Farmers expect better times

All three broad-based measures of farmer sentiment improved in July. The Purdue University-CME Group Ag Economy Barometer Index increased 8 points to 113. At the same time, the Index of Current Conditions increased by 10 points to 100, and the Index of Future Expectations at 119 was 7 points better than a month earlier.

July’s sentiment improvement occurred even though prices for both corn and soybeans declined from the time survey responses were collected in June to July. For example Eastern Corn Belt cash prices for corn declined 11 percent and cash prices for soybeans declined 5 percent from mid-June to mid-July. Responses to the individual questions used to calculate the indices indicated that the sentiment shift was primarily attributable to fewer respondents saying conditions were worse than a year earlier and fewer saying that they expect bad times in the future. Data collection for the July survey took place July 15-19, which coincided with the dates for the Republican National Convention held in Milwaukee.

When asked about their biggest concerns in the year ahead, the No. 1 choice among producers once again was inflated input costs, chosen by 34 percent of respondents. But weak commodity prices were also on producer minds; 29 percent of producers in the July survey pointed to the risk of reduced crop and livestock prices as a No. 1 concern, an increase from 25 percent of respondents in June. Only 17 percent of respondents cited increasing interest rates as a No. 1 concern, a decrease from 23 percent in June – consistent with signals from the Federal Reserve that interest rates have peaked.

The Farm Financial Performance Index weakened by 4 points in July to 81, leaving the index 6 points less than a year earlier. July’s decline followed back-to-back improvements in the index in May and June. The index’s decrease reflects farmer concerns about the impact of weakening commodity prices combined with inflated input prices. Although the cost of production for principal crops, including corn and soybeans, has decreased year-to-year, output prices have declined even more. That highlights the possibility of a cost-price squeeze for U.S. crop producers.

Despite the weakness in producer perspectives regarding farm financial performance, the Farm Capital Investment Index increased 6 points in July to 38. Although the index increased to more than June’s reading, it remains in weak territory; it was still 7 points less than in July 2023. This month’s improvement in the index was primarily attributable to a modest shift in the percentage of producers who said it was a bad time to make large investments. In July there were 75 percent of survey respondents who said it was a bad time to invest, a decrease from 80 percent who felt that way in June. The shift in perspective coincided with fewer producers citing interest rates as an important concern for the upcoming year.