CHICAGO, ILLINOIS, US — After falling in July to its lowest level in more than a year, the Purdue University/CME Group Ag Economy Barometer rose slightly in August with US producers expressing more optimism about current and future economic conditions.
The barometer increased by four points in August to 138. It is calculated each month from 400 producers’ responses to a telephone survey. This month’s survey was conducted between Aug. 23-27.
“Although corn, soybean, and wheat prices have declined in recent weeks, farmers have more confidence in their 2021 revenue expectations,” said James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “Yield prospects stabilized or improved for many producers in August as some precipitation fell in areas that had been abnormally dry and drought-stricken. That helps explain this month’s improvement in the Farm Financial Performance and Current Conditions indices.”
In August, producers had a more positive view of their farms’ financial situation than earlier this summer. The Farm Financial Performance Index rose 11 points to 110, its highest reading since May, as more farmers indicated they expect profitability to be better this year compared to 2020.
Producers are becoming increasingly concerned about farm input price inflation. In the August survey, 39% of respondents said they expect input prices to rise by 8% or more in the next 12 months, up from 30% who felt that way in both June and July. One in five producers (21%) expect farm input price inflation to exceed 12% in the next 12 months. Just 13% of producers surveyed said they expect input price pressure in the upcoming year to fall in a range of 0% to 2%, which would be similar to the average rise in farm input prices over the last decade.
Both the Short-Term and Long-Term Farmland Values Expectations Indices rose by 4 points in August compared to July, as producers remain optimistic that farmland values will continue to rise. At the same time, about one-half of corn/soybean growers expect farmland cash rental rates to rise above 2021 levels in 2022. Among growers who expect cash rents to increase, 44% said that they expect rental rates to rise from 5% to less than 10% with one-third of respondents indicating they expect rates to rise by 10% or more.
The Farm Capital Investment Index leveled out after four consecutive months of declines, up 3 points to a reading of 53. The small improvement in the index could be traced to fewer producers in August saying they planned to reduce their farm construction activity compared to a year ago. Farmers’ machinery purchase plans reported on the August survey were unchanged from those reported in July.
“Industry reports continue to suggest that supply chain challenges are hampering farmers’ machinery purchase plans and could also be playing a role in reduced construction activity,” Mintert said.
Read the full Ag Economy Barometer report at https://purdue.ag/agbarometer.