Following a pointy enhance to shut out 2022, the Purdue College/CME Group Ag Financial system Barometer had solely a modest enhance in January, up 4 factors to a studying of 130. The rise in sentiment was primarily attributable to higher expectations for the long run, because the Future Expectations Index improved by 5 factors to 127. The Index of Present Circumstances rose just one level to a studying of 136. The Ag Financial system Barometer is calculated every month from 400 U.S. agricultural producers’ responses to a phone survey. This month’s survey was carried out from January 16-20.
“Though producers have been a bit extra optimistic concerning the future this month, they once more reported expectations for tighter margins in 2023 than in 2022,” stated James Mintert, the barometer’s principal investigator and director of Purdue College’s Heart for Business Agriculture.
Enchancment in farmer sentiment carries over into 2023 (Purdue/CME Group Ag Financial system Barometer/James Mintert).
The Farm Capital Funding Index was up 2 factors this month to 42; nevertheless, it remained 7% decrease than a yr earlier. Simply over 7 out of 10 survey respondents stated they assume now could be a foul time to make giant investments of their farm operation. Amongst respondents who felt now could be a foul time, 39% stated excessive costs for equipment and new development, 25% stated rising rates of interest, and 12% stated uncertainty about farm profitability was the first motive. Rates of interest have gotten a much bigger concern for farmers. As lately as November, simply 19% p.c of farmers within the month-to-month barometer survey selected rising rates of interest as a key issue impacting their perspective on investments.
Every January, beginning in 2020, the survey has included a query asking respondents in the event that they count on to have a bigger working mortgage in comparison with the earlier yr and, in that case, the rationale for the bigger mortgage. In January, 22% of respondents stated they count on to have a bigger 2023 farm working mortgage in comparison with 2022, down from 27% final yr. Amongst respondents who count on to have a bigger working mortgage, 80% indicated it was resulting from elevated enter prices, whereas solely 5% stated it was resulting from carrying over unpaid working debt, which in line with Mintert is essential to notice. The share of respondents who attribute their want for a bigger mortgage to unpaid working debt has fallen sharply because the query was first posed in January 2020. At the moment, simply over one-third of producers who anticipated needing a bigger mortgage stated it was due to unpaid working debt. That proportion fell to twenty% in 2021 and to 13% in 2022 earlier than declining once more to only 5% in 2023.
“The sharp decline within the proportion of producers anticipating to hold over unpaid working debt is essential,” stated Mintert. “It helps the concept that the overwhelming majority of producers are getting into 2023 in a robust monetary place regardless of the rise in manufacturing prices.”
Producers’ expectations for short-term and long-term farmland values have been combined in January. The Brief-Time period Farmland Index fell 4 factors to 120, down 15% when in comparison with one yr earlier, as extra producers stated they count on values to carry regular over the approaching yr as an alternative of accelerating. The Lengthy-Time period Farmland Values Index rose barely to 142 from 140 in December. During the last yr, the long-term index has declined simply 2%, as producers proceed to retain a extra optimistic long-term than short-term view of farmland values. Amongst producers who count on to see farmland values rise over the following 5 years, the highest causes for his or her optimism proceed to be non-farm investor demand (63%) and inflation (23%).
This month’s survey additionally included questions on leasing farmland for carbon sequestration, and U.S. farmers proceed to precise curiosity in carbon contracts. Through the first quarter of 2021, roughly 7% of survey respondents stated they’d engaged in discussions with corporations about being paid to seize carbon on their farms. Once we repeated the query about carbon funds in August 2022 and once more in January 2023, the share of producers who stated they’d mentioned a carbon contract with an organization rose modestly to 9% of respondents. Nevertheless, comparatively few farm operators have chosen to signal a carbon contract, with simply 1% of January’s survey respondents indicating they’d signed a contract.
Learn the complete Ag Financial system Barometer report at https://purdue.ag/agbarometer. The location additionally provides further assets – comparable to previous reviews, charts and survey methodology – and a kind to join month-to-month barometer e mail updates and webinars.
Every month, the Purdue Heart for Business Agriculture gives a brief video evaluation of the barometer outcomes, accessible at https://purdue.ag/