American farmers are reining in spending and backing away from investing in their farms despite high crop prices.
Soaring input costs are causing them to get conservative with their plans.
“Despite strong 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,” said Jim Mintert, director for Purdue University’s Centre for Commercial Agriculture, in his summary of the June Ag Economy Barometer.
“That combination is leaving producers very concerned about their farms’ financial performance.”
The Barometer is a monthly farmer sentiment measure that charts how optimistic farmers are feeling. The June 2022 result is the lowest farmers have felt since April 2020, as the world was grappling with plummeting demand, collapsing supply chains, widespread lockdowns and a bleak-looking future.
The Farm Financial Performance Index, which measures farmers’ expectations of returns, has fallen 41 percent since April 2021, when optimism reigned.
The result, according to the 400 American farmers included in the survey, is farmers hanging on to their money.
“In the May survey, only 13 percent of respondents said this is a good time to make large investments in their operations, while 78 percent said they viewed it as a bad time to invest in things like machinery and buildings.”
Half the farmers in the survey said their machinery purchasing plans were being hit by low dealer inventories.
However, farmers remain confident and bullish about farmland prices. The Short-Term Farmland Value Expectations Index rose slightly and the Long-Term Farmland Expectations Index rose, with farmers continuing to see outside investor interest in farmland protecting their most important asset.
