Optimism improves in June Ag Economy BarometerOptimism improves in June Ag Economy Barometer
Perception of current conditions remained unchanged from May.
July 5, 2023
The Purdue University/CME Group Ag Economy Barometer index improved in June, rising 17 points to a reading of 121. The upswing in sentiment was driven by producers’ more optimistic view of the future; however, their perception of current conditions remained unchanged from May. The Index of Future Expectations rose 25 points to a reading of 123, while the Index of Current Conditions held flat at a reading of 116 in June. 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 12-16.
“Optimism about U.S. agriculture’s future and a more sanguine interest rate outlook help explain producers’ more positive view of the future expressed in June’s survey; however current conditions in the farming economy continue to present a challenge for some producers,” said James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “This month four out of 10 producers stated that their financial situation has deteriorated compared to a year ago.”
To better understand the large month-to-month swing in producers’ expectations for the future, responses between the May and June surveys were compared. In June, 20% of respondents said they expected their financial condition to improve over the next year, compared to just 13% who said that in May. Meanwhile, only 32% expect their farm’s financial situation to decline over the upcoming year, compared to 44% who responded that way in May. Producers’ improved perspective on the future was not focused solely on their own farms but extended to all of U.S. agriculture. The percentage of producers expecting good times for U.S. agriculture in the next five years rose 8 points to 33%, while the percentage of producers expecting bad times fell 3 points to 41%.
The Farm Financial Performance Index also rose this month, up 10 points from May, and was likely a result of a late-May to early-June rally in harvest-time prices for corn and soybeans, as well as optimism toward positive returns for cattle producers. In June, 50% of respondents said they expect “good times” for livestock producers in the next five years, up from 37% in May. Optimism about positive returns for cattle producers, especially cow-calf operations, was likely a key factor behind the positive livestock outlook.
The Farm Capital Investment Index rose five points in June to a reading of 42; however, nearly 75% of respondents still feel now is a bad time to make large investments in their farming operation. Respondents in June cited rising interest rates (35% of respondents) and increasing prices for equipment and new construction (37% of respondents) as key reasons for viewing now as a bad time for investments.
Producers were more optimistic about farmland values in June as both the short and long-run farmland value indices rose. The short-term index, which asks producers about their outlook over the next 12 months, jumped 16 points to a reading of 126, its highest reading since last November. Meanwhile, the long-term index, which asks producers to look ahead five years, rose a more modest 6 points to a reading of 151, pushing that index up to its highest level since February 2022. Additionally, 43% of producers in the June survey think interest rates have peaked, and nearly a quarter of survey respondents expect to see lower interest rates within the next year.
This month’s survey also included a question targeted toward corn and soybean producers regarding their expectations for farmland cash rental rates in 2024. Twenty-five percent of the corn/soybean producers in this month’s survey said they expect 2024 cash rental rates in their area to rise above 2023’s rates. Of those respondents who said they expect rental rates to rise, nearly one-third (32%) said they expect 2024 rental rates to increase up to 5%, while nearly half (49%) look for rates to rise from 5% to 10%, when compared to 2023.
This month’s survey included questions to learn more about producers’ thoughts on the passage of a new farm bill. Among corn and soybean producers, the Crop Insurance title and the Commodity title remain the two most important farm bill components. When asked about expectations for PLC reference prices for corn and soybeans, half of corn and soybean producers said they expect Congress to raise prices for both.
In response to the recent Supreme Court ruling, which upheld California’s Proposition 12 mandating housing standards for hogs processed into pork that will be sold in that state, all survey respondents were asked about the likelihood Congress would overturn the proposition as part of a new farm bill. Producers were split in their response to this question, with 36% stating it’s either somewhat or very unlikely that Congress will try to overturn the proposition, and 25% stating it is at least somewhat likely Congress will take on Proposition 12 in new farm bill legislation.
The full Ag Economy Barometer report can be found here.
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