WEST
LAFAYETTE, Ind. and CHICAGO, June 6, 2023
/PRNewswire/ -- Producer sentiment fell to its weakest reading
since July 2022, as the Purdue University/CME Group Ag Economy Barometer
declined 19 points to a reading of 104 in May. The Index of
Future Expectations was down 22 points to a reading of 98 in
May, while the Index of Current Conditions was down 13
points to a reading of 116. This month's lower sentiment was fueled
by drops in both of the barometer's sub-indices and likely
triggered by weakened crop prices. In mid-May, Eastern Corn Belt
fall delivery bids for corn fell over $0.50/bushel (10%) and soybean bids declined over
$1.00/bushel (8%), while new crop
June/July delivery wheat bids declined nearly $0.50/bushel (8%), all compared to bids available
in mid-April when last month's barometer survey was conducted. 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 between May
15-19.
"Producers are feeling the squeeze from weakened crop prices
which has reduced their expectations for strong financial
performance in the coming year," said James
Mintert, the barometer's principal investigator and director
of Purdue University's Center for
Commercial Agriculture.
The Farm Financial Performance Index was impacted by
lower sentiment dropping 17 points to a reading of 76 in May. Crop
price weakness, uncertainty related to U.S. bank failures, and
rising interest rates were likely key factors behind the decline.
This month, 38% of respondents said they expect weaker financial
performance for their farm this year, compared to just 23% who felt
that way in April. Higher input cost remains the top concern among
producers in the year ahead; however, concern over the risk of
lower crop and/or livestock prices is growing. This month 26% of
respondents chose lower output prices as their top concern compared
with just 8% of respondents who felt that way in September.
Meanwhile, nearly three-fifths (59%) of producers said they expect
interest rates to rise during the upcoming year and 22% of
respondents chose it as a top concern for their farm in the next 12
months. Additionally, 40% of farmers in this month's poll said they
expect this spring's U.S. bank failures to lead to some changes in
farm loan terms in the upcoming year, possibly putting more
financial pressure on their operations.
Unsurprisingly, the Farm Capital Investment Index was
also lower, down six points to a reading of 37 in May. More than
three-fourths (76%) of respondents continue to feel now is a bad
time for large investments. Among those who feel now is a bad time,
two-thirds (67%) cited rising interest rates and increased prices
for machinery and new construction as key reasons.
Producers' expectations for short-term farmland values fell 13
points to 110 in May and marked the weakest short-term index
reading since August 2020. In this
month's survey, just 29% of respondents said they expect farmland
values to rise over the next 12 months compared to 54% who felt
that way a year earlier. In contrast, producers remain more
optimistic about the longer-term outlook for farmland values as the
Long-Term Farmland Value Expectations Index rose 3 points in
May to a reading of 145.
With farm bill discussions on going, this month's survey asked
respondents what title in the upcoming legislation will be most
important to their farming operation. Nearly half (48%) of
producers said the Crop Insurance Title will be the most important
aspect of a new farm bill to their farms, followed by the Commodity
Title, chosen by 25% of respondents. In a follow-up question, corn
and soybean growers were asked what change, if any, they expect to
see to the Price Loss Coverage (PLC) reference prices in a new farm
bill. Close to half (45%) of corn and soybean growers said they
expect Congress to establish higher reference prices for both
crops, with very few (10% and 13%) expecting lower reference prices
for soybeans and corn, respectively.
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 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
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trademark of Commodity Exchange, Inc. BrokerTec and EBS are
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Writer: Kami Goodwin,
765-494-6999, kami@purdue.edu
Source: James Mintert,
765-494-7004, jmintert@purdue.edu
CME-G
Related websites:
Purdue University Center for
Commercial Agriculture: http://purdue.edu/commercialag
CME Group: http://www.cmegroup.com/
Photo Caption: Farmer sentiment sours as crop prices
decline (Purdue/CME Group Ag Economy
Barometer/James Mintert).
https://www.purdue.edu/uns/images/2023/agecon-barometer2305LO.jpg
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