Agricultural Producers’ Sentiment Declines as Crop Prices and Production Costs Weigh on Farmers

Agricultural producers’ sentiment took a hit for the second consecutive month, as the Purdue University/CME Group Ag Economy Barometer index dropped 9 points to a reading of 106 in September. The decline in sentiment reflects concerns among farmers about their current situation and future prospects for their farms. Both the Current Conditions and Future Expectations Indices also experienced a 10-point decline, reaching readings of 98 and 109, respectively. It is worth noting that all three indices are currently below their levels from a year ago.

The latest Ag Economy Barometer survey, conducted from September 11-15, 2023, revealed that weakening prices for major crops and worries about high production costs and interest rates were key factors contributing to farmers’ concerns. High input costs remained the top concern for one-third of respondents, followed by rising interest rates (25%) and lower crop and/or livestock prices (22%). The percentage of farmers citing lower crop and/or livestock prices as a top concern has increased since the beginning of the year.

Despite the decline in sentiment, there was a slight increase in the Farm Capital Investment Index, rising 2 points to a reading of 39 in September. However, three-fourths of the producers still expressed that it is currently a bad time for large investments. Rising interest rates and the high cost of machinery and new construction were the primary reasons cited by those who felt it was not an opportune time for significant investments.

Farmers who believe it is a good time to make investments pointed to strong cash flows on their farm operations as the primary reason. The Farm Financial Performance Index remained unchanged in September compared to August, with an index reading of 86. The survey also revealed varying perspectives on financial conditions, with some farmers expecting better conditions and others anticipating worse conditions compared to the previous year.

Surprisingly, despite concerns about high input costs, rising interest rates, and the risk of lower crop and livestock prices, farmers remained relatively optimistic about farmland values. The Short-Term Farmland Value Expectations Index remained unchanged at a reading of 126, while the long-term index rose 2 points to 153. Non-farm investor demand for farmland and inflation were cited as the top reasons for the expected rise in farmland values over the next five years.

The September survey also explored corn and soybean growers’ perspectives on cover crops. Over half (52%) of the corn/soybean growers reported currently planting cover crops on a portion of their acreage. Soil health improvements and erosion control were the primary reasons cited by those who used cover crops. However, some farmers discontinued their use of cover crops due to low profitability, decreased crop yields, insufficient soil benefits, and a lack of resources.

While agricultural producers’ sentiment has declined, the Purdue University/CME Group Ag Economy Barometer provides valuable insights into the challenges faced by farmers. Efforts to address high input costs, rising interest rates, and market fluctuations can help support the agricultural industry and ensure a sustainable future for farmers.

For more information, please visit the Purdue University Center for Commercial Agriculture (http://purdue.edu/commercialag) and CME Group (http://www.cmegroup.com/).

Image: [Link to the image provided in the press release]