The Purdue University/CME Group Ag Economy Barometer was down again in June, as farmers were feeling less optimistic about the state of their current and future production operations due to rising input costs.
James Mintert, the barometer’s principal investigator and the director of Purdue University’s Center for Commercial Agriculture, said, "Farmers expect their input costs to rise much more rapidly in the year ahead than they have over the last decade, contributing to their concerns about their farm finances and financial future."
Since peaking in April, the Farm Financial Performance Index, which asks farmers about their financial performance this year compared to last year, has dropped steadily, falling 42 points since April.
This bleak outlook was reflected in the Farm Capital Investment Index, which declined by 11 points, marking the lowest investment index reading since May 2020.
Most of the decline can be attributed to the 61% of producers who reported plans to reduce the construction of new farm buildings or grain bins. Comparably, 44% of respondents said they would reduce their machinery purchases, whereas 45% planned to hold their machinery purchases constant.
A main area of concern for producers is the rapidly rising cost of production associated with consumer and farm input price inflation.
The survey found 30% of farmers expecting farm input prices to increase 8% or more over the next year and 21% who expect input prices to increase by less than 2%. For reference, the average rise over the last ten years has been 1.8%.
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In comparison, just 17% of respondents expect consumer prices to rise by 8% or more over the next year.
Concerns about a labor shortage could also be contributing to producers’ outlook, as 66% of respondents said they had “some” or “a lot of difficulty” in hiring adequate labor. Only three of 10 producers reported experiencing difficulties in 2020.
Expectations for farmland value also dipped nine points, but the index was still at the third highest value recorded for farmland prices since data collection started in 2015.
Finally, in June 47% of corn-soybean producers said they expect cash rental rates to rise in the coming year, which is a slight dip from May, when two-thirds of respondents expected rates to rise in the coming year.
The Ag Economy Barometer is calculated using the telephone responses of 400 agricultural producers. To read the full report, go to https://purdue.ag/agbarometer.
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