Ag Economy Barometer falls for second month

The Purdue University/CME Group Ag Economy Barometer marks a second month of sharp declines, down 21 points to a reading of 137 in June. Producers were less optimistic about both current conditions on their farming operations as well as their expectations for the future. The Index of Current Conditions dropped 29 points to a reading of 149, and the Index of Future Expectations fell 17 points to a reading of 132. 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 June 21-25.

“Farmers expect their input costs to rise much more rapidly in the year ahead than they have over the last decade, contributing to their concerns about their farm finances and financial future,” said James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.

Since peaking in April, producers’ view of their farms’ financial performance has fallen sharply. The Farm Financial Performance Index, which is based on a question that asks producers about expectations for their farm’s financial performance this year compared to last year, declined 30 points this month, and 42 points since April, to a reading of 96.

Weakening perceptions of farm financial performance spilled over into the Farm Capital Investment Index, which declined 11 points to a reading of 54, the lowest investment index reading since May 2020. The decline in the investment index appears to be driven more by plans to hold back on constructing new farm buildings and grain bins than purchasing farm machinery. In June, 61% of producers said they reduced plans for new construction, while 9% said they increased plans. In comparison, 44% of producers indicated they plan to reduce their machinery purchases, 45% plan to hold purchases constant, and 10% plan to increase purchases, all compared to a year ago.

Rapidly rising production costs related to both consumer and farm input price inflation are a concern for agricultural producers. Nearly 30% of producers said they expect farm input prices to rise by 8% or more in the upcoming year, which would be more than four times the average rise over the last 10 years of just 1.8%.

On the other hand, 21% of producers expect prices paid for inputs to increase less than 2%, which would be more in line with recent history. Interestingly, producers expect farm input costs to rise more rapidly than prices for consumer items, which could pressure their margins. For example, just 17% of respondents said they expect consumer prices to rise by 8% or more over the next year.

Read the full Ag Economy Barometer report.