Farmer sentiment about the agricultural economy took a big hit in June for the second month in a row.
The Purdue University/CME Group Ag Economy Barometer — based on a monthly survey of 400 crop and livestock producers across the U.S. — declined sharply to a reading of 137 (relative to a baseline average index of 100).
The index measures farmer sentiment on current conditions and future expectation. It dropped 21 points from May’s reading of 158, which was down 17 points from April.
“I wasn’t surprised it went down, but I was surprised it went down as much as it did,” said Jim Mintert, director of the Purdue Center for Commercial Agriculture.
Michael Langemeier, associate director of the center, said he thought the index might weaken a little bit but not nearly as much as it did.
“Given the strong prices, I thought that would hold the index of current conditions up there a little bit. But obviously I was wrong,” Langemeier said during the latest “Ag Barometer” podcast.
Corn and soybean prices were still strong by historical standards, but they were weaker than a month earlier, Mintert said.
“I think that probably contributed quite a bit to the negativity. … I probably underestimated how much that was impacting people’s perspective,” he said.
Langemeier said he thinks there are also underlying concerns about crop prospects in some parts of the Corn Belt and Great Plains.
“I just think this general notion of uncertainty and possible price inflation is concerning to respondents,” he said.
The index of current conditions fell 29 points from 178 in May to 149 in June, a pretty big drop, Mintert said.
“The index of future expectations fell as well, but it didn’t fall nearly as much,” he said.
That index fell 17 points from 149 in May to 132 in June.
Producers’ view of their farm financial performance was really the driver with respect to current conditions. That index fell from 126 in May to 96 in June and fell 42 points from April.
That’s a big drop in that financial performance index and a little surprising given the relative strength in crop prices compared with long-term history, he said.
“This one surprised me more than the fact that the index of current conditions declined as much as it did,” Langemeier said.
There’s a lot of uncertainty about return prospects this fall, but they’re still pretty good. That leads him to wonder if producers are thinking prices are not going to be as strong this fall and not as good moving into 2022 as they were earlier in 2021, he said.
Mintert said it’s important to remember the survey is asking producers how they feel about their farm’s financial performance and not asking them to look at their balance sheet or projected income statement.
He suspects the decline in commodity prices fueled the decline in sentiment and increase in negativity and uncertainty relative to a month earlier.
Also playing into the lower barometer reading are rapidly rising production costs related to consumer and farm input price inflation, increased cash rental rates for farmland, increased labor costs and strong prices for farm machinery.