The US Ag economy gauge drops by 22 points

Farmers’ morale deteriorates as manufacturing prices rise

calendar icon June 16, 2022

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Purdue College/CME Group Ag . Economic system Scale It fell to its lowest degree since April 2020, down 22 factors in Could to a studying of 99. Agricultural producers have weak perceptions of present situations on their farms, in addition to their future expectations, this month. The Present Situations Index fell 26 factors to a studying of 94 and the Future Expectations Index fell 21 factors to a studying of 101. The Ag economic system gauge is calculated every month from the responses of 400 US agricultural producers to a phone survey. This month’s survey was performed Could 16-20.

“Regardless of sturdy commodity costs, weak producer sentiment this month seems to have been pushed by quickly rising manufacturing prices and uncertainty concerning the course of enter costs,” mentioned James Minter, principal investigator on the barometer and director of Purdue College’s Commerce Heart. Farming. “This mixture makes producers very involved concerning the monetary efficiency of their farms.”

The farm’s monetary efficiency index fell 14 factors to a studying of 81 in Could. The proportion of producers who count on the monetary efficiency of their farms to deteriorate in 2022 in comparison with final yr elevated from 29% in April to 38% in Could. Over the previous 13 months, the farm’s monetary efficiency index is down 41% from its survey excessive of 138 in April 2021.

The Agricultural Capital Funding Index drifted to an all-time low in Could and fell 30 factors from the identical interval final yr. Within the Could survey, solely 13% of respondents mentioned it was a great time to make vital investments of their operations, whereas 78% mentioned they noticed it as a nasty time to put money into issues like equipment and buildings. Half of producers on this month’s survey mentioned their machinery-buying plans have been affected by low farm equipment stock ranges, up from 41% within the April survey, suggesting that provide chain points are at the least partly answerable for the continuing weak spot within the capital funding index. .

Excessive enter prices stay a significant concern for producers with 44% of these surveyed selecting it as the largest concern dealing with planting operations within the coming yr. As well as, 57% of producers mentioned they anticipated a 30% or extra enhance within the costs paid for farm inputs in 2022 in comparison with the costs paid final yr. The Could survey additionally requested producers about their expectations for enter prices in 2023 in comparison with 2022 with almost 39% of producers indicating they count on a further value enhance of 10% or extra within the subsequent yr.

In response to the Biden administration’s coverage proposal to help a $10-per-acre wheat and soybean crop insurance coverage, this month’s ballot requested respondents whether or not the subsidy would encourage them to plant extra wheat in fall 2022 than they’d in any other case. Amongst producers who’ve used a double-crop wheat/soybean rotation previously, simply over one in 5 (22%) mentioned it could encourage them to develop extra wheat. Amongst producers who haven’t adopted the wheat/soybean rotation previously, just one in ten mentioned the insurance coverage subsidy would encourage them to plant extra wheat this fall.

Lastly, farmers stay optimistic about farmland values. The index of short-term farmland worth expectations, primarily based on producers’ 12-month expectations, rose 1 level to 145. In the meantime, the index of long-term farmland worth expectations, primarily based on producers’ farmland expectations over the following 5 years, rose 8 factors in Could to a studying of 149. In a follow-up query, respondents who count on farmland values ​​to rise over the following 5 years have been requested the principle motive they count on values ​​to rise. Over the previous few months this query has been requested, respondents have persistently chosen non-farm investor demand because the primary trigger, carefully adopted by inflation.