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Following a two-month decline and a year of weak sentiment, the
"The improvement in current sentiment was motivated by producers' stronger perception of current financial conditions on their farms and could be attributed to producers taking time to estimate their farms' 2022 income following the completion of the fall harvest," said James Mintert, the barometer's principal investigator and director of
The Farm Financial Performance Index climbed 18 points to a reading of 109 in December. Notably, this was the only time in 2022 that the index was above 100. The turnaround was driven by a sharp increase in the percentage of producers who expect better performance than last year, which jumped from 23% to 35% of respondents, and is consistent with
The Farm Capital Investment Index climbed 9 points this month to 40, the highest reading for the index since February; yet, it remains 9 points lower than a year earlier. Among the nearly three-quarters of respondents who said it was a bad time for large investments, the most commonly cited reason was high prices for farm machinery and new construction (41%) followed by rising interest rates (28%).
Despite the improvement in farmers' perception of their financial situation, both the short-term and long-term farmland value indices continued to drift lower in December. The short-term index fell 5 points to 124 while the long-term index declined 4 points to 140. When examined over the course of the last year it's clear that sentiment among producers about farmland values has shifted. For example, compared to a year ago, the percentage of respondents who expect to see farmland values decline in the upcoming year increased from 6% to 15%, while the percentage expecting to see values rise declined from 59% to 39%. Among producers who expect farmland values to rise over the next 5 years, just over three-fourths of them said that a combination of non-farm investor demand and inflation are the main reasons they expect to see values rise.
Looking to the year ahead, the December survey asked producers to compare their expectations for their farm's financial performance in 2023 to 2022. Producers indicated they expect lower financial performance in 2023 and cited rising costs and narrowing margins as key reasons. Concerns about costs continue to be top of mind for producers. Nearly half (47%) of crop producers said they expect farmland cash rental rates in 2023 to rise above the previous year. Other top concerns for 2023 include higher input costs (45% of respondents), rising interest rates (22% of respondents) and lower crop or livestock prices (13% of respondents).
Read the full Ag Economy Barometer report at https://purdue.ag/agbarometer. The site also offers additional resources – such as past reports, charts and survey methodology – and a form to sign up for monthly barometer email updates and webinars.
Each month, the
The Ag Economy Barometer, Index of Current Conditions and Index of Future Expectations are available on the
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The Center for Commercial Agriculture was founded in 2011 to provide professional development and educational programs for farmers. Housed within
