Agricultural producer sentiment improved slightly in July as the Purdue University-CME Group Ag Economy Barometer rose two points above its June reading to an index value of 123. This month’s two-percent rise in the barometer was primarily the result of farmers’ improved perception of current conditions on their farms as the Index of Current Conditions rose 5 points to a reading of 121. The Index of Future Expectations changed little compared to June, rising just one point to 124. This month’s Ag Economy Barometer survey was conducted from July 10-14, 2023.
Farmers’ rating of financial conditions on their farms was virtually unchanged in July, compared to June, as the Farm Financial Conditions Index rose just one point to 87 vs. a reading of 86 in June. Looking back to May, however, the percentage of producers rating their farm’s financial performance as better than last year improved from 14% to 17%, while those rating financial performance as worse than a year ago fell from 38% to 30% of respondents. When asked to look ahead one year, there was a one percentage point increase in farmers expecting farm financial conditions to improve in July vs. June and, correspondingly, a one-point decline in the percentage of farmers expecting conditions to worsen. And farmers’ longer-term perspective on the U.S. agricultural economy improved somewhat in July, as the percentage of respondents expecting bad times in the upcoming 5 years fell from 41% in June to 39% in July.
The improvement in farmers’ perspective on current conditions spilled over into a modest rise in July’s Farm Capital Investment Index of 3 points to a reading of 45. Since bottoming out at a reading of 31 in November 2022 the index has climbed 14 points and now stands 9 points above its July 2022 level. Comparing the July responses to last fall’s low point, the percentage of producers saying now is a good time for large investments has improved to 17% from just 10% and the percentage of farmers who feel it’s a bad time to invest declined to 72% vs. 79% who felt that way in November. This month’s improvement in the investment index occurred despite a rise in the percentage of producers who expect interest rates to rise over the next year. Nearly two-thirds (65%) of producers in July said they expect interest rates to increase, up from 57% who felt that way in June. Among those producers who said now is a bad time to make large investments the top reason cited for this being a bad time was concern about rising interest rates.
Farmers’ top concern for their farming operations in the upcoming year is still higher input costs, chosen by 37% of respondents in this month’s survey. The number two concern for this month’s survey respondents was rising interest rates, chosen by nearly one out of four (24%) producers followed by lower output prices chosen by 19% of farmers in the survey. Given the volatility in commodity prices, especially crop prices, this spring and early summer it’s notable that more producers expressed concern about rising interest rates than declining output prices.
