High cost inflation still worries farmers
According to a CME Group press release, Purdue University/CME Group Agricultural economy barometer improved in April as much as 8 points to a reading of 121. However, it remains 32% below its reading from the same period last year. Growers’ views on current conditions and future expectations have been on the rise over the past month. The current conditions index improved 7 points to a reading of 120 and the future expectations index improved 9 points to a reading of 122.
“Rising prices for key commodities, particularly corn and soybeans, appear to be driving the shift in improving financial prospects for producers,” said James Mintert, Barometer senior researcher and director of the Center for Commercial Agriculture at Purdue University. “However, it’s hard to overstate the magnitude of the cost increases producers say they’re facing.”
The farm financial performance index improved to 95, up 8 points from March and 12 points higher than January and February. As Mintert suggests, much of this could be attributed to firming commodity prices. For example, Eastern Corn Belt corn spot prices in mid-April were up more than 10% from their mid-March level, while bids for delivery to the Fall 2022 corn harvest increased 20% over the same period. Soybean prices have also increased. Short-term delivery prices for soybeans rose about 7% from mid-March to mid-April, while elevator bids for fall delivery of new crop soybeans rose 5%. % over the period of one month.
Even though commodity prices have firmed, producers continue to say that rising input costs are the biggest concern for their farm operation. In April, 42% of producers chose rising input costs as their top concern, more than double those who chose government policies (21%) or falling producer prices (19%). In April, 60% of respondents said they expected input prices to rise by 30% over the next 12 months. This compares to an average of 37% of respondents who said they expected a cost increase of this magnitude when the same question was asked in surveys from December 2021 to March 2022.
When asked specifically what their expectations are for crop input prices in 2023 compared to prices paid for crop inputs in 2022, 36% of respondents said they expect prices to increase by 10 % or more and 21% of crop growers said input price increases of 20% or more were likely. The war in Ukraine has also added a new level of uncertainty for producers. Sixty percent of respondents said the greatest impact of the war on US agriculture will be felt in input prices.
The challenges of agricultural inputs go beyond their inflated cost to their availability. In April, 34% of producers said they had difficulty buying inputs for the 2022 crop year, compared to 27% in March. In a follow-up question, growers who said they had difficulty obtaining inputs said herbicides (30% of respondents) were the most problematic, followed closely by farm machinery parts (27%), fertilizers (26%) and insecticides (17%). In a related question, 11% of crop producers said they had been notified that an input supplier would not be able to deliver one or more crop inputs they had already purchased for use in 2022. Among those Here, the availability of herbicides was the main problem reported.
Despite a general improvement in the outlook for financial returns, the farm capital investment index remains at an all-time low. Supply chain issues remain a key reason why many producers feel that now is not the right time to invest heavily in their farm operations. For example, just over 40% of producers said their farm machinery purchase plans had been affected by low machinery inventories. The rising cost of all inputs, including machinery, buildings and grain silos, is likely another factor leading producers to say now is not the right time for big investments.
The Ag Economy Barometer is calculated monthly from the responses of 400 US agricultural producers to a telephone survey. This month’s survey was conducted between April 18 and 22.
TheCattleSite News Desk