Farmer sentiment rises on strengthening current financial position

Rhea-AI Summary

The Purdue University/CME Group Ag Economy Barometer rose 9 points to 125 in December, its second increase since May. The Index of Current Conditions climbed 18 points to 146, while the Index of Future Expectations increased by 4 points to 114. Farmers reported the Farm Financial Performance Index at 113, its highest since May. However, concerns remain about rising production costs, with 47% citing higher input costs as a major concern. The Farm Capital Investment Index improved to 49 but remains significantly lower than December 2020. Some producers faced challenges in securing crop inputs.

Positive

• Ag Economy Barometer rose 9 points to 125, only the second increase since May.
• Index of Current Conditions increased to 146, indicating improved farmer sentiment.
• Farm Financial Performance Index reached 113, the highest since May, reflecting strong cash flow.

Negative

• Concerns about rising production costs, with 47% of farmers highlighting input costs as a major concern.
• Farm Capital Investment Index at 49 is 47% lower than the previous year, signaling hesitancy in investment.
• 39% of producers reported difficulties in securing crop inputs for the upcoming season.

WEST LAFAYETTE, Ind. and CHICAGO, Jan. 4, 2022 /PRNewswire/ -- The Purdue University/CME Group Ag Economy Barometer rose for only the second time since May, up 9 points to a reading of 125 in December. The Index of Current Conditions and the Index of Future Expectations also rose this month with a stronger current conditions index primarily responsible for the barometer's rise. The December's Index of Current Conditions rose 18 points to a reading of 146, while the Index of Future Expectations rose 4 points to a reading of 114. 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 December 8-14, 2021.

December marked the second month in a row that farmers reported a stronger financial performance for their farms. The Farm Financial Performance Index rose 7 points to 113 in December which is the index's highest reading since May and is 21% higher than readings obtained just before the pandemic's onset.

"Excellent crop yields this fall combined with strong crop prices provided many producers with their most positive cash flow in recent years. That combination helps explain the year-end rise in the financial index as well as the barometer overall," said James Mintert, the barometer's principal investigator and director of Purdue University's Center for Commercial Agriculture.

Even as supply chain issues continue to hamper producers' capital investment plans, the Farm Capital Investment Index rose in December, up 10 points to a reading of 49. This marks the most positive value for the investment index since August, but remains 47% lower than in December 2020. The investment index's improvement was primarily the result of fewer producers in December saying they planned to reduce their machinery purchases in the upcoming year, responding instead that they plan to hold their investments steady with the prior year. This month, 45% of survey participants said that low farm machinery inventory levels impacted their farm machinery purchase plans.

Farmers expressed concern about rising production costs and the availability of production inputs. When asked what their biggest concerns are for their farming operation in the upcoming year, 47% of respondents selected higher input cost from a list that included lower crop and/or livestock prices, environmental policy, farm policy, climate policy and COVID's impact. Over half (57%) of producers said they expect farm input prices in the upcoming year to rise by more than 20% compared to a year earlier and nearly four out of ten respondents said they expect input prices to rise by more than 30%.

This month's survey also asked crop producers if they have had any difficulty purchasing crop inputs from their suppliers for the 2022 crop season. Nearly four out of ten (39%) of respondents said they've experienced some difficulties. In a follow-up question, producers who indicated that they were experiencing difficulties in making purchases were asked which crop inputs they've had trouble purchasing. Responses were varied which could be an indication of problems across the supply chain and included difficulties in purchasing fertilizer (31%), herbicides (28%), farm machinery parts (24%) and insecticides (17%).

Both the short-term and long-term farmland value indices declined slightly in December. The Short-Term Farmland Value Expectation Index declined 4 points to 153, while the long-term index declined 6 points to 152. Although both indices declined in December, they remain near their all-time highs. Producers who indicated they expect farmland values to rise over the next five years, were asked a follow up question asking them about the main reason they expect farmland values to rise. Producers indicated non-farm investor demand (61%), low interest rates (13%), and strong farm cash flows (11%) were their primary reasons for expecting values to rise.

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. 

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 and EBS are trademarks of BrokerTec Europe LTD and EBS Group LTD, 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: Kami Goodwin, 765-494-6999, kami@purdue.edu    
Source: James Mintert, 765-494-7004, jmintert@purdue.edu

CME-G

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

Photo Caption: Farmer sentiment rises on strengthening current financial position. (Purdue/CME Group Ag Economy Barometer/James Mintert). https://www.purdue.edu/uns/images/2021/ag-barometer1221LO.jpg

 

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SOURCE CME Group

FAQ

What was the December reading for the CME Ag Economy Barometer?

The December reading rose to 125.

How did the Index of Current Conditions perform in December?

The Index of Current Conditions increased by 18 points to 146.

What factors contributed to the rise in the Farm Financial Performance Index?

Strong crop yields and prices contributed to the rise.

What concerns do farmers have regarding production costs?

47% of farmers cited higher input costs as a major concern.

How did the Farm Capital Investment Index change in December?

It rose to 49 but remains significantly lower than December 2020.