Farmer sentiment weakens amid rising concerns of a cost-price squeeze
In October 2021, the Purdue University/CME Group Ag Economy Barometer indicated a decline in producer sentiment, dropping to 121, part of a three-month downward trend. The Index of Current Conditions fell to 140, while the Index of Future Expectations decreased to 114. Key concerns driving this sentiment include rising input prices, particularly in fertilizers, with over half of producers expecting an 8% or more increase in costs. Despite these challenges, farmland value expectations hit a record high index of 161.
- Long-Term Farmland Value Expectations Index reached a record high of 161.
- Short-Term Farmland Value Expectations Index increased to 156.
- Ag Economy Barometer declined by 3 points, indicating weakening producer sentiment.
- Input price concerns led to a decline in the Farm Financial Performance Index to 104.
- 43% of producers expect lower farmland cash rental rates for 2022, down 7 points from September.
- Farm Capital Investment Index remains 50% lower than at the beginning of the year.
WEST LAFAYETTE, Ind. and CHICAGO, Nov. 2, 2021 /PRNewswire/ -- The Purdue University/CME Group Ag Economy Barometer recorded a drop in producer sentiment in October, down 3 points to a reading of 121. The modest drop was part of a three-month slide for the index primarily due to producers' weakened perceptions for both current and future conditions in the production agriculture sector. The Index of Current Conditions was down 5 points to a reading of 140, while the Index of Future Expectations fell 2 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 October 18-22, 2021.
"Recent weakness in farmer sentiment appears to be driven by a wide variety of issues, with concerns about input price rises topping the list," said James Mintert, the barometer's principal investigator and director of Purdue University's Center for Commercial Agriculture. "Rapid run-ups in input prices, especially fertilizer for crop production, are giving rise to concerns among producers' about their operating margins weakening. Livestock producers are also concerned about a cost-price squeeze, especially in the pork and dairy sectors."
Producer's view of their farms' financial situation was less optimistic in October compared to September. The Farm Financial Performance Index declined 6 points to 104 in October. Over half (
Rising input costs are starting to have a dampening effect on expectations for farmland cash rental rates. In October, the percentage of corn and soybean producers expecting higher farmland rental rates in 2022 compared to 2021, dipped to
Tight machinery inventories continue to hold back producers' machinery investment plans, nearly four out of ten respondents said their purchase intentions were impacted by low farm machinery inventory levels. Even so, the Farm Capital Investment Index improved modestly in October, up 3 points to a reading of 46. Even with that rise, however, the index was still
Over the past year, there's been little change in producers' awareness of carbon capture opportunities on their farms. Just
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
Related websites:
Purdue University Center for Commercial Agriculture: http://purdue.edu/commercialag
CME Group: http://www.cmegroup.com/
Photo Caption: Farmer sentiment weakens amid rising concerns of a cost-price squeeze. (Purdue/CME Group Ag Economy Barometer/James Mintert). https://www.purdue.edu/uns/images/2021/ag-baromter1021OG.jpg
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SOURCE CME Group
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