The agricultural economy barometer drops for the second month; rising input costs worry farmers

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July 6, 2021

The agricultural economy barometer drops for the second month; rising input costs worry farmers

The agricultural economy barometer drops for the second month; rising input costs worry farmers (Purdue / CME Group Ag Economy Barometer / James Mintert).
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WEST LAFAYETTE, Ind. and CHICAGO – The Purdue University / CME Group farm economy barometer marks a second month of strong declines, down 21 points to a reading of 137 in June. Producers were less optimistic about the current state of their farms and their expectations for the future. The Current Conditions Index fell 29 points to a reading of 149, and the Future Expectations Index fell 17 points to a reading of 132. The Ag The Economy Barometer is calculated each month from the responses of 400 American agricultural producers to a telephone survey. This month’s survey was conducted from June 21 to 25.

“Farmers expect their input costs to increase much faster in the coming year than in the past decade, contributing to their concerns about their farm finances and financial future.” said James Mintert, principal investigator of the Barometer and director of the Purdue University Center. for commercial agriculture.

Since the peak reached in April, producers’ opinions on the financial performance of their operations have fallen sharply. The Farm Financial Performance Index, which is based on a question that asks producers about their farm’s financial performance expectations this year compared to last year, fell 30 points this month and 42 points since April, to reach 96.

Weaker perceptions of the financial performance of farms are reflected in the capital investment index, which fell 11 points to 54, the lowest investment index since May 2020. The decline in the investment index appears to be more driven by plans to delay the construction of new farm buildings and silos. grains than through the purchase of agricultural machinery. In June, 61% of producers said they had reduced their plans for new construction, while 9% said they had increased their plans. In comparison, 44% of producers said they plan to reduce their machinery purchases, 45% plan to keep purchasing constant, and 10% plan to increase their purchases, all from a year ago.

The rapid increase in production costs linked to the inflation of consumer prices and agricultural inputs is a concern for agricultural producers. Almost 30% of producers said they expected agricultural input prices to increase by 8% or more in the coming year, which would be more than four times the average increase of the past 10 years of just 1.8%.

In contrast, 21% of producers expect the prices paid for inputs to increase by less than 2%, which would be more in line with recent history. Interestingly, producers expect farm input costs to rise faster than the prices of consumer items, which could put pressure on their margins. For example, only 17% of those polled said they expected consumer prices to increase by 8% or more in the next year.

Labor issues may also contribute to producer anxiety, as farms that normally hire non-family labor have reported more difficulty hiring labor this year than ‘in 2020. Just over half (54% in 2020, 51% in 2021) of those surveyed reported hiring non-family members. . In June 2021, nearly two-thirds (66%) of those surveyed said they had had “a few” or “a lot of difficulty” in hiring the right workforce, compared to just three in 10 people in 2020.

Although sentiment eased in June, producers remained optimistic about the value of farmland. The short-term farmland value expectation index, based on producers’ 12-month expectations for farmland value, fell nine points to 148; however, this is the third highest value in the index since data collection began in 2015. The index of long-term farmland value expectations, based on producers’ five-year outlook, does not fell only 3 points to 155, which was also the third highest reading on record for this index.

Corn and soybean growers gave a somewhat mixed response when asked about their cash rental rate expectations in 2022. In May, nearly two-thirds of growers said they expected a rate increase in 2022 compared to 2021; however, in June, less than half (47%) of corn-soybean producers said they expected rental rates to increase in the coming year. Many expect the rate hike to be significant. Almost half expect cash rental rates to increase by five to less than 10% and almost a third expect rates to increase by 10% or more.

Interest in leasing farmland for solar power projects has increased dramatically over the past two years. Almost a third (32%) of farms in the June survey said they were aware of the possibilities of renting solar power for their farmland. Of those who were aware of rental opportunities, 29% said they had entered into discussions with businesses about leasing some of their farmland. Less than 3% (2.6%) of all survey respondents reported having signed a solar lease on some of their farmland. This is about double the percentage of producers who said they signed a carbon sequestration contract on barometric surveys conducted last winter and spring.

Read the full report of the Agricultural Economy Barometer. 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.

Each month, the Purdue Center for Commercial Agriculture provides a short video analysis of the barometer results. For even more information, check out the Purdue Commercial AgCast podcast. It includes a detailed breakdown of each month’s barometer, in addition to a discussion of recent agricultural news affecting farmers.

The Agricultural Economy Barometer, Current Conditions Index and Future Expectations Index are available on the Bloomberg Terminal under the following ticker symbols: AGECBARO, AGECCURC and AGECFTEX.

About the Purdue University Center for Commercial Agriculture

the Commercial Agriculture Center was founded in 2011 to provide professional development and education programs to farmers. Based within the Department of Agricultural Economics at Purdue University, the centre’s faculty and staff develop and execute research and educational programs that meet the various management needs in today’s business environment.

About the CME Group

As the world’s leading and most diversified derivatives market, CME Group (www.cmegroup.com) enables clients to trade over-the-counter futures, options, liquidity and markets, to optimize portfolios and analyze data, enabling market players around the world to effectively manage risks and seize opportunities. . CME Group stock exchanges offer the widest range of global benchmark products in all major asset classes based on interest rates, stock indices, currencies, energy, agricultural commodities and metals. . The company offers futures and options on futures contracts through the CME Globex® platform, rate trading via BrokerTec and currency trading on the EBS platform. In addition, it operates one of the world’s leading providers of central counterparty clearing, CME Clearing. With a range of pre- and post-trade products and services that underpin the entire lifecycle of a transaction, CME Group also offers optimization and reconciliation services through TriOptima, and transaction processing services. transactions through Traiana.

CME Group, the Globe logo, CME, Chicago Mercantile Exchange, Globex, and E-mini are trademarks of Chicago Mercantile Exchange Inc. CBOT and Chicago Board of Trade are trademarks of Board of Trade of the City of Chicago, Inc. NYMEX, New York Mercantile Exchange, and ClearPort are trademarks of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. BrokerTec, EBS, TriOptima and Traiana are trademarks of BrokerTec Europe LTD, EBS Group LTD , TriOptima AB and Traiana, Inc., respectively. Dow Jones, Dow Jones Industrial Average, S&P 500 and S&P are services and / or trademarks of Dow Jones Trademark Holdings LLC, Standard & Poor’s Financial Services LLC and S & P / Dow Jones Indices LLC, as applicable, and have made licensed for use by Chicago Mercantile Exchange Inc. All other trademarks are the property of their respective owners.

Writer: Kami Goodwin, 765-494-6999, [email protected]

Source: James Mintert, 765-494-7004, [email protected]

Media contacts:

Aissa Good, Purdue University, 765-496-3884

Dana Schmidt, CME Group, 312-872-5443

Related websites:

Purdue University Center for Commercial Agriculture

CME Group

Agricultural communications: (765) 494-8415;

Maureen Manier, Head of Department, [email protected]

Agricultural news page


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