US producer pessimism grows

Barometer shows farmers are 30% less optimistic than last year
calendar icon 19 December 2021
clock icon 2 minute read

The Purdue University/CME Group Ag Economy Barometer slipped five points in November to a reading to 116, marking continued pessimism among producers.

A nationwide measure of the health of the US agricultural economy, the Purdue University/CME Group Ag Economy Barometer is based on survey of 400 agricultural producers. Its aim is to provide a sense of the agricultural economy's health with an index value.

The results of the most recent survey, conducted 15-19 November, revealed producers are concerned about mounting costs. The report shows that the Index of Current Conditions declined 7 points in November to a reading of 128, and the Index of Future Expectations fell 4 points to 110.

November marked the lowest reading of 2021 for all three measures of producer sentiment and comparing year-over-year, the barometer is 30% lower than in November of 2020.

“Farmers are facing sharp rises in production costs coinciding with fluctuating crop and livestock prices, the prospect of changing environmental and tax policy, uncertainty over COVID-19, as well as a host of other issues, all of which are negatively impacting farmer sentiment,” said James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.

Farmers expressed concerns about the rising cost of production, particularly for fertiliser, farm machinery, seed and fuel. According to November's survey, 43% of respondents expected input costs to rise by more than 16% in the upcoming year. This compares with the actual average rate of farm input price inflation over the past decade of less than 2%.

The Farm Capital Investment Index declined 7 points to 39, a decline that analysts attributed to supply chain problems. It's the lowest reading since April of 2020.

In November, 44% of respondents said their plans to purchase machinery were impacted by low inventories.

Nearly half of respondents (47%) chose rising input costs as their biggest concern for the upcoming year.

The Farm Financial Performance Index rose 2 points to 106 in November. That's 10% higher than the reading in June 2021. Mintert attributed this to good crop yields and and strength in wheat prices.

The index also shows that producers are very optimistic about farmland values.

Respondents showed concern over government policies and regulations as well. In the November survey, 82% of producers who responded said they expect restrictive environmental regulations to increase, 74% export higher estate taxes, and 77% expect higher income taxes in the near future.

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