WEST LAFAYETTE, Ind. and
CHICAGO, July 6, 2021 /PRNewswire/ -- 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 from June
21-25, 2021.
"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% respondents said they
expect consumer prices to rise by 8% or more over the next
year.
Labor concerns may also be contributing to producers' anxiety as
farms that normally hire non-family labor reported more difficulty
in hiring labor this year than in 2020. Just over half (54% in
2020, 51% in 2021) of those surveyed reported hiring non-family
members. In June 2021, nearly
two-thirds (66%) of respondents said they either had "some" or "a
lot of difficulty" in hiring adequate labor, that compared to just
three out of ten respondents in 2020.
Even as sentiment dipped in June, producers remained bullish on
farmland values. The Short-Term Farmland Value Expectations
Index, based upon producers' 12-month expectation for farmland
values, declined nine points to a reading of 148; however, that
matches the third-highest reading for the index since data
collection began in 2015. The Long-Term Farmland Value
Expectations Index, based upon producers' five-year outlook,
declined just 3 points to a reading of 155, which was also the
third-highest reading on record for that index.
Corn and soybean producers gave a somewhat mixed response when
asked about their expectations for cash rental rates in 2022. In
May, nearly two-thirds of producers said they expected rates to
rise in 2022 compared to 2021; however, in June less than half
(47%) of corn-soybean producers said they expect rental rates to
rise in the coming year. Among those who expect rates to increase,
many anticipate the rise will be significant. Nearly half expect
cash rental rates to rise between five to less than 10% and nearly
one-third expect rates to rise by 10% or more.
Interest in leasing farmland for solar energy projects has risen
sharply over the last couple of years. Nearly one-third (32%) of
farms in the June survey said they are aware of solar leasing
opportunities for their farmland. Of those aware of leasing
opportunities, 29% of them said they had engaged in discussions
with companies about leasing some of their farmland. Less than 3%
(2.6%) of all survey respondents reported having signed a solar
lease on some of their farmland. This is approximately double the
percentage of producers who reported having signed a carbon
sequestration contract on barometer surveys conducted this past
winter and spring.
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 even more
information, check out the Purdue Commercial
AgCast podcast. It includes a detailed breakdown of each
month's barometer, in addition to a discussion of recent
agricultural news that affects farmers. Available now
at https://purdue.ag/agcast.
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. With a range
of pre- and post-trade products and services underpinning the
entire lifecycle of a trade, CME Group also offers optimization and
reconciliation services through TriOptima, and trade processing
services through Traiana.
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, EBS, TriOptima, and Traiana are
trademarks of BrokerTec Europe LTD, EBS Group LTD, TriOptima AB,
and Traiana, Inc., 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: Ag Economy Barometer falls for second month;
rising input costs causing concern for farmers (Purdue/CME Group Ag
Economy Barometer/James
Mintert).
https://www.purdue.edu/uns/images/2021/ag-barometer621LO.jpg.
CME-G
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SOURCE CME Group