One Silver Lining In Clouds Of Economic Concern
There was a sharp decline in farmer sentiment in May, according to the latest Ag Economy Barometer published on June 6.
Specifically, the barometer declined 19 points to a reading of 104 for the month. The results mean producer sentiment fell to its weakest reading since July 2022, according to Jim Mintert, principal investigator and director of Purdue University’s Center for Commercial Agriculture.
The barometer is based on a monthly telephone survey of 400 U.S. agricultural producers and is designed to learn more about farmers’ attitudes and sentiments regarding the status of the U.S. farm economy. The latest Ag Barometer survey was conducted between May 15 and May 19.
A Mixed Outlook For The Future
The situation isn’t one of only gloom and doom but rather it indicates farmers have a mixed perspective, Mintert told AgriTalk Host Chip Flory.
“I think what's going on is, from a cash-flow standpoint, a lot of folks are walking into what's shaping up to be a difficult year here in 2023 with very strong working capital,” Mintert said. “I think that's being reflected in the current conditions.”
Mintert’s take on the situation is that farmers’ “real concerns” are around their future expectations for profitability.
“It's concern over the risk of a cost-price squeeze, and we're right in the middle of it,” he said.
Three factors primarily are contributing to farmers’ feelings that they’re in the midst of a cost-price squeeze, Mintert contends:
1. Crop prices have dropped significantly in the past month, and the expectation is for softer prices moving forward. In mid-May, Eastern Corn Belt fall delivery bids for corn fell over $0.50/bushel (10%), and soybean bids declined over $1.00/bushel (8%), while new crop June/July delivery wheat bids declined nearly $0.50/bushel (8%) – all compared to bids available in mid-April, when last month’s barometer survey was conducted, Mintert’s published report said.
“We're in the throes of a weather market, and so I think that's going to be really interesting to see how that impacts people's perspective (in the next month),” he said. “We're going to be looking out the window at crop conditions, we're going to be looking at is there any possibility of any rain?”
2. High input costs continue to erode farmer confidence. Costs for fertilizer and fuel have moderated somewhat, compared to this time last year. “But our other input costs have not backed up at all, so we're stuck with some relatively high input costs,” Mintert said.
3. Interest rates are going the wrong way. Mintert said it’s not clear to him how many farmers have already felt the impact of rising interest rates. He anticipates the impact will be felt by farmers as they tabulate their year-end results for 2023 and move into 2024.
Mintert reiterated that many farmers are walking into the near-term future with strong working capital. The bulk of the row-crop farmers the barometer surveys have an adjusted gross income of at least $500,000, he noted.
“They have very strong current ratios,” he said. “That's going to help them manage the downside going forward. So that's the good news.”
Outlook For The Farm Bill
With farm bill discussions ongoing, this month’s survey asked respondents what title in the upcoming legislation will be most important to their farming operation.
Nearly half (48%) of producers said the Crop Insurance Title will be the most important aspect of a new farm bill to their farms, followed by the Commodity Title, chosen by 25% of respondents, the barometer report stated.
In a follow-up question, corn and soybean growers were asked what change, if any, they expect to see to the Price Loss Coverage reference prices in a new farm bill. Close to half (45%) of corn and soybean growers surveyed said they expect Congress to establish higher reference prices for both crops, with very few (10% and 13%) expecting lower reference prices for soybeans and corn, respectively.
The full Ag Economy Barometer report is available here: Farmer Sentiment Sours as Crop Prices Decline
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.
Listen to the conversation on AgriTalk here:
