James Mintert and Michael Langemeier Purdue Center for Commercial Agriculture
The Purdue University-CME Group Ag Economy barometer improved to a reading of 121 in April, which was 8 points better than a month ago. The ag sentiment index is currently 32 percent less than its April 2021 reading.
This month’s modest increase in the barometer was attributable to an improvement in ag-producer’s perspective on the current situation as well as what they expect for the future. The Index of Current Conditions increased by 7 points to a reading of 120 while the Index of Future Expectations increased by 9 points to an index value of 122. Similar to the barometer, both current-conditions and future-expectations indices remain well less than in the year. -ago levels. Ongoing strength in commodity prices appears to be responsible for the modest sentiment improvement, although producer concerns about both increasing input costs and their difficulties in procuring inputs to hold back sentiment.
The Purdue University-CME Group Ag Economy Barometer sentiment index is calculated every month from 400 U.S. agricultural-producer responses to a telephone survey. This month’s survey was conducted April 18-22, 2022.
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An improvement perspective on farm financial performance was key to improving this month’s sentiment. The Farm Financial Performance Index improved by reading 95, an increase of 8 points compared to March and 12 points better than January and February. Increasing prices for major commodities, especially corn and soybeans, have led to the change in producers’ financial outlook. For example Eastern Corn Belt cash prices for corn increase mid-April by more than 10 percent from their mid-March level; Bids for fall delivery of 2022 crop corn climbed 20 percent during the same period.
Soybean prices rise as well, despite the US Department of Agriculture’s late-March release of US producers’ surprisingly-large 2022 soybean-planting intentions. Near-term delivery prices for soybeans increased by about 7 percent from mid-March to mid-April. Elevator bids for fall delivery of new-crop soybeans climbed 5 percent during the one-month span.
Producers continue to say their biggest concern is increased input costs. Forty-two percent of producers chose increased input costs as their biggest concern, which was more than twice as many who chose government policies at 21 percent or reduced output prices at 19 percent. It’s difficult to overstate the magnitude of the cost increases producers say they are facing.
This month 60 percent of survey respondents said they expect input prices to increase by 30 percent during the next 12 months. That compares to an average of 37 percent of respondents who said they were expecting a cost increase of this magnitude when the same question was posed in the December 2021 through March 2022 surveys. When asked about their expectations for 2023 crop-input prices compared to prices paid for 2022 crop inputs, 36 percent of respondents said they expect prices to increase 10 percent or more; 21 percent of crop producers said input prices increase by 20 percent or more. Ukraine has added a new level of uncertainty for producers. Sixty percent of survey respondents said the impact of the war on US agriculture would be on input prices.
Crop-input challenges extend beyond their availability to inflated costs. In April, 34 percent of producers said they experienced some difficulty purchasing inputs for the 2022 crop season – an increase from 27 percent in March.
In a follow-up question, producers rated where they had the most difficulty in obtaining inputs.
• Of the respondents 30 percent chose herbicides.
• Of the respondents 27 percent chose farm-machinery parts.
• Of the respondents 26 percent chose fertilizer.
• Of the respondents 17 percent chose insecticides.
In a closely related question, 11 percent of crop producers said they received an input supplier would not be able to deliver one or more crop inputs they had already purchased for use in 2022. Herbicide availability was the biggest problem reported by those producers.
The Farm Capital Investment Index was unchanged in April, despite an improved financial-performance outlook. April’s investment index reads 36 left at its all-time worst number, one point less than the previous number observed in May 2019. Follow-up questions revealed that producers were a bit less pessimistic in April about both their machinery-buying and New-construction plans received more responses in the coming year than in the March survey.
But supply-chain problems remain a key reason many producers feel there is not a good time to make large investments in their farming operations. About 40 percent of producers said their farm-machinery purchase plans were impacted by reduced machinery inventories. The rising cost of all inputs – including machinery, buildings and grain bins – is another factor causing producers to say that now is not a good time for large investments.
Both short-term and long-term farmland-value indices dropped 5 points in April, leaving both indices at a reading of 141. Expectations for continued farmland values appear to have peaked in fall 2021. Three-month moving results of both The short- and long-term indices in April were 7 percent to 8 percent less than the peak values reached in November. Responsibilities to the 12-month-ahead farmland-value question since fall 2021 reveal a shift in productivity from producers toward increasing farmland values to remain about the same. Looking at responses since November to the five-year-ahead farmland-value question, the shift away from growing values was split between producers who expect prices to remain the same and producers who expect prices to decline.
Ag-producer financial-performance expectations improved in April, largely as a result of strong commodity prices. In turn, expectations of greater financial performance provided support to farmer sentiment. That helped improve the Ag Economy barometer by 8 points in April. But despite this month’s improvement in sentiment, the index was still 32 percent less than a year ago – indicating producers remain troubled regarding uncertainty surrounding input prices and availability.
Looking ahead to 2023, more than half of crop producers expect input prices to rise even more than 2022’s inflated level. One out of five crop producers expect input prices to increase by 20 percent or more this year. About one-third of crop producers reported difficulty purchasing inputs for the 2022 crop season. And 11 percent of crop producers said an input supplier told them that the supplier would not be able to deliver an input for current purchase this season – forcing them to search for a substitute. Furthermore it appears the war in Ukraine has raised concerns about producers about input-price levels and has made availability even more uncertain.
James Mintert and Michael Langemeier are agricultural economists with Purdue University. Each month the Ag Economy Barometer from the Purdue University-Center for Commercial Agriculture surveys 400 U.S. agricultural producers to discern attitudes and sentiments regarding the status of the US farm economy. Each quarter 100 agribusiness leaders are surveyed to provide additional insight into the health of the agricultural economy. Visit ag.purdue.edu for more information.
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