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Crop production costs rise, farmers’ optimism drops, Ag Barometer shows

Machinery purchase plans fall, survey shows.

The expectation of higher crop input costs for 2022 is sending the U.S. producer sentiment lower for the third month in a row.

The Purdue University/CME Group Ag Economy Barometer recorded a drop in producer sentiment in October, down 3 points to a reading of 121. 

The barometer reads how farmers feel about current and future ag economic conditions.

The Index of Current Conditions was down 5 points to a reading of 140, while the Index of Future Expectations fell 2 points to a reading of 114, according to the Purdue University press release. 

The Ag Economy Barometer is calculated each month from 400 U.S. agricultural producers’ responses to a telephone survey. This month’s survey was conducted Oct. 18-22.

“Recent weakness in farmer sentiment appears to be driven by a wide variety of issues, with concerns about input price rises topping the list,” James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture, stated in the press release. “Rapid run-ups in input prices, especially fertilizer for crop production, are giving rise to concerns among producers about their operating margins weakening. Livestock producers are also concerned about a cost-price squeeze, especially in the pork and dairy sectors.”

In October, farmers became less optimistic about their farms’ financial situation vs. how they felt in September.

The Farm Financial Performance Index declined 6 points to 104 in October. Over half (51%) of producers in the survey said they expect input prices to rise 8% or more in the coming year, and one-third of producers said they expect those prices to rise by 12% or more, according to the Purdue University press release. 

“While the dramatic rise in fertilizer prices that’s taken place in recent months is a key factor, rising input costs also extend to other inputs such as seed, pesticides, machinery repairs, and ownership costs, leading farmers to become increasingly concerned about a cost-price squeeze on their operating margins,” Mintert stated.

Farmers see the rising input costs keeping a lid on farmland cash rental rates. 

In October, the percentage of corn and soybean producers expecting higher farmland rental rates in 2022 compared with 2021 dipped to 43%, down 7 points from September, with more respondents expecting rates to remain unchanged in the coming year, according to the Purdue University press release. 

Farmers remain bullish on farmland values. The Long-Term Farmland Value Expectations Index set a new record high this month with a reading of 161, 2 points, while the short-term index rose 1 point to 156.

Producers involved in the survey are holding back on purchasing machinery. 

Nearly four of 10 respondents said their purchase intentions were impacted by low farm machinery inventory levels. Even so, the Farm Capital Investment Index improved modestly in October, up 3 points to a reading of 46. Even with that rise, however, the index was still 50% lower than it was at the beginning of the year, according to the Purdue University press release. 

Other Topics

The percentage of producers planning to increase building and grain bin construction on their farms fell to 10% in October vs. 13% in September, according to this month’s barometer.

Over the past year, there’s been little change in producers’ awareness of carbon capture opportunities on their farms. Just 29% of respondents in the October survey said they were aware of opportunities to receive payments to capture carbon on their farms, on par with survey results from last winter and spring. Of those aware of the opportunities, just over 2% said they had discussed carbon capture payments with any companies, compared with 5% last winter and spring, according to the Ag Economy Barometer report.

Read the full Ag Economy Barometer report. 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.

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