12 January 2024

3 minute learn

The newest report from the Purdue College/CME Group Ag Financial system Barometer signifies that US farmers’ inflation expectations have subsided whereas general producer sentiment modified little.

The December barometer recorded a studying of 114, only one level decrease than in November. Each subindices of the barometer, the Index of Present Situations and the Index of Future Expectations, mirrored this slight decline, settling one level under their respective November figures at 112 and 115. Notably, farmers’ inflation expectations for the upcoming yr had been markedly decrease than these reported a yr in the past for 2023. This month’s Ag Financial system Barometer survey was carried out from Dec. 4-8.

Farmers reported one other enchancment of their farms’ monetary efficiency in the course of the month of December. The Farm Monetary Efficiency Index noticed a 2-point enhance in comparison with the earlier month, marking a continued optimistic pattern. Since late summer time, the index has climbed 11 factors, and at year-end, it was 21 factors above the low level for 2023, which occurred in Might.

“The shift in farmers’ notion of monetary efficiency in the course of the fall quarter corresponds with USDA’s (U.S. Division of Agriculture’s) extra optimistic 2023 farm revenue outlook launched in late November, which was $10 billion greater than their earlier forecast,” mentioned James Mintert, the barometer’s principal investigator and director of Purdue College’s Heart for Industrial Agriculture.

The Farm Capital Funding Index studying of 43 was just one level above November’s, but it surely marked a 13-point enhance in comparison with the identical interval final yr. Respondents endorsing the notion that now’s a good time for substantial investments of their farm operation cited “greater vendor inventories” and “robust money flows” as key components supporting this angle. Whereas the proportion of respondents deciding on “robust money flows” as a rationale for funding rebounded from the earlier month, it remained much less well-liked than in July and August. Conversely, in December, the proportion of producers citing “greater vendor inventories” as a main motivation for funding was greater than double the proportion who expressed an analogous sentiment in July.

“Excessive enter prices proceed to be regarding for US farmers, though a notable shift in considerations came about as 2023 unfolded,” Mintert mentioned.

Farmers involved in regards to the threat of decrease costs for crops and livestock elevated from 16% of respondents in January to over one-fourth (26%) by December. Quantity three on the checklist of considerations for the upcoming yr was “rising rates of interest,” chosen by 24% of farmers in December’s survey.

Producers’ inflation expectations moderated, with 70% anticipating inflation in 2024 to be lower than 4%. By comparability, 50% of the producers anticipated an inflation price of 6% or greater a yr in the past. When requested about rates of interest, about one-third (34%) of respondents mentioned they anticipate charges declining in 2024 whereas 22% count on no change in rates of interest within the upcoming yr.

Views on farmland values weakened barely in December in comparison with November. The Brief-Time period Farmland Worth Index fell 4 factors to a studying of 121, whereas the long-term index decreased by 2 factors to 149. In comparison with a yr in the past, the short-term index was down 3 factors, whereas the long-term index was 9 factors greater.

“The development in farmers’ rate of interest expectations since late 2022 might assist clarify the year-to-year rise in farmers’ long-term farmland worth expectations,” Mintert acknowledged.