High input costs continue to concern US farmers as sentiment stabilizes

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By the end of 2023, more farmers were concerned about the risk of lower livestock and crop prices. Image: Getty/Omer Serkan Bakir

The latest Purdue University/CME Group Ag Economy Barometer reading indicates that farmers have more moderate inflation expectations compared to a year ago, but many are still worried about input costs.

According to the latest survey, carried out between 4-8 December, high input costs continue to be a primary source of concern for US farmers. Farmers concerned about the risk of lower prices for crops and livestock increased from 16% of respondents in January 2023 to over one-fourth (26%) by December 2023. Rising interest rates, chosen by 24% of farmers in December’s survey, were another major source of concern for producers.

The December 2023 Barometer recorded a reading of 114, just one point lower than November 2023. Both the Index of Current Conditions (112) and the Index of Future Expectations (115) fell one point below their respective November readings, and were 17% and 6% respectively below last year’s readings.

 All three indices were weaker than in December 2022, with the Ag Economy Barometer falling 10% below a year earlier.

Farmers reported an improved financial performance during the month of December, with the Farm Financial Performance Index rising 2 points. Since late summer, the index has climbed 11 points, and at year-end, it was 21 points above its 2023 low point in May. The shift in farmers’ perception of financial performance during the fall quarter corresponds with USDA’s more optimistic 2023 farm income outlook released in late November which was $10bn higher than their previous forecast.

In a similar vein, the Farm Capital Investment Index rose one point month-on-month but recorded a 13-point increase year-on-year. Producers who thought now is a good time for substantial investments in their operations cited ‘higher dealer inventories’ and ‘strong cash flows’ as key factors supporting this perspective.

Inflation expectations were more moderate, with 70% expecting inflation in 2024 to fall below 4%. In comparison, 50% of those surveyed this time last year anticipated an inflation rate of 6% or higher.

The Short-Term Farmland Value Index fell 4 points month-on-month and 3 points year-on-year, signalling weakened perspectives on farmland values.

However, the Long-Term Index was 9 points higher year-on-year, which could be explained with producers’ more moderate interest rate expectations since late 2022.