CHICAGO, ILLINOIS, US — US ag producers were less optimistic about current conditions on their farming operations and expectations for the future lowering the Purdue University/CME Group Ag Economy Barometer 21 points to a reading of 137 in June.
The Ag Economy Barometer is calculated each month from 400 US agricultural producers’ responses to a telephone survey. This month’s survey was conducted June 21-25.
The Index of Current Conditions also fell in the month of June. It decreased 29 points to a reading of 149 and the Index of Future Expectations fell 17 points to a reading of 132.
“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,” said James Mintert, the barometer's principal investigator and director of Purdue University's Center for Commercial Agriculture.
The Farm Financial Performance Index has declined since its peak in April. It is based on a question that asks producers about expectations for their farm’s financial performance this year compared to last year, declined 30 points this month, and 42 points since April, to a reading of 96.
The lack of optimism of farm financial performance seems to be a continuing trend as the Farm Capital Investment Index, which declined 11 points to a reading of 54, the lowest investment index reading since May 2020. The investment decrease is linked to producers waiting to construct new building and grain bins.
“In June, 61% of producers said they reduced plans for new construction, while 9% said they increased plans,” the survey said. “In comparison, 44% of producers indicated they plan to reduce their machinery purchases, 45% plan to hold purchases constant, and 10% plan to increase purchases, all compared to a year ago.”
Rising production costs for both consumer and farm input price inflation is a concern for producers, 30% expect farm input prices to increase by 8% or more in the upcoming year, which would be more than four times the average rise over the last 10 years of just 1.8%.
However, 21% of producers anticipate prices paid for inputs to increase less than 2%, which would be more in-line with recent history.
Labor concerns also have attributed to the lack of producer optimism as the survey found farms that normally hire non-family labor reported more difficulty in hiring labor in 2021 compared to 2020. Just over half, 54% in 2020, 51% in 2021, of those surveyed reported hiring non-family members.
In June 2021, 66% of respondents said they either had “some” or “a lot of difficulty” in hiring adequate labor, that compared to just three out of 10 respondents in 2020.
Despite US producer sentiment dropping in June, they remained bullish on farmland values. The Short-Term Farmland Value Expectations Index, based upon producers’ 12-month expectation for farmland values, declined nine points to a reading of 148, which matches the third-highest reading for the index since data collection began in 2015.
Similar to short-term farmland value, the Long-Term Farmland Value Expectations Index, based upon producers’ five-year outlook, decreased as well. It fell a total of three points to a reading of 155, which was also the third-highest reading on record for that index.
The survey received a mixed response from corn and soybean producers about cash rental rate expectation in 2022. In May, nearly two-thirds of producers said they expected rates to rise in 2022 compared to 2021; however, in June 47% of corn-soybean producers said they expect rental rates to rise in the coming year.
Interest in farmland leasing for solar energy projects has been on the rise over the past few years. According to the survey, 32% of farms in the June survey said they are aware of solar leasing opportunities for their farmland and of those aware of leasing opportunities, 29% of them said they had engaged in discussions with companies about leasing some of their farmland.
A total of 2.6% of survey respondents said they had signed a solar lease on some of their farmland, which according to the report is about double the percentage of producers who reported having signed a carbon sequestration contract on barometer surveys conducted this past winter and spring.