WEST
LAFAYETTE, Ind. and CHICAGO, Feb. 7, 2023
/PRNewswire/ -- Following a sharp increase to close out 2022, the
Purdue University/CME Group Ag Economy
Barometer had only a modest increase in January, up 4 points to a
reading of 130. The rise in sentiment was primarily attributable to
better expectations for the future as the Future Expectations
Index improved by 5 points to 127. The Index of Current
Conditions rose only 1 point to a reading of 136. 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 from January
16-20.
"Although producers were a bit more optimistic about the future
this month, they again reported expectations for tighter margins in
2023 than in 2022," said James
Mintert, the barometer's principal investigator and director
of Purdue University's Center for
Commercial Agriculture.
The Farm Capital Investment Index was up 2 points this
month to 42; however, it remained 7% lower than a year earlier.
Just over 7 out of 10 survey respondents said they think now is a
bad time to make large investments in their farm operation. Among
respondents who felt now is a bad time, 39% said high prices for
machinery and new construction, 25% said rising interest rates, and
12% said uncertainty about farm profitability was the primary
reason. Interest rates are becoming a bigger concern for farmers.
As recently as November, just 19% percent of farmers in the monthly
barometer survey chose rising interest rates as a key factor
impacting their perspective on investments.
Each January, starting in 2020, the survey has included a
question asking respondents if they expect to have a larger
operating loan compared to the previous year and if so, the reason
for the larger loan. In January, 22% of respondents said they
expect to have a larger 2023 farm operating loan compared to 2022,
down from 27% last year. Among respondents who expect to have a
larger operating loan, 80% indicated it was due to increased input
costs, while only 5% said it was due to carrying over unpaid
operating debt, which according to Mintert is important to note.
The percentage of respondents who attribute their need for a larger
loan to unpaid operating debt has fallen sharply since the question
was first posed in January 2020. At
that time, just over one-third of producers who anticipated needing
a larger loan said it was because of unpaid operating debt. That
percentage fell to 20% in 2021, to 13% in 2022, before declining
again to just 5% in 2023.
"The sharp decline in the percentage of producers expecting to
carry over unpaid operating debt is important," said Mintert. "It
supports the idea that the vast majority of producers are entering
2023 in a strong financial position despite the rise in production
costs."
Producers' expectations for short-term and long-term farmland
values were mixed in January. The Short-Term Farmland Index
fell 4 points to 120, down 15% when compared to one-year earlier,
as more producers said they expect values to hold steady over the
coming year instead of increasing. The Long-Term Farmland Values
Index rose slightly to 142 from 140 in December. Over the last
year, the long-term index has declined just 2% as producers
continue to retain a more optimistic long-term than short-term view
of farmland values. Among producers who expect to see farmland
values rise over the next 5 years, the top reasons for their
optimism continue to be non-farm investor demand (63%) and
inflation (23%).
This month's survey also included questions about leasing
farmland for carbon sequestration and U.S. farmers continue to
express interest in carbon contracts. During the first quarter of
2021, approximately 7% of survey respondents said they had engaged
in discussions with companies about being paid to capture carbon on
their farms. When we repeated the question about carbon payments in
August 2022 and again in January 2023, the percentage of producers who
said they had discussed a carbon contract with a company rose
modestly to 9% of respondents. However, relatively few farm
operators have chosen to sign a carbon contract with just 1% of
January's survey respondents indicating they had signed a
contract.
Read the full Ag Economy Barometer report at
https://purdue.ag/agbarometer. 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, available
at https://purdue.ag/barometervideo. For more information,
check out the Purdue Commercial AgCast podcast
available at https://purdue.ag/agcast, which includes a detailed
breakdown of each month's barometer and a discussion of recent
agricultural news that affects farmers.
The Ag Economy Barometer, Index of Current Conditions and Index
of Future Expectations are available on the Bloomberg Terminal
under the following ticker symbols: AGECBARO, AGECCURC and
AGECFTEX.
About the Purdue University Center for Commercial
Agriculture
The Center for Commercial Agriculture was founded in 2011 to
provide professional development and educational programs for
farmers. Housed within Purdue
University's Department of Agricultural Economics, the
center's faculty and staff develop and execute research and
educational programs that address the different needs of managing
in today's business environment.
About CME Group
As the world's leading and most diverse derivatives marketplace,
CME Group (www.cmegroup.com) enables clients to trade futures,
options, cash and OTC markets, optimize portfolios, and analyze
data – empowering market participants worldwide to efficiently
manage risk and capture opportunities. CME Group exchanges offer
the widest range of global benchmark products across all major
asset classes based on interest rates, equity
indexes, foreign exchange, energy, agricultural
products and metals. The company offers futures and
options on futures trading through the CME Globex® platform,
fixed income trading via BrokerTec and foreign exchange trading on
the EBS platform. In addition, it operates one of the world's
leading central counterparty clearing providers, CME
Clearing.
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 and EBS are
trademarks of BrokerTec Europe LTD and EBS Group LTD,
respectively. Dow Jones, Dow Jones Industrial Average, S&P
500 and S&P are service and/or trademarks of Dow Jones
Trademark Holdings LLC, Standard & Poor's Financial Services
LLC and S&P/Dow Jones Indices LLC, as the case may be, and have
been licensed for use by Chicago Mercantile Exchange Inc. All
other trademarks are the property of their respective owners.
Writer: Kami Goodwin,
765-494-6999, kami@purdue.edu
Source: James Mintert,
765-494-7004, jmintert@purdue.edu
Related websites:
Purdue University Center for
Commercial Agriculture: http://purdue.edu/commercialag
CME Group: http://www.cmegroup.com/
Photo Caption: Improvement in farmer sentiment carries over
into 2023 (Purdue/CME Group Ag Economy
Barometer/James Mintert).
https://www.purdue.edu/uns/images/2023/ag-barometer123LO.jpg
CME-G
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SOURCE CME Group