Opinion

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Vol. XLVi ❖ No. 15 www.TheLandOnline.com 42 pages, 2 sections facebook.com/TheLandOnline plus supplements twitter.com/TheLandOnline Cover photo by Paul Malchow

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Although they might not always show it on the outside, farmers are generally an optimistic lot. Spring planting requires a major investment and farmers patiently wait four to five months to see how everything pans out. If they weren’t optimistic, why put the seed in the ground in the first place?

Purdue University has an Ag Economy Barometer which tracks producers’ expectations for the future. The Ag Economy LAND MINDS Barometer is calculated each month from 400 U.S. agricultural producers’ By Paul Malchow responses to a telephone survey. This month’s survey was conducted June OPINION 13-17.

A recent release from Purdue University said the Index of Future Expectations fell 5 points to a reading of 96, marking the lowest level for the index since October 2016. Meanwhile, producers were slightly more optimistic regarding current conditions; the Index of Current Conditions improved 5 points to a reading of 99. “Rising input costs and uncertainty about the future continue to weigh on farmer sentiment,” said James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “Many producers remain concerned about the ongoing escalation in production costs as well as commodity price volatility, which could lead to a production cost/income squeeze in 2023.”

The Farm Financial Performance Index, which is primarily reflective of income expectations for the current year, improved 2 points to a reading of 83 in June, yet remains at one of the index’s lowest readings over the past two years. When asked about expectations for their farm’s financial condition in June 2023 compared to June 2022, 51 percent of survey respondents said they expect their farms to be worse off financially a year from now. This is the most negative response received to this question since data collection began in 2015.

For the second month in a row, the Farm Capital Investment Index held at a record low of 35, as producers continue to say now is not a good time to make large investments in their farm operation. Supply chain issues continue to frustrate farmers. In May and June, 50 percent of producers said that tight machinery inventories were impacting their farm machinery purchase plans.

The top concerns for producers in the upcoming year continue to be input prices (43 percent), followed by input availability (21 percent), government policies (18 percent), and lower output prices (17 percent). Sixtythree percent of producers expect higher costs in 2023, on top of the large increases experienced in 2022. Nearly four out of 10 farmers expect input prices to rise by 10 percent or more next year when compared to 2022. Producers also expect inflation to push up the cost of living for farm families in the year ahead. Seven out of 10 survey respondents said they expect the rate of inflation for consumer items to be 6 percent or higher over the next year, and 35 percent of respondents said they expect the inflation rate to exceed 10 percent.

No matter how you cut it, anticipating a 10 percent inflation rate is anything but optimistic.

When asked about their cropping plans for the upcoming year, one out of five farmers said they intend to change their crop mix in response to rising input costs. Almost half of the respondents (46 percent) said the biggest change will be to devote a higher percentage of their acreage to soybeans. Twenty-six percent of those planning a crop mix change said the biggest change would be to devote more of their farm to wheat production, while 21 percent of respondents said they would shift to planting more corn.

The big shift to soybeans is optimism at its best. China has been a steady (if not unwilling) U.S. soybean buyer for the last couple of years. But China has already shifted its buying back to Brazil while the strength of the U.S. dollar is pricing the United States out of the market. By most accounts, Brazil’s 2022 soybean crop yields were strong and Brazil is already anticipating a jump in soybean acreage. Does this leave U.S. farmers out in the cold? By adding soybean acres in 2023, will the United States see a crash in market price for a crop with no market? The optimistic U.S. farmer doesn’t seem too concerned with the prospect.

Of course it’s a long way to the harvest of 2023 and anything can happen. Soybean carryover has been shrinking steadily and some are expressing concern over supply. So a bumper U.S. soybean crop this year shouldn’t sound many alarms; but if the 2022 crop sits in storage while farmers plant more soybeans in 2023, even the most optimistic grower might get caught looking in the rearview mirror.

Paul Malchow is the managing editor of The Land. He may be reached at editor@TheLandOnline.com. ❖

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