(West Lafayette, IN) - The Purdue University/CME Group Ag Economy Barometer dropped to its lowest level since April 2020, down 22 points in May to a reading of 99.
Agricultural producers' perceptions regarding current conditions on their farms, as well as their future expectations, both weakened this month. The Index of Current Conditions dipped 26 points to a reading of 94, and the Index of Future Expectations fell 21 points to 101. The Ag Economy Barometer is calculated monthly from 400 U.S. agricultural producers' responses to a telephone survey. This month's survey was conducted between May 16-20.
Despite solid commodity prices, this month's weakness in producers' sentiment appears to be driven by the rapid rise in production costs and uncertainty about where input prices are headed. That combination is leaving producers very concerned about their farms' financial performance.
The Farm Financial Performance Index declined 14 points to 81 in May. The percentage of producers who expect their farm's financial performance to worsen in 2022 compared to last year rose from 29% in April to 38% in May. Over the previous 13 months, the Farm Financial Performance Index has fallen 41% below its life of survey high of 138 set in April 2021.
The Farm Capital Investment Index drifted to an all-time low in May and is down 30 points from this same time last year. In the May survey, only 13% of respondents said this is a good time to make large investments in their operation, while 78% said they viewed it as a bad time to invest in things like machinery and buildings.
Half of the producers in this month's survey said their machinery purchase plans were impacted by low farm machinery inventory levels, up from 41% in the April survey, suggesting that supply chain issues are at least partly responsible for the ongoing weakness in the capital investment index.
Higher input costs remain a top concern for producers, with 44% surveyed choosing it as the most significant concern facing their farming operation in the coming year. Additionally, 57% of producers said they expect a 30% or more rise in prices paid for farm inputs in 2022 compared to prices paid last year.
The May survey also asked producers about their expectations for input costs in 2023 compared to 2022, with nearly 39% of producers indicating they expect an additional cost increase of 10% or more in the coming year.