 when the index stood at 118. The Index of Current Conditions declined 12 points to a reading of 140 and the Index of Future Expectations fell 16 points to a reading of 116. 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 between September 27-29, 2021.

The Farm Financial Performance Index was unchanged from last month with a reading of 110. However, examining the detailed responses reveals there was a shift among producers with regard to their farms' financial performance. In September, fewer farms said they expected their farms financial performance to match last year's, while the percentages of producers expecting both worse and better financial performance rose.

"Although the combined responses left the Farm Financial Performance Index unchanged from a month earlier, the increasing divergence in expectations among respondents from August to September could reflect differences in how individual farms managed risk in a period of rapidly fluctuating commodity prices," said James Mintert, the barometer's principal investigator and director of Purdue University's Center for Commercial Agriculture.

The decline in farmer sentiment spilled over into the Farm Capital Investment Index, which declined 10 points to a reading of 43, down 50% since the beginning of the year and the lowest investment index reading since April 2020. Fewer farmers this month said they planned to increase their machinery purchases than on the August survey as just 8% of respondents plan to increase purchases, down from 10% last month. In a follow-up question, over half (55%) of respondents reported that their farm machinery purchase plans have been impacted by low farm machinery inventories, likely contributing to weak sentiment regarding whether or not now is a good time to make large investments. Although plans for machinery purchases fell, producers' plans for new construction rose this month with 13% expecting to increase construction of grain bins and farm buildings, up from 8% in August.

Producer concerns about rising input costs rose sharply this month with over one-third of respondents saying they expect input prices to rise by more than 12% in the coming year, which is six times the average farm input inflation rate of the last decade. Inflation expectations were higher this month across the board with the percentage of respondents expecting input inflation to rise above 12% doubling since July with an increase to 34%, up from 21% last month.

Despite September's decline in farmer sentiment, farmers remain bullish about farmland values. The Short-Term and Long-Term Farmland Values Expectations Indices rose this month, with the long-term index hitting a record high reading of 159, which is 4 points higher than the previous month. The short-term index rose 9 points to 155, which is its third-highest reading since data collection began in 2015. Additionally, about one-half of corn/soybean growers continue to say they expect farmland cash rental rates to rise above 2021 levels in 2022. Among growers who expect cash rents to increase, 44% said they expect rental rates to rise from 5 to less than 10%, and three out of ten respondents indicated they expect rates to rise by 10% or more.

In early 2020, about 70% of producers expected agricultural exports to increase over the next five years. Since then, farmer expectations regarding future agricultural trade prospects have continued to weaken with only a few exceptions. September recorded the lowest percentage (37%) of growers expecting agricultural exports to increase since the question was first posed early last year. Concerns regarding the future of agricultural trade could be another factor behind weakness in the Future Expectations Index.

Read the full Ag Economy Barometer report at https://purdue.ag/agbarometer. 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 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. Available now at https://purdue.ag/agcast.

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.

CME Group, the Globe logo, CME, Chicago Mercantile Exchange, Globex, and E-mini are trademarks of Chicago Mercantile Exchange Inc. CBOT and Chicago Board of Trade are trademarks of Board of Trade of the City of Chicago, Inc. NYMEX, New York Mercantile Exchange and ClearPort are trademarks of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. BrokerTec, EBS, TriOptima, and Traiana are trademarks of BrokerTec Europe LTD, EBS Group LTD, TriOptima AB, and Traiana, Inc., respectively. Dow Jones, Dow Jones Industrial Average, S&P 500, and S&P are service and/or trademarks of Dow Jones Trademark Holdings LLC, Standard & Poor's Financial Services LLC and S&P/Dow Jones Indices LLC, as the case may be, and have been licensed for use by Chicago Mercantile Exchange Inc. All other trademarks are the property of their respective owners. 

Writer: Torrie Sheridan, 765-494-6032, ward121@purdue.edu   
Source: James Mintert, 765-494-7004, jmintert@purdue.edu 

Related websites:
Purdue University Center for Commercial Agriculture: http://purdue.edu/commercialag 
CME Group: http://www.cmegroup.com/

Photo Caption: Farmer sentiment declines in September, inflation expectations jump (Purdue/CME Group Ag Economy Barometer/James Mintert). https://www.purdue.edu/uns/images/2021/ag-baromter921LO.jpg

CME-G

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SOURCE CME Group

FAQ

What does the Ag Economy Barometer indicate for CME Group in October 2021?

The Ag Economy Barometer fell to 124 in September 2021, indicating declining farmer sentiment.

How has farmer sentiment changed according to the September 2021 report?

Farmer sentiment decreased by 14 points, the lowest since July 2020.

What are the current expectations for farmland values according to CME Group's report?

Long-term farmland value expectations have risen to a record high of 159.

What was the Farm Capital Investment Index reading in September 2021?

The Farm Capital Investment Index dropped to 43, showing decreased investment sentiment.

How did farmers respond to input price expectations in the survey?

34% of farmers expect input prices to rise by more than 12%, indicating increased cost concerns.