Farmer sentiment rises in October - Purdue/CME Barometer

US producers report improved financial conditions
calendar icon 8 November 2023
clock icon 3 minute read

There was a slight uptick in agricultural producers' sentiment in October, as the Purdue University/CME Group Ag Economy Barometer index rose 4 points to a reading of 110. The modest improvement in farmer sentiment resulted from farmers' improved perspective on current conditions on their farms as well as their expectations for the future. The Index of Current Conditions rose 3 points to 101 while the Index of Future Expectations rose 5 points to 114. This month's Ag Economy Barometer survey was conducted from October 16-20, 2023.

"Farmers in this month's survey were slightly less concerned about the risk of lower prices for crops and livestock and felt somewhat better about their farms' financial situation than a month earlier," said James Mintert, the barometer's principal investigator and director of Purdue University's Center for Commercial Agriculture.

Farmers' more optimistic view of their farms' financial situation was reflected in the Farm Financial Performance Index, which rose 6 points in October compared to September. This month's index value of 92 was the highest farm financial performance reading since April and pushed the index 7% above its reading from a year ago. The index's rise stood in contrast to USDA's' forecast for 2023 net farm income to fall below 2022's income level.

"Reports of higher-than-expected corn and soybean yields in some Corn Belt locations, along with a modest rally in corn prices, likely contributed to this month's rise in the financial conditions and the barometer indices," said Mintert.

Despite the perception that financial conditions were stronger than a month earlier, the Farm Capital Investment Index fell 4 points in October to a reading of 35. This was the lowest reading of the year for the investment index. In October, nearly 8 out of 10 (78%) respondents said it was a bad time to make large investments in their farm operation, while just 13% of farmers said it was a good time to make large investments. Among those who said it's a bad time to invest, the most commonly cited reason was rising interest rates, chosen by 41% of respondents, up one point from September. Of those who said it is a good time to make large investments in their farm operation, 24% stated "strong cash flows," down from 32% who felt that way in September, and 20% pointed to "expansion opportunities" up from 6% in September.

Just over one-third (35%) of producers in this month's survey said they expect farmland values to rise in their area in the upcoming year, while nearly two-thirds (65%) of survey respondents expect farmland values to rise over the next 5 years. As a result, the Short-Term Farmland Value Index changed little, dropping just one point compared to a month earlier, while the Long-Term Farmland Value Expectations Index rose three points. Key reasons cited by producers for optimism about farmland values over the next five years continue to be non-farm investor demand, followed by inflation.

Dry weather this past spring and summer stimulated discussions among producers about shifts in long-term weather patterns. This month's survey asked corn and soybean producers if they have explicitly made any changes in their farming operation in response to changes in long-term weather patterns in their area. Nearly one out of four corn/soybean farmers (24%) in the October survey indicated they implemented changes in their farm operations to better deal with shifting weather patterns. A follow-up question posed only to farmers who said they've made changes, asked them to identify the biggest operational changes they've made to date. Responses indicated farmers are choosing from among a broad mix of technologies and capital investments to adapt to changing weather patterns, including: increased use of no-till (25% of respondents); changed mix of crops planted (23% of respondents); planted more drought resistant varieties (20% of respondents); installed tile drainage (9% of respondents); and installed irrigation (9% of respondents).

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