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Farmer confidence sours amid rising costs, income squeeze

Despite high farm income in 2021, farmer confidence has been on a nearly unbroken decline since last April, said Purdue University on Tuesday.

“Producers expect financial performance in 2022 to be much weaker than in 2021,” said the monthly Ag Economy Barometer, pointing to rising costs and difficulties in acquiring pesticides, fertilizer, and machinery parts.

More than 40% of the large-scale farmers and ranchers polled by Purdue said they expect the next 12 months will bring bad times for the agricultural economy, nearly twice the number of those who believe good times lie ahead.

Producers were even more pessimistic about their own operations; 15% said they expected to be better off financially a year from now, and nearly 45% said they would be worse off. One in four said they expected to borrow more money from the bank to cover operating costs this year than in 2021, with higher input costs the overwhelming reason.

The current barometer reading of 119 was the second lowest since July of 2020. With two exceptions, the barometer has declined monthly since last April, when it stood at a near-record 178.

“Rising farm input costs and ongoing supply chain disruptions appear to be contributing to producers’ weaker perception of current conditions,” wrote Purdue economists Jim Mintert and Michael Langemeier, who oversee the barometer. “Producers expect lower income in 2022 compared with 2021 as producers look for higher production costs to offset commodity price strength.”

Federal payments, which totaled $27.2 billion last year, are expected to tumble this year with the expiration of pandemic aid programs. Some $19.9 billion of last year’s subsidies were pandemic assistance. Direct federal payments equaled 23% of last year’s estimated $116.8 billion in net farm income, the highest since 2013. Net farm income is a USDA gauge of profitability.

Since last fall, nearly half of farmers have named “higher input costs” as their biggest concern, followed by government policies, lower commodity prices, and COVID-19.

In the latest survey, from January 17-21, 45% of respondents named inputs costs as their greatest concern, 23% said government policies, 21% lower prices, and 11% the pandemic.

Some 57% of producers said they expected input prices to rise by more than 20% this year.

Fewer producers reported difficulty in purchasing crop inputs than in the December poll, but 28% said they had problems. One third of those said herbicides were the greatest challenge, followed by fertilizer and farm equipment parts.

Farmland is a producer’s greatest asset, and by a large margin farmers expected land prices will be higher next year and in the next five years, although the belief has slipped somewhat since last November.

Still, 58% expected land prices will be higher in five years. The most common reason, chosen by 45% of respondents, was “non-farm investor demand,” followed by inflation, at 32%.

Farmers dominate the land market. Iowa State University, which tracks land values, says local farmers account for 68% of land sales.

The Ag Economy Barometer is based on a telephone survey of 400 operators with production worth at least $500,000 a year. USDA data say the largest 7.4% of U.S. farms top $500,000 in annual sales. It has a margin of error of plus or minus 5%.

The home page of Ag Economy Barometer is available here.

Produced with FERN, non-profit reporting on food, agriculture, and environmental health.
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