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PURDUE/CME GROUP SURVEY: FARMER SENTIMENT IMPROVES IN AUGUST, BUT INFLATIONARY CONCERNS MOUNT
Sep. 7, 2021
By James Mintert and Michael Langemeier, Purdue Center for Commercial Agriculture
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Agricultural producers' sentiment improved slightly in August compared to July as the Ag Economy Barometer rose four points to a reading of 138 vs. 134 a month earlier. The modest rise in the barometer was primarily attributable to an improvement in the Index of Current Conditions, which climbed 9 points to 152 while the Index of Future Expectations rose just 2 points to 132.
Although the barometer and its two key sub-indices improved in August compared to July, all three indices remain well below the very positive sentiment readings posted this past spring. The Purdue University-CME Group Ag Economy Barometer sentiment index is calculated each month from 400 U.S. agricultural producers' responses to a telephone survey. This month's survey was conducted from August 23-27, 2021.
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| Figure 1. Purdue/CME Group Ag Economy Barometer, October 2015-August 2021.
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The improvement in the Current Condition Index was tied to producers' more positive view of their farms' financial situation. The Farm Financial Performance Index rose 11 points to 110, its highest reading since May, as farmers indicated they expect profitability this year to be better than a year earlier. Although corn and soybean prices have declined in recent weeks, they were still well above year-ago levels as were wheat prices.
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| Figure 2. Indices of Current Conditions and Future Expectations, October 2015-August 2021.
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Uncertainty about final yields for fall harvested crops continues, but yield prospects stabilized or improved for many producers in August as some precipitation fell in abnormally dry and drought-stricken areas. Livestock price strength also provided a boost to some farms' income prospects as fed cattle and slaughter hog prices continued to trade well above levels observed 12 months earlier.
The Farm Capital Investment Index improved modestly in August, rising to a reading of 53, up 3 points compared to July. The small improvement in the index could be traced to fewer producers in August saying they planned to reduce their farm construction activity compared to a year ago. At the same time, farmers said their machinery purchase plans were unchanged from those reported in July. Industry reports continue to suggest that supply chain challenges are hampering farmers' machinery purchase plans.
Producers are becoming increasingly concerned about rising input costs. For the third month in a row, the barometer survey asked respondents for their expectations about farm input price changes in the upcoming 12 months. On the August survey, 39% of respondents said they expect input prices to rise by 8% or more, up from 30% who felt that way in both June and July while one in five producers (21%) expect farm input price inflation to exceed 12%. Just 13% of producers surveyed said they expect input price pressure in the upcoming year to fall in a range of 0 to 2%, which would be similar to the rise in farm input prices over the last decade.
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